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Mentor plans to outmaneuver activist investor

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CIOL Bureau
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SAN FRANCISCO: EDA vendor Mentor Graphics Corp has announced a new shareholder rights plan.According to the new plan, existing shareholders will be entitled to purchase Mentor’s common stock shares at a discount of 50 per cent. Shareholders can go in for this move if any person or group acquires 15 per cent of the company without the approval of the company’s board of directors.

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The new plan is reportedly a bid to protect Mentor from the recent business maneuvers by Carl Icahn, an activist investor who has been buying Mentor shares in significant numbers. Reportedly one of the richest people in the world, Icahn is known for butting heads with management at companies that he buys large amounts of stock in, pushing them to go in for mergers and acquisitions or a change in leadership.

Last month Icahn said that mentor shares were undervalued, and requested a meeting with the management. He also opened up 7 per cent of the company through operations with various other companies.

Sources say that as of Wednesday, Icahn held 9.5 of outstanding mentor shares.

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According to the new plan, any individual or group that already possesses 15 per cent  of the company will not be able to avail the 50 p.c discount. The new plan will enable Mentor shareholders to reduce the ownership percentage held by Icahn’s or any other investor who possesses more than 15 per cent in the company.

The plan also gives all shareholders of record - by the end of business on July 6 — one incentive stock purchase right for each share of the common stock they hold.

Also, synthetic ownership of Mentor’s common stock as derivative securities will be counted towards the 15 per cent, in the event that the individual or group that holds it physically owns 5 per cent or more of the common stock. The incentive stock purchase right expires on December 31, 2011, unless it is redeemed earlier by the company.

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