Town Sports International Holdings Adopts Stockholder Rights Plan
Posted: December 31, 2014 in Chains
Town Sports International
NEW YORK, NY – Town Sports International Holdings, Inc. (the “Company”) (Nasdaq:Club), announced today that its Board of Directors has adopted a stockholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of the Company’s common stock.
Over the past several months, a group of investors has accumulated a significant position (according to their filings with the SEC, approximately 26%) of the outstanding shares of the Company’s common stock. Last week, in connection with rejecting the Company’s offer to provide these investors representation on the Board, the investor group sent a letter to the Company demanding a majority of the seats on the Board, a copy of which letter is attached hereto. In conversations with Thomas J. Galligan III, the Company’s Chairman of the Board the investor group suggested other actions that the Board felt were inconsistent with its obligations to other stakeholders of the Company. In light of the investor group’s threats and actions, the Board has adopted the rights plan.
Mr. Galligan said: “We have always prided ourselves on a strong relationship with our investors and we look forward to continuing to engage in constructive dialogue with our investors regarding all avenues for enhancing and delivering value to our stockholders. Consistent with this approach, this rights plan is designed to protect the interests of all of our stockholders, which includes the significant interest held by management and the Board, against any coercive takeover tactics to gain control of the Company that would deprive our stockholders of a control premium.”
Robert Giardina, the Company’s Chief Executive Officer, added, “We continue to make solid operating progress and believe we are on the right path to maximizing long-term shareholder value. In August 2014, we commenced rolling out the high-value low-price (“HVLP”) model, and we already are seeing positive trends in guest traffic, membership levels, and increased cash flow. We are excited about these results and as a result have accelerated the roll-out of the HVLP model from 60 clubs (as announced in our last earnings call) to 71 clubs as of December 31, 2014. We continue to believe this strategy best addresses our changing industry while leveraging our position as one of the largest and most well known health and fitness brands in the Northeast United States.”
The stockholder rights plan does not prevent the investor group from engaging in a proxy contest, but rather, if it wants control of the Board, it must submit its plans for the Company directly to all stockholders. The rights plan also will not prevent a takeover, but should encourage anyone seeking to acquire the Company to negotiate with the Board prior to attempting a takeover. The rights plan contains an exception for offers that meet certain requirements that are made for all of the shares of common stock of the Company and that treat all stockholders equally.
Consistent with the Company’s commitment to good corporate governance, the rights will be submitted for stockholder approval at the Company’s 2015 annual meeting of stockholders and if not approved by a majority of the shares eligible to vote (other than those shares owned by the investor group) will expire immediately; and if approved at the meeting, will expire in June 2016.
The rights will be exercisable if any person or group acquires beneficial ownership of 20% or more of the common stock of the Company, provided with respect to any person or group that already owns 20% or more (such as the current investor group) the rights will be exercisable only if its beneficial ownership increases. If the rights become exercisable, all rights holders (other than the person or group triggering the rights) will be entitled to acquire, upon exercise, common stock of the Company having a value equal to two times the exercise price of the right.
The dividend distribution will be made on January 12, 2015 payable to stockholders of record on that date, and is not taxable to shareholders.
The full text of the stockholders rights plan will be filed with the Securities and Exchange Commission.
