Mergers & Acquisitions

Pier 1 Counters Hedge Fund With Poison Pill

The retailer follows Alden Global's purchase of a 9.5% stake with a plan to protect shareholders from “coercive or unfair” tactics.
Matthew HellerSeptember 28, 2016

A week after a New York hedge fund disclosed a 9.5% stake in Pier 1 Imports, the struggling home-goods retailer has adopted a “poison pill,” saying shareholders needed to be protected from “coercive or unfair” tactics.

Pier 1 said its shareholder rights protection agreement may “block or render more difficult” a takeover by causing substantial dilution to anyone acquiring 10% or more of its shares. Alden Global Capital disclosed its stake in a regulatory filing Sept. 19, saying Pier 1 was at a “critical juncture.”

Pier 1’s plan gives current shareholders the right to buy shares of junior preferred stock with voting privileges if any person or group acquires 10% of the company’s common stock.

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The company did not mention Alden in a news release Tuesday, but said its board acted 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.”

Pier 1 shares were up 1.4%, at $4.24, in trading Wednesday after rising 1.7% on Tuesday.

Alden said in its 13-D filing that it may “endeavor to increase or decrease” its stake and hoped the Pier 1 board would “voluntarily take appropriate action” to address such concerns as the company’s “disappointing” preliminary second-quarter earnings.

Under CEO Alex Smith, Pier 1 has been evolving from a pure brick-and-mortar business to an “omnichannel” retailer catering to online shoppers. But on Sept. 7, it announced Smith was leaving the company as it reported a fourth straight quarter of sales declines.

For the second quarter, overall sales fell 6.7% while comparable-store sales, which included e-commerce, were down 4.3%. Pier 1 had forecast a 1% increase in same-store sales.

Alden is now Pier 1’s second-largest institutional investor, behind only T. Rowe Price, which has an 11.6% stake. The hedge fund said it believed the stock was ” undervalued and represented an attractive investment opportunity.”