Pier 1 Imports Adopts a Poison-Pill Measure

Pier 1 Imports Inc., under scrutiny of an activist investor, unveiled steps Tuesday to protect itself from any single shareholder acquiring a 10% or more stake.

The adoption of a so-called poison pill comes a week after hedge fund firm Alden Global Capital LLC revealed a 9.5% stake in the home-goods retailer, which has launched a search for a new chief executive amid disappointing sales.

According to a prepared statement, the new restriction won't prevent a takeover "but may cause substantial dilution to anyone acquiring 10% or more of the company's common stock, which may block or render more difficult a merger, tender offer or other business combination."

The agreement attaches to every share of common stock the right to buy a fraction of junior preferred stock at the price of $17.50. The preferred shares would carry similar voting terms to common stock, watering down the influence of any shareholder with a big stake.

The agreement is extended to shareholders of record at the close of business Oct. 7 and expires following the company's 2017 annual shareholder meeting unless amended.

Pier 1 doesn't mention Alden Global in the statement announcing the new measure. "The board feels it is important to ensure that all shareholders have the opportunity to realize the long-term value of the iconic Pier 1 Imports brand, and to guard against coercive or unfair tactics to gain control of the company without paying all shareholders an appropriate premium," said Chairman Terry London, in the statement.

Alden Global and Pier 1 didn't immediately respond to requests for comment.

Last week in a regulatory filing, Alden said it has been in contact with Pier 1 management regarding shareholder representation to the board, the company's recent financial results and the search for a new chief executive. Alden said it intends to continue the communication and that it believes that Pier 1 is "at a critical juncture."

Alden said it obtained the stake, composed of some 7.9 million shares outstanding, because it believed the stock was "undervalued and represented an attractive investment opportunity." The stake places Alden second only to T. Rowe Price Associates Inc., which has an 11.6% stake, among institutional investors in Pier 1, according to FactSet data.

Any shareholder with a 10% or higher stake gathered before the new agreement, like T. Rowe Price, wouldn't trigger the new measure unless an additional 1% of shares is obtained, Pier 1 said in its Tuesday statement.

Earlier this month, Pier 1 said that Chief Executive Alex Smith was slated to leave the company at the end of the year, and a search for his replacement had been launched. The announcement came on the same day that the chain reported disappointing preliminary results for the quarter ended in August. It said net sales declined about 6.7% from the same period a year ago, with comparable sales falling 4.3%, much more than the company's forecast of a range of a 1% loss and a 1% climb, respectively. Analysts cited by FactSet expected comparable sales to fall 0.4%.

Write to Ezequiel Minaya at [e-mail]

(END) Dow Jones Newswires

September 27, 2016 19:15 ET (23:15 GMT)

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