SCO stymies hostile bidders with shareholder plan

SCO has issued a shareholder rights plan to protect its stockholders from a hostile takeover bid, prompting speculation that the company could become an acquisition target.

The company played down its motive for the move, insisting that many publicly traded companies take similar steps.

Under the plan, SCO has given shareholders the right to buy one preferred share as a dividend for each share held. This should make it more expensive for a bidder to buy enough SCO stock to acquire the company.

But some observers have said shareholder rights plans like SCO?s often pre-empt a takeover move or partial sale of the company. The plan means that any company that buys over 50 per cent of SCO must assume the obligations to shareholders that SCO is introducing.

Two weeks ago, beleaguered database supplier Informix took similar action to toughen up its poison pill options in a bid to protect itself from a hostile bid (PC Dealer, 17 September).

Under its beefed-up option, Informix has stepped up a rights plan that take effect if any buyer purchases more than 20 per cent of the outstanding stock in the company.