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From Home Furnishing Business

Purple Adopts ‘Poison Pill’ as Directors Mull Buyout Offer from Shareholder

Specialty mattress producer Purple Innovation, whose largest shareholder made a takeover offer earlier this month, has adopted a shareholder rights plan that will make it more difficult for an outside entity to gain control of the company while its board of directors evaluates the buyout proposal.

The rights plan, commonly called a “poison pill” provision, gives shareholders one “right” for each share of stock owned. If any stockholder acquires a 20 percent stake on the company, the “rights” are immediately converted into additional shares of the company – a move that would dilute that stockholder’s stake.

Coliseum Capital Management, which currently owns about 45 percent of Purple’s shares and has offered to buy all remaining shares for $4.35 per share, can’t acquire any more shares without triggering the rights plan, according to the company.

“The Rights Plan is intended to enable the company's shareholders to realize the full value of their investment and to guard against any attempts to gain control of the company without paying all shareholders an appropriate control premium,” Purple said in a statement.

The company said the board had formed a special committee of outside directors to evaluate the Coliseum Capital offer.

“The Special Committee adopted the Rights Plan in response to the Coliseum proposal, Coliseum's substantial increase in ownership of shares of Purple over the last year and the Special Committee's desire to have the time and flexibility necessary to evaluate the Coliseum proposal,” the company’s statement read.

“The Rights Plan applies equally to all current and future shareholders and does not deter any offer or preclude the Special Committee from considering an offer that is fair and otherwise in the best interests of Purple shareholders.”

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