What is the purpose of this new shareholder rights plan?

The primary purpose of the new rights plan is to deter hostile takeovers. It is designed to provide the Board of Directors with a more effective means to protect shareholders from coercive or unfair takeover tactics and to ensure that any potential acquisition proposal is evaluated in a manner that maximizes long-term shareholder value.

How does this rights plan work?

Upon adoption, each outstanding share of McKesson common stock receives one 'Right.' These Rights do not become exercisable until a 'Triggering Event' occurs, such as an individual or group acquiring 15% or more of McKesson's outstanding common stock without board approval, or commencing a hostile tender offer. Upon a Triggering Event, the Rights would allow holders (excluding the acquirer) to purchase McKesson's Series A Junior Participating Preferred Stock at a substantial discount, effectively diluting the acquirer's stake and making the takeover more expensive.

Are there any tax implications for shareholders?

The distribution of the Rights themselves is generally not expected to be a taxable event for McKesson or its shareholders. However, shareholders may recognize taxable income if the Rights become exercisable (e.g., for preferred stock or securities of an acquiring company) or if the company redeems the Rights.

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

Yes, McKesson's Board of Directors has the right to redeem all of the outstanding Rights at any time for a nominal price of $0.01 per Right, payable in cash or stock. This redemption typically occurs before a Triggering Event, effectively terminating the plan.

MCK 8-K: Material Agreements & Shareholder Matters

Summary

McKesson Corporation (MCK) filed an 8-K on October 22, 2004, to announce the adoption of a new shareholder rights plan, commonly known as a 'poison pill'. This plan, effective October 22, 2004, replaces a previous rights agreement that expired on the same date. The new plan involves distributing one 'Right' for each outstanding share of common stock, entitling holders to purchase a fraction of a share of Series A Junior Participating Preferred Stock at a specified price, subject to adjustments. The primary purpose of this rights plan is to deter hostile takeovers by making any acquisition of 15% or more of McKesson's stock prohibitively expensive without the board's approval. The plan outlines specific trigger events, such as a person acquiring a substantial percentage of shares or commencing a hostile tender offer, which would cause the Rights to become exercisable. This action signals the board's commitment to protecting shareholder value and maintaining control over strategic decisions. Investors should note that while the distribution of these Rights is generally not a taxable event, the exercise of Rights or subsequent redemption could have tax implications. The Rights are designed to provide the Board with leverage to negotiate any potential acquisition offers that are deemed to be in the best long-term interests of the company and its shareholders. The plan is set to expire in ten years, on October 22, 2014, unless redeemed or exchanged earlier by the company.

Key Highlights

1McKesson Corporation adopted a new shareholder rights plan ('poison pill') effective October 22, 2004, replacing its prior agreement.
2The plan grants one 'Right' per share of common stock, allowing holders to purchase preferred stock under certain conditions.
3The primary objective is to prevent hostile takeovers by making significant stake acquisitions costly without board approval.
4A 'Triggering Event' (e.g., acquiring 15% or more of stock, hostile tender offer) activates the Rights.
5Upon a Triggering Event, Rights holders can purchase McKesson stock or the acquirer's stock at a discount, diluting the acquirer's stake.
6The Board retains the right to redeem the Rights for a nominal price ($0.01) prior to a Triggering Event.
7The new Rights plan is set to expire on October 22, 2014, unless earlier redeemed or amended.

MCKESSON CORP 8-K Report, Material Agreement (Oct 22, 2004)

Summary

Key Highlights

Frequently Asked Questions