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Netflix adopts poison pill in effort to rebuff Carl Icahn

November 05, 2012|By Joe Flint
  • Netflix said it has adopted a stockholder rights plan to block a hostile takeover by the activist investor.
Netflix said it has adopted a stockholder rights plan to block a hostile… (Charles Krupa / Associated…)

Call it the Carl Icahn pill.

Netflix on Monday said it has adopted a stockholder rights plan to block a hostile takeover by the activist investor, who last week acquired a 10% stake in Netflix, the online entertainment company that has more than 30 million subscribers around the world.

The company said the move was "intended to protect Netflix and its stockholders from efforts to obtain control of Netflix that the board of directors determines are not in the best interests of Netflix and its stockholders."

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For decades, Icahn been a thorn in the side of many media companies, including most recently movie and television studio Lionsgate.

The plan, known to investors as a "poison pill," would kick in if an individual or group tried to buy a sizable chunk of the company without approval from Netflix's board. If that happened, Netflix can now use a technical maneuver to flood the market with new shares and make a takeover attempt extremely expensive.

Netflix said it would issue a dividend distribution of one right for each outstanding share of common stock, which would only be exercisable should a hostile suitor or investor acquire 10% or more of the company. The plan will be in place for at least three years.

Icahn has said he invested in Netflix because he believes its stock is undervalued and that the company is well-positioned to play a leading role in the media landscape of the future.

“All the habits are changing. You’re going to have distribution changing the whole entertainment business, and they have the greatest platform," Icahn told the Los Angeles Times.

Icahn, however, has a history of trying to exert influence on companies and their board of directors in hopes of either motivating a merger or,  in the worst-case scenario, having his stake bought out at a premium.

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Follow Joe Flint on Twitter @JBFlint.

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