Human Genome Sciences (NASDSAQ:HGSI) has adopted a stockholder rights plan - known widely as a “poison pill” defense strategy - in an effort to protect itself from a hostile takeover bid by rival drug maker GlaxoSmithKline (NYSE:GSK).
The biotechnology company adopted the one-year plan on Thursday after its board determined the $2.6 billion offer by Britain’s GlaxoSmithKline undervalued the company. It recommended shareholders not tender their shares in favor of the acquisition.
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Human Genome said the rights plan “is intended to allow the company to fully engage in its strategic review process and as a means to protect the long-term interests of the company’s stockholders.”
These types of defense strategies are common in the face of a hostile acquisition as they buy time for the company to evaluate other strategic options. Earlier this year, gene sequencing Illumina (NASAQ:ILMN) adopted a poison pill to defend against Roche’s $5.7 billion bid.
The rights plan doesn’t stop other companies from bidding and the board accepting those it feels are in the best interest for shareholders.
Human Genome also on Thursday declared a dividend of one share purchase right for each share of its common stock held as of May 29.
The company first squashed Glaxo’s $13 a share bid on April 19, when it was at an 81% premium. However, analysts have long said they think Human Genome could get Glaxo to move higher. On average, 13 analysts in a Thomson Reuters poll believe a deal could reach $15.
Human Genome is considered a pioneer in the biotech field. It began a research partnership with Glaxo in 1993 that continues today. Mostly recently, the two have worked on a lupus drug called Benlysta and are collaborating on experimental drugs for diabetes and heart disease.
Glaxo last week launched a tender offer for Human Genome. It is expected to expire at midnight June 7.