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Shareholders Fall in the Middle of Battlefield

Hostile takeovers are just that- they are hostile. Large investment firms buying up large sums of a public company’s stock until the firm is the majority shareholder and in control of the company. This is considered hostile because the public company who’s shares are being bought up does not want to lose control of their business. It becomes a battle for control; but that’s only if the public company knows what to do.

There is currently a hostile takeover taking place that is worth noting, that is Engaged Capital is attempting to become the majority shareholder of Rent-A-Center. This is one of those circumstances that has become a true battle for control. You see, knowing the takeover is looming, Rent-A-Center has enacted what is considered the “Poison Pill” (Thomas, 2017). In basic terms, Rent-A-Center has announced that if Engaged Capital, or any other party with more than 15% of shares, were to acquire more shares then Rent-A-Center would pay dividends to all shareholders with a new series of Preferred Stocks. Thus disabling a hostile takeover.

The details of how this works are fairly nitty-gritty and as a student who has yet to take a finance class I am in no position to try and explain how it works. Instead, I will discuss Rent-A-Center’s bold actions that have protected themselves as well as their average stockholder. During a hostile takeover, it is typical to see stockholders having their stocks bought from them at unfair prices in the open market (Thomas, 2017). Rent-A-Center announced that because of this, they had a duty to protect their shareholders and their stock.

Is it reasonable for Rent-A-Center to say that they announced the Poison Pill to protect their shareholders? Or, is Rent-A-Center trying to save themselves and to do so have to please the shareholders so that they don’t sell stock? Either way Rent-A-Center has made a smart move in their company and shareholders should be pleased.

 

Thomas, Larry. “News.” Home Furnishings Business. N.p., 28 Mar. 2017. Web. 01 Apr. 2017.

 

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