ON Semiconductor announced today that its board of directors (the “Board”) has adopted a short-term stockholder rights plan (the “Rights Plan”). The Rights Plan is designed to protect stockholder interests by reducing the likelihood that any person or group would gain control of the Company through the open-market accumulation of ON shares during this period of market dislocation without appropriately compensating ON’s stockholders for such control.
In adopting the Rights Plan, the Board noted, in particular, the recent disclosure by Koch Industries and its affiliates (“Koch”) on Schedule 13G of beneficial ownership of shares of the Company’s common stock and Koch’s submission of a notification form with the U.S. Federal Trade Commission and U.S. Department of Justice on May 15, 2020 seeking approval to allow Koch the flexibility to acquire more than 10% of the outstanding shares of the Company’s common stock (up to a maximum of $940.1 million in value). Koch’s request for early termination of the waiting period under the Hart-Scott-Rodino Act was granted on June 5, 2020. The Board also noted, however, that Koch’s Schedule 13G filing indicates that the ON shares “were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of [ON].” The Board also took note of the substantial market volatility and the resulting impact on both the Company’s stock price and the potential for Koch and other investors to take increased positions in the Company’s stock, as well as potential ongoing market volatility as a result of the COVID-19 pandemic and its impact on the Company’s business.
Further, the Rights Plan will position the Company’s Board of Directors to fulfill its fiduciary duties on behalf of all stockholders by ensuring that the Board has sufficient time to make informed judgments about any attempts to take over the Company and to encourage anyone seeking to gain a controlling interest in the Company to negotiate prior to attempting a takeover. The Rights Plan is not intended to prevent or interfere with any action with respect to the Company that the Board determines to be in the best interests of stockholders.
The Rights Plan is similar to plans recently adopted by other publicly traded companies, including with respect to its limited scope and duration of less than one year. Pursuant to the Rights Plan, the Company is issuing one right for each share of common stock as of the close of business on June 18, 2020. The rights will initially trade with the Company common stock and will become exercisable, subject to the terms of the Rights Plan, only if any person (or any persons acting as a group) acquires ownership (including through certain derivative positions and as otherwise provided in the Rights Plan) of 15% or more of the Company’s outstanding common stock (the “triggering percentage”). If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of ON’s common stock at a 50% discount to the market price at that time or the Company may elect to exchange each right held by such holders for one share of ON’s common stock. Subject to the terms of the Rights Plan, any person who currently owns more than the triggering percentage may continue to own the shares of common stock but may not acquire (including under derivatives, options or similar instruments) any additional shares without triggering the Rights Plan.
The Rights Plan has a 364-day term, expiring on June 7, 2021. The Board may consider an earlier termination of the Rights Plan if market and other conditions warrant.
Additional details regarding the Rights Plan will be contained in a Form 8-K to be filed by the Company with the U.S. Securities and Exchange Commission.