Formally known as a shareholder rights plan, the pill is designed to trigger excessive dilution of Agnico’s stock in the event that a hostile company amasses more than 20% of Agnico’s shares. The dilution is created by shareholders, other than the buyer, exercising their right to buy Agnico shares at a significant discount to market prices.
The company is adopting the rights plan “in the interest of all shareholders to ensure fair treatment in the event of unsolicited take-over bids,” Barry Landen, Agnico’s secretary-treasurer said.
Agnico defends its plan by noting that the majority of U.S. mining companies has adopted similar schemes. The Agnico plan also includes a provision that take-over bids be submitted directly to its shareholders as an alternative to dealing only with the board of directors.
Paul Penna, Agnico’s president, added that the rights plan was not in response to an anticipated take-over bid.
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