Encore Acquisition adopts stockholder rights plan to avoid 'unfair' takeover techniques

By Jennifer Lanning Drey

Portland, Ore., Oct. 29 - Encore Acquisition Co.'s board of directors adopted a stockholder rights plan in reaction to the recent discounted trading price of its stock, Jon S. Brumley, chief executive officer of Encore, said during a Wednesday conference call.

"We felt it was prudent to protect the shareholders from somebody using unfair techniques to pick up the company on the cheap," Brumley said.

The terms of the rights plan provide for a dividend distribution of one right for each outstanding share of common stock to holders of record at the close of business on Nov. 7, Encore said in a news release.

The plan would be triggered if an acquiring party accumulates 10% or more of Encore's common stock and would entitle holders of the rights to purchase either shares of the company's common stock or shares in an acquiring entity at half of market value.

The company would generally be entitled to redeem the rights at $0.01 per right at any time until the 10th day following the time the rights became exercisable.

The rights will expire on Oct. 28, 2011.

"We believe that the mismatch between equity value and NAV values will be solved within three years, and that is why we choose a three-year plan as opposed to most of our peers, which have 10-year plans," Brumley said during the call.

According to the news release, the rights plan was not created in response to any current accumulation of shares or takeover situation.

Encore is a Fort Worth developer of onshore North American oil and natural gas reserves.

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