Tempur Sealy Adopts Shareholder Rights Plan

February 14, 2017

On February 12, 2017 the Board of Directors of Tempur Sealy International, Inc. (NYSE: TPX) approved the adoption of a limited duration stockholder rights plan (the “Rights Plan”) and declared a dividend distribution of one right (“Right”) for each outstanding share of common stock. The record date for such dividend distribution is February 20, 2017. The Rights Plan is a limited duration rights plan and expires on February 7, 2018.

According to the Company’s press release,

The adoption of the Rights Plan is intended to protect Tempur Sealy and its stockholders from the actions of third parties that the Board of Directors determines are not in the best interests of Tempur Sealy and its stockholders, and to enable all stockholders to realize the long-term value of their investment in Tempur Sealy. The Board of Directors believes that the Rights Plan will ensure that the Board of Directors remains in the best position to discharge its fiduciary duties to Tempur Sealy and its stockholders. The Rights Plan is not intended to interfere with any sale, merger, tender or exchange offer or other business combination approved by the Board of Directors. Nor does the Rights Plan prevent the Tempur Sealy Board of Directors from considering any offer that it considers to be in the best interest of Tempur Sealy’s stockholders.

Under the Rights Plan, the rights generally would become exercisable only if a person or group (including a group of persons who are acting in concert with each other) acquires beneficial ownership of 20% or more of Tempur Sealy’s common stock in a transaction not approved by Tempur Sealy’s Board of Directors. In that situation, each holder of a right (other than the acquiring person or group, whose rights will become void and will not be exercisable) will have the right to purchase, upon payment of the exercise price and in accordance with the terms of the Rights Plan, a number of shares of Tempur Sealy common stock having a market value of twice such price. In addition, if Tempur Sealy is acquired in a merger or other business combination after an acquiring person acquires 20% or more of Tempur Sealy’s common stock, each holder of the right would thereafter have the right to purchase, upon payment of the exercise price and in accordance with the terms of the Rights Plan, a number of shares of common stock of the acquiring person having a market value of twice such price. The acquiring person or group would not be entitled to exercise these Rights. In the Rights Plan, the definition of “beneficial ownership” includes derivative securities.

The Rights Plan is similar to other plans adopted by publicly-held companies.

Since January 2017 10 public companies have adopted Poison Pill Plans (also called “Rights Plans”). As depicted in the chart below, 5 of the 10 companies adopted Poison Pill Plans to avoid hostile takeovers by activist shareholders. The remaining 5 companies adopted Poison Pill Plans to protect valuable tax assets, such as net operating losses (“NOLs”). These types of Poison Pill Plans are usually called NOL Rights Plans or NOL Poison Pill Plans.


Originally published at section382study.com on February 15, 2017.

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