San Antonio Express-News (Sunday)
POISON PILL
ers to realize the expected benefits of the long-term value of their investment by reducing the likelihood that any person or group would want to gain control of the Company…during the market dislocation caused by COVID-19 without appropriately compensating…shareholders,” the filing stated.
Adopting a poison pill has become a popular strategic move by many companies confronted with depressed stock prices brought on by the pandemic.
Other companies that have done so include San Antoniobased radio giant iHeartMedia Inc.; Six Flags Entertainment Corp., owner of the Six Flags Fiesta Texas theme park in San Antonio; Tailored Brands Inc., the Houston parent of Men's Wearhouse; Spirit Airlines; shopping website operator Groupon Inc.; and Office Depot Inc.
The poison pills are generally similar.
During a call with analysts earlier this month, iHeart President, CFO and COO Richard Bressler said the company adopted a rights plan “to protect the best interest of all iHeartMedia stockholders during the current period of high equity market volatility and price disruption.”
Shares topped $18 in late January and fell as low as $4.79 in March. They closed at $7.02 Friday. The company, which emerged from bankruptcy last year, owns about 850 radio stations in more than 150 markets. In San Antonio, iHeart's stations include WOAI-AM, KQXT-FM and KAJA-FM.
An iHeart spokeswoman declined to comment.
In a May 6 statement, iHeart said it was acting to “protect” the company and its shareholders “by deterring any entity person, or group from attempting opportunistically to gain undue influence or control of iHeartMedia…without paying an appropriate control premium.”
Six Flags announced a rights plan on March 31 after its stock had fallen from more than $46 in late December to just over $10 on March 18 — after it temporarily suspended operations at its parks due to the coronavirus. It closed at $23.54 Friday.
In a statement at the time the plan was announced, Six Flags said its board “believes that the current trading price of company stock does not reflect the company's intrinsic value.
“The Rights Plan is intended to enable the company's stockholders to realize the long-term value of their investment, ensure that all stockholders receive fair and equal treatment in the event of any proposed takeover of the company, and to guard against tactics to gain control of the company without paying all stockholders an appropriate premium for that control,” Six Flags added.
Many lawyers and outside advisers have been recommending public company boards consider adopting poison pills and other defensive measures “to protect against any threat of opportunistic bidders in the wake of recent stock price shocks,” proxy advisory firm Institutional Shareholder Services said last month.
ISS typically encourages boards to put poison pills to a shareholder vote.
“A severe stock price decline as a result of the COVID-19 pandemic is likely to be considered valid justification in most cases for adopting a pill of less than one year in duration,” ISS said in guidance for companies dealing with the pandemic.
Clear Channel's poison pill has a 360-day term, so it will expire May 14.
The company, which was spun off from iHeart last year as part of the broadcast company's bankruptcy reorganization, has been bracing for the impact of COVID-19 on its U.S. operations. It has cut salaries, reduced hours for hourly employees and implemented furloughs. It had 1,700 U.S. employees and 4,200 international employees as of Dec. 31.
The pandemic initially hurt Clear Channel primarily in Europe and China, where revenues already were sliding before the crisis.
Clear Channel's shares closed Friday at $1.03 — the first time they've closed above a buck since March 13. Last month, it received notice from the New York Stock Exchange that the stock could face delisting if it continues to trade below $1. The company has six months from the notice to regain compliance.
After Friday's market close, Los Angeles-based investment management firm Ares Management LLC disclosed it had upped its stake in Clear Channel to 5.9 percent.
In a regulatory filing, Ares said it has or may engage in talks with Clear Channel's management and/or board about the advertising company's business, operations, direction and strategic alternatives. Ares added it “may take other steps seeking to bring about changes” at the company.
A Clear Channel spokesman didn't immediately respond to a request for comment.