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Foot Locker’s Poison Pill Aimed at Activist Investor With 5% Stake in Macy’s

Foot Locker adopted a short-term shareholder rights plan, or so-called “poison pill,” that seems to be aimed at warding off the “Czech sphinx” activist investor who grabbed a roughly 5 percent stake in Macy’s earlier this year.

These kinds of rights plans generally pose difficulties for entities angling to gain control of a company by amassing large amounts of stock. Such anti-takeover plans are often put into place by firms that have seen their share prices plummet—making them prime pickings for acquisitive vultures—or because an agitator already owns a considerable stake in the company.

In the case of Foot Locker, the 12-month plan—which is effective immediately—could dilute Czech billionaire Daniel Kretinsky’s 12.2 percent stake in the athletic retail chain.

In fact, Foot Locker said it adopted the plan in response to the “recent significant accumulation” of shares by Vesa Equity Investment S.a.r.l., a Kretinsky-controlled holding company.

Vesa had received clearance under the Hart-Scott-Rodino Act to acquire up to 50 percent of the Foot Locker’s stock, the retailer said in a statement Tuesday. On Dec. 4, Vesa revealed that it had acquired an additional 153,730 shares, bringing its total holdings to 12.2 percent of the firm’s outstanding common stock.”

The rights plan would kick in once an investor owns 20 percent of the company’s common shares, subsequently voiding the rights of the 20-percent owner and giving other shareholders the option to purchase one share for every share of common stock they already own. The additional shares purchased under the terms of the rights plan plus the shares the investors exercising the rights already hold will have the effect of diluting the 20 percent holder, neutralizing that entity’s ability to influence the firm.

A rash of fashion players has adopted poison pills in recent history—many in the wake of Covid-19—including Express, Chico’s FAS, Ascena Retail Group, J. C. Penney, Francesca’s and Tailored Brands, the latter four of which have subsequently filed for bankruptcy.

Critics of poison pills believe the plans give too much power to boards because they force an investor to negotiate with boards instead of with other shareholders.