Chorus Aviation Inc. on April 27 announced it has entered into a shareholder rights plan effective immediately. Commonly known as a “poison pill” in the world of mergers and acquisitions, a shareholder rights plan is leveraged by a company board against a takeover. The defensive tool is being used by several public companies in a range of sectors under the current economic environment caused by the COVID-19 pandemic, which created a dramatic decrease in many share prices.
As Chorus explains its rights plan is designed to ensure that all Chorus shareholders are treated fairly in connection with any takeover bid and to protect against “creeping bids”, which involve the accumulation of more than 20 per cent, on an aggregate basis, of the Chorus’ Class A Variable Voting Shares and Class B Voting Shares through purchases exempt from what the describes as an applicable takeover-bid rules.
Chorus notes the adoption of its rights plan has not been implemented in response to, or in anticipation of, any pending or threatened takeover bid.
“Since the onset of the COVID-19 pandemic, the price of Chorus’ shares have declined significantly,” said Joe Randell, president and CEO, Chorus. “We have taken significant steps to bolster our liquidity and remain focused on taking all actions necessary to emerge from this crisis as a strong company. We have adopted the rights plan to protect against those who may seek to take advantage of the current market environment to the detriment of Chorus and its shareholders.”
Pursuant to its rights plan, Chorus explains one right attaches to each issued and outstanding share. Subject to the terms of the rights plan, the rights become exercisable in the event that any person (together with certain related parties) becomes a beneficial holder of 20 per cent or more of the outstanding shares without complying with the “Permitted Bid” provisions under the rights plan. In such event, Chorus continues to explains holders of the rights (other than the acquiring person and its related parties) will be permitted to exercise their rights to purchase additional shares at a 50 per cent discount to the then prevailing market price of the shares.
The rights plan is effective as of April 27, 2020, but subject to ratification by Chorus’ shareholders within six months of its adoption. Chorus is holding its annual and special meeting on June 29, 2020.