Human Genome Sciences ($HGSI) has added a poison pill to its portfolio as it tries to fend off the hostile takeover by its longtime partner GlaxoSmithKline ($GSK).
The company says the shareholder-rights plan is for one year and gives all shareholders the right to acquire additional shares if one gets a 15% stake in the drugmaker, reports Dow Jones. These kinds of shareholder-rights plans are called "poison pills" because they are intended to kill off unwanted takeovers by diluting the value of shares and making a takeover more expensive.
Poisonous is probably the right descriptor for the atmosphere around the two companies that have worked together for 20 years and share the rights to HGS' lupus drug Benlysta, the first new drug for the condition in 50 years. HGS last month turned up its nose at GSK's $13-a-share, $2.6 billion buyout offer, saying it was not nearly enough given its own potential. Its shares are now trading above $14 a share. In response, GSK said it would forget playing nice and go directly to shareholders with an offer, which the HGS board hopes they will ignore while it figures out a way to get them more for their investment.
HGS says the rights plan will not prevent it from accepting any deals but will provide a buffer so its board can explore all of its options. It has already hired a couple of investment banks to help it parse through "strategic alternatives," including a possible sale.