What is a Shareholder Rights Plan or 'Poison Pill' and why did Air Products adopt one?

A Shareholder Rights Plan, commonly known as a 'poison pill,' is a defensive strategy used by corporations to prevent hostile takeovers. Air Products adopted this plan to ensure the Board of Directors can effectively protect the interests of all shareholders and to promote fair treatment in the event of an unsolicited acquisition attempt. It makes it significantly more expensive and difficult for any single entity to acquire a substantial stake (10% or more) without the board's consent.

Do these new Rights affect my current stock ownership or dividends?

Initially, the Rights are distributed as a dividend and trade with the common stock, meaning they are inseparable. They do not grant holders any immediate voting or dividend rights. Your current ownership of APD common stock and any associated dividends remain unchanged until the Rights become exercisable, which only happens under specific conditions (e.g., a hostile takeover attempt).

What happens if an 'Acquiring Person' emerges?

If a person or group becomes an 'Acquiring Person' by exceeding the ownership threshold without board approval, the Rights will become exercisable. Existing rights holders (excluding the Acquiring Person) will be able to purchase additional APD common stock at a discounted price. This 'flip-in' provision dilutes the stake of the Acquiring Person. A 'flip-over' provision also exists for subsequent mergers, allowing holders to acquire shares of the acquiring company at a discount.

Can the company get rid of these Rights before a takeover attempt?

Yes, the Board of Directors has the option to redeem all the Rights for a nominal amount ($0.001 per Right) at any time before an 'Acquiring Person' is identified. This is a common feature of these plans, allowing the company to neutralize the defense if it deems it no longer necessary or if a mutually agreeable transaction arises.

APD 8-K: Material Agreements, Shareholder Matters & More

Summary

Air Products & Chemicals, Inc. (APD) announced on July 24, 2013, the adoption of a new shareholder rights plan, often referred to as a 'poison pill.' This plan involves declaring a dividend of one preferred share purchase right for each outstanding share of common stock. These rights will become exercisable if an individual or group acquires beneficial ownership of 10% (or 20% for certain institutional investors) of APD's common stock without the board's approval. The primary stated purpose of this Rights Agreement is to promote fair and equal treatment of all stockholders and to ensure the Board of Directors can effectively discharge its fiduciary duties. The agreement is designed to deter hostile takeovers by imposing a significant penalty on any party attempting to acquire a controlling stake without board approval. This could lead to substantial dilution for an unauthorized acquirer, making such a takeover attempt more difficult and costly. Investors should note that this is a standard anti-takeover measure. The rights themselves do not grant immediate voting or dividend rights and are initially inseparable from the common stock. They will expire on July 24, 2014, unless redeemed by the Board or triggered by the acquisition of a significant stake. The company also filed a Certificate of Designations for Series A Junior Participating Preferred Stock and a Certificate of Elimination for previous preferred stock designations.

Key Highlights

1Adoption of a Shareholder Rights Plan ('Poison Pill') on July 24, 2013.
2Dividend of one preferred share purchase right declared for each outstanding common share, payable August 5, 2013.
3Rights trigger if an 'Acquiring Person' obtains 10% (or 20% for 13G filers) beneficial ownership without Board approval.
4Plan designed to deter hostile takeovers and protect shareholder interests by potentially causing dilution to an unauthorized acquirer.
5Rights become exercisable 10 days after public announcement of an Acquiring Person, with 'flip-in' and 'flip-over' provisions.
6The Rights will expire on July 24, 2014, unless redeemed by the Board.
7The Board retains the right to redeem the Rights for $0.001 per Right before an 'Acquiring Person' emerges.

Air Products & Chemicals, Inc. 8-K Report, Material Agreement (Jul 25, 2013)

Summary

Key Highlights

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