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TheStreet Open House

Aeropostale Installs Poison Pill To Ward Off Takeover Attempts

Aeropostale Inc (ARO) adopted a poison pill that would be triggered if a stockholder buys 10% of the clothing retailer.

With the company facing fire from activist shareholders, the move is considered an attempt to ward off unwanted takeover attempts.

Aeropostale faces growing investor pressure

Last week, shareholder Crescendo Partners pressured the retailer to sell itself, amid the company's fading fortunes.

Aeropostale Inc (ARO) has been posting disappointing results for the past three quarters in a row. The retailer has been incurring losses amid challenging a teen retail environment, high levels of promotional activity and weak traffic trends.

According to Sagarika Jaisinghani of Reuters, the retailer has been trying to reposition itself as a lifestyle brand and offer more fashionable products, in addition to hoodies, jeans and t-shirts, that will allow it to charge more for its clothing. The retailer has warned of another quarterly loss when it reports next week. Aeropostale Inc (ARO) has been hit along with rivals by heavy discounting going into the holiday shopping season.

Aeropostale's poison pill

The teen clothing retailer indicated Tuesday its poison pill would see a large number of new shares issued to other shareholders if one investor bought more than 10% of the company. However, for a passive investor, the threshold limit is 15%.

The retailer denied that it was resorting to the poison pill measures to ward off any takeover proposal. Its plan, effective November 26, aims to provide stockholders with adequate time to fully assess any takeover bid. The retailer indicated it would put the plan to a stockholder vote at its 2014 annual meeting. The plan will expire at the 2014 annual meeting if it doesn't get stockholder approval.

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