MEMPHIS, Tenn. (News release) -- Sylvamo's board of directors unanimously adopted a limited-duration shareholder rights plan to protect the interests of all shareholders. The rights plan is effective immediately.
The board adopted the plan after Atlas Holdings confirmed it entered into a block trade that would give Atlas nearly 14% of Sylvamo's outstanding shares and informed Sylvamo it also holds an unspecified amount of derivatives on Sylvamo shares. Sylvamo's leaders maintain open dialogue with Sylvamo's investors, including Atlas, and plan to continue these conversations. Sylvamo recognizes Atlas' extensive experience in the paper industry.
The rights plan, which is designed to allow Sylvamo shareholders to realize the long-term value of their investment, reduces the likelihood any person or group could gain control of the company through open market or private accumulations of our shares without appropriately compensating shareholders for such control or providing the board sufficient time to make informed decisions. The rights plan applies equally to all current and future shareholders; it does not deter offers or prevent the board from considering offers that are in the best interest of Sylvamo shareholders. In light of, among other things, recent market volatility and Sylvamo's March 7 announcement regarding its business in Russia, Sylvamo does not believe the current market price reflects its intrinsic value.
The rights plan is similar to those adopted by other publicly traded companies. Sylvamo is issuing one right for each share of common stock outstanding as of the close of business May 2, 2022. The rights will initially trade with Sylvamo common stock and will generally become exercisable only if any person (or group) acquires 10% (or 20% for certain passive investors) or more of Sylvamo's outstanding common stock, except that any person or group who currently owns more than the triggering percentage may continue to own shares of common stock. However, any current owner of more than the triggering percentage may not acquire any additional shares without triggering the rights plan. The rights plan does not combine the ownership of shareholders "acting in concert" unless they have formed a group under applicable securities laws.
If the rights become exercisable, all holders (other than any triggering person or group) will be entitled to acquire shares of common stock at a 50% discount, or Sylvamo may exchange each right held by such holders for one share of common stock. The plan does not contain any dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board of directors to redeem the rights.
The rights plan has a one-year term, expiring April 21, 2023. However, the board may consider an earlier termination as circumstances warrant.
Additional details about the rights plan are available in a Form 8-K to be filed with the Securities and Exchange Commission.