Fred’s swallows poison pill

Fred’s Inc. is playing defense.



The Memphis-based retailer on Tuesday adopted a shareholder rights plan, or “poison pill,” less than a week after news surfaced that an activist investor had amassed a big stake in the company. It also comes approximately one week after Fred’s announced it had agreed to purchase 865 divested Rite Aid stores as part of the expected Walgreens Boots Alliance-Rite Aid merger. The acquisition would more than double Fred’s store count.



The shareholder-rights initiative was put in place after Alden Global Capital quietly acquired approximately one-quarter of Fred’s outstanding shares, making it the company’s biggest shareholder, in a one-month period from later November to late December. Fred’s said its board unanimously approved the plan after it noticed "unusual and substantial activity" with its shares.



The plan will be triggered when someone acquires ownership of 10% or more of the company's common shares or if a large shareholder adds to their position, which could prevent Alden from further increasing its stake.



Fred’s said the plan reduces the chances for anyone to “gain control of the company through open market accumulation without appropriately compensating its shareholders for such control or providing the board sufficient time to make informed judgments.”