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Charlotte Russe Enacts Poison Pill

Shareholder rights provisions would be triggered by hostile takeover bid.

Charlotte Russe Holding Corp. said Thursday its board adopted a stockholder rights plan, also known as a poison pill, which companies often use to discourage hostile takeovers. The specialty retailer emphasized that the move was not in response to a specific proposal.

The plan applies to shareholders of record at the close of business on Aug. 25. Those shareholders will receive rights to purchase shares of a new series of preferred stock.

Charlotte Russe said the plan is “designed to enable all stockholders…to realize the full value of their investment and to provide for fair and equal treatment for all stockholders in the event that an unsolicited attempt is made to acquire Charlotte Russe.”

Although poison pills make it harder to attempt a hostile takeover, Charlotte Russe pointed out that the plan is not intended to bar such a move by another company. The purpose, the specialty chain said, is to “deter any attempt to acquire Charlotte Russe in a manner or on terms not approved by Charlotte Russe’s board of directors and, in some cases, the stockholders.”

Under the terms of the plan, the rights will be distributed as a nontaxable dividend, and will expire 10 years from the record date. The rights become exercisable “only if a person or group acquires 15 percent or more” of the retailer’s common stock or announces a tender offer for that much of the company or more.

Should anyone acquire the requisite 15 percent trigger, all rights holders except the buyer become entitled to acquire Charlotte Russe’s common stock at a discount. This puts a greater share of equity in the hands of those not pursuing a purchase of the company, effectively putting the prospective buyer — at least one not working in cooperation with the board — at a disadvantage.

The rights plan may be ended at any time by the board, which can also redeem the rights before the time they are triggered.

Shares of the mall-based fashion chain rose 42 cents, or 3.5 percent, on Thursday to close at $12.51. The close is 26.4 percent higher than the 52-week low of $9.90 on Aug. 4 but 39.3 percent below the high of $20.61 registered on Feb. 25.

Charlotte Russe offers value-priced apparel and accessories targeting young women in their teens and 20s. As of June 28, it operated 469 stores in 45 states and Puerto Rico.