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LONDON, UK / ACCESSWIRE / December 28, 2016 / Active Wall St. blog coverage looks at the headline from drugstore chain Fred's Inc. (NASDAQ: FRED) as the Company announced on December 27, 2016, that its Board of Directors had approved the Shareholder Rights Plan unanimously. The Board reiterated that the decision was taken so that it could fulfill its fiduciary duties and to ensure that all Fred's shareholders receive fair and equal treatment. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
One of Fred's competitors within the Discount, Variety Stores space, Tuesday Morning Corp. (NASDAQ: TUES), is estimated to report earnings on February 03, 2017. AWS will be initiating a research report on Tuesday Morning in the coming days.
Fred's Shareholders Rights Plan
The Company's communication stated that the decision was taken following the "unusual and substantial activity" in its shares in recent weeks. Under the rights plan, Fred's is issuing a right for each share of the common stock outstanding as on record date of January 05, 2017. The plan would be set in motion only in the event that an individual or group acquired beneficial ownership of 10 percent or more of the Company's common shares. The rights will expire on June 26, 2019. Fred's will have the right to redeem the rights at $0.01 per right, at any given point before the date of expiry.
According to the Company's Board, the rights plans allows all Fred's Pharmacy shareholders to realize the long-term value of their investment by reducing the likelihood that any person or group might gain control of the Company through open market accumulation without appropriately compensating shareholders for such control or providing the board sufficient time to make informed judgments. The rights plan would also prevent a hostile takeover of the company and avoid certain default provisions of its credit facilities from being triggered.
The Board assured the Company's shareholders that it is committed to the Fred's growth and would continue to remain focused on four predetermined key areas - pharmacy expansion, specialty pharmacy, front store growth, and lucrative acquisitions and partnerships.
The Company has specifically stated that the Shareholders Rights Plan was not in response to any specific takeover bid or other proposal to acquire control of the Company.
Other concurrent decisions taken by Fred's Board
The Board of Directors of Fred's made several amendments to the Company's by-laws, including procedural restrictions on the shareholder right to call special meetings, a provision for advanced notice for director nominations, and shareholder proposals etc.
The Board decided to close 40 of its underperforming stores by H1 2017 which will result in a savings of over $4 million. The funds would be invested in upgrading the Company's technology and infrastructure.
On December 20, 2016, Fred's had announced that it had signed an agreement with Walgreens Boots Alliance, Inc. (NASDAQ:WBA) and Rite Aid Corporation (NYSE:RAD) to purchase 865 stores for $950 million in cash. Rite Aid had decided to sell its 865 stores to ease antitrust concerns over its merger with Walgreens Boots Alliance. The acquisition of the 865 stores would catapult Fred's market position and make it the third-largest drugstore chain in the US. Following the acquisition, Fred's would not only be able to double its footprint but would also be able to spread its reach geographically.
The above news was followed by the revelation that the hedge fund Alden Global Capital had purchased 24.8% of shares in Fred's outstanding stock within a month period between late November and late December 2016. The revelation was based on the filing on December 22, 2016 by Alden with the US Securities and Exchange Commission.
At the close on December 27, 2016, Fred's share price finished the trading session at $19.63, declining 2.82%. A total volume of 1.27 million shares exchanged hands, which was higher than the 3 months average volume of 1.04 million shares. The stock has surged 104.28% and 103.65% in the last month and past three months, respectively. Furthermore, since the start of the year, shares of the company have surged 22.28%. The stock has a dividend yield of 1.22% and currently has a market cap of $704.72 million.
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