Starz Entertainment said Wednesday that its board voted unanimously to adopt a limited-duration shareholder protection rights agreement, also known as a “poison pill,” effective immediately and expiring in a year. The move follows Byron Allen acquiring a big chunk of stock in the company.
The Allen Media Group founder and CEO unveiled a 10.7% stake in Starz last week. He paid $25 million for 1.8 million shares. Shareholder rights plans make buying stock over a certain threshold more expensive, usually prohibitively so. It’s a defensive strategy used by companies against hostile takeovers. In this case, the rights will be triggered by a person or group acquiring a 17.5% ownership stake. The plans allow existing stockholders to buy shares at a steep discount, which dilutes the value and voting power of new share purchases.
Newly public Starz, run by CEO Jeff Hirsch, separated from Lionsgate Studios last year. Lionsgate itself has a shareholder rights plan in place that expires in May.
The Starz plan can be extended by shareholder resolution to March 10, 2029, or terminated or amended by the board earlier.
“The Board determined to adopt the Rights Plan as they believe it is in the best interest of the Company and allows it to pursue its long-term strategic plan and maximize value for all shareholders,” the company said. “Poison pills reduce the likelihood that any person or group can gain control of the company’s shares without appropriately compensating shareholders for that control.”
The plans call for Starz to issue one right for each outstanding common share, with rights generally exercisable only if a person or group has acquired beneficial ownership of 17.5% or more of the company’s outstanding common shares. Any person or group who currently owns more than this percentage can continue to own the position, but it would trigger the rights plan if they acquire more.
If the rights do become exercisable, all holders of rights (other than the person or group triggering the plan, whose rights would become void) will be entitled to acquire common shares of Starz at a 50% discount to the then-current market price, or the company may exchange each right held by such holders for one common share of the company.
