Gain Capital adopts ‘poison pill’ defense against FXCM hostile takeover
Gain Capital adopts ‘poison pill’ explained by professional Forex trading experts the “Gain Capital adopts ‘poison pill’” FX trading team.
Gain Capital adopts ‘poison pill’
Well this certainly didn’t take long — and should confirm to our readers what we wrote yesterday, namely that FXCM-Gain Capital friendly discussions had been going on behind the scenes for quite some time between FXCM and Gain Capital management, before breaking down, leading to FXCM’s unsolicited offer to acquire Gain Capital made through a ‘bear hug’ letter to Gain’s board.
Gain Capital was clearly ready and prepared for FXCM’s bid to buy the company. In a very quick move, Gain Capital has announced that it has put in place a Shareholder Rights Plan, to ward off any takeover of the company not agreed to by the board.
How does a Shareholder Rights Plan work? Well first, the Gain Capital Board (right now) issues rights to all existing shareholders to buy more Gain Capital stock at a deep discount to the current share price. But those rights only become exercisable if an outsider (namely, FXCM) actually succeeds in acquiring more than 15% of Gain Capital’s shares. If FXCM does indeed acquire 15% or more of Gain’s shares then the plan would automatically kick into place — existing (pre-FXCM) shareholders would then be able to exercise their rights to buy more Gain Capital stock (and lots of it) at a heavily discounted price. As only the existing shareholders — and not the hostile acquirer, namely FXCM — have these rights, it makes it prohibitively expensive for FXCM to try and buy the company, without the consent of the board.
Gain Capital adopts ‘poison pill’ Conclusion
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