Essendant clarifies poison pill deadline

US wholesaler Essendant has amended its ‘poison pill’ rights agreement to confirm that the shareholding in the company of Staples owner Sycamore Partners has not triggered the agreement.

The poison pill was adopted by the Essendant board on 17 May to prevent Sycamore from increasing its shareholding of almost 10% in the wholesaler and pursuing a hostile takeover. However, on the very same day, Sycamore acquired more than 470,000 further Essendant shares to take its shareholding to almost 11.2%.

Apparently, that led to some confusion as to whether Sycamore’s increased shareholding had actually triggered the poison pill or not, or whether the private equity firm was classified as an ‘exempt person’ for purposes of the rights issue.

In its 17 May regulatory filing, Essendant described an exempt person as: “[…] any person or group of affiliated or associated persons who, as of the time of the first public announcement of the Rights Agreement, beneficially owns 10% (or 15% in the case of a ‘13G Institutional Investor’, as defined in the Rights Agreement) or more of the outstanding shares of common stock […], but only for so long as such person, together with its affiliates and associates, does not become the beneficial owner of any additional shares of common stock while such person is an Exempt Person.”

Had the timing of Sycamore’s acquisition of further shares in Essendant triggered the poison pill? If so, it would have effectively ended Sycamore’s chances of acquiring Essendant and put the wholesaler’s board of directors in a very awkward situation and likely facing a shareholder lawsuit.

Now, the definition of an exempt person has been modified to read: “[…] the definition of ‘Exempt Person’ applies to all persons or groups of affiliated or associated persons who, as of midnight at the end of May 17, 2018, New York City time, beneficially owned 10% or more of the outstanding shares of common stock of the company.”

That puts Sycamore in the exempt person bucket, but it means that it cannot acquire further Essendant shares without triggering the poison pill.

That is not to say that Sycamore is out of the running to acquire Essendant. However, it does mean that any takeover would have to be done with the consent of the Essendant board.

Officially, the Essendant board is still recommending the merger with SP Richards, but it still may have to engage with Sycamore if the private equity firm signs a confidentiality agreement that will let it see Essendant’s books. As of yet, we do not have confirmation on whether or not Sycamore has signed this agreement.

Essendant’s shares are currently trading at around the $14.30 mark. This is significantly higher than the improved offer from SP Richards owner Genuine Parts that valued Essendant’s shares at $12. This $2.30 delta suggests that Sycamore is still interested – for the time being at least.

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