Foot Locker Plans Rights Issue To Block Billionaire Activist Daniel Kretinsky

Czech billionaire Daniel Kretinsky has built a 12.2% stake in Foot Locker, the company said Tuesday as it unveiled a rights issue that could dilute his holding.
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Foot Locker Inc.  (FL) - Get Report launched a shareholder rights offering Tuesday that could be used as a barrier to activist investor Daniel Kretinsky taking control of the sports apparel retailer. 

Foot Locker said it would issue one right for each outstanding share, allowing for the purchase of one Foot Locker share, but said they would only be exercisable if an investor were to acquire a 20% stake in the company. Vesa Equity Investment, Foot Locker said, has built a 12.2% stake in the company. Vesa is an investment vehicle controlled by Czech Republic-born billionaire Daniel Kretinsky, who had also built a stake in Macy's  (M) - Get Report earlier this year.

"The Board believes that the Rights Plan provides the Board with sufficient time to make informed judgments that are in the best interests of shareholders, while it continues to oversee the execution of the Company's strategic plan to drive long-term growth, profitability, and shareholder value," Foot Locker said. "The Rights Plan has not been adopted in response to any specific proposal and is not intended to prevent or deter any action or offer that the Board determines to be in the best interests of shareholders."  

Foot Locker shares were marked 0.1% higher in early trading Tuesday to change hands at $41.41 each, a move that extends their six-month gain to around 17%.

Footlocker noted in a Securities and Exchange Commission filing in March that it "may face risks associated with shareholder activism" that could "interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, and divert the attention of management, any of which could have an adverse effect on our business or stock price".

Late last month, Foot Locker posted stronger-than-expected third quarter earnings as the athletic retailer took advantage of a solid performance from Nike  (NKE) - Get Report and improving consumer spending during the back-to-school season.

Foot Locker said adjusted earnings for the three months ending on November 1 came in at $1.21 per share, up 7% from the same period last year and well ahead of the Street consensus forecast of 63 cents per share. Group revenues, Footlocker said, rose 9% to $2.106 billion as same-store sales jumped 7.7%.

The retailer decline to provide full-year or holiday quarter guidance, however, but noted that end of October inventories were 8.5% lower from last year at $1.193 billion.