Having already taken its financial lumps during the past year, Energy Department contractor Fluor announced a measure Wednesday meant to ensure its shareholders get a fair shake “in the event of any proposed takeover.”
The limited-duration stockholder rights agreement will also shield against “abusive tactics to gain control of the Company without paying all Fluor stockholders a premium for that control,” according to a press release.
Fluor spokesman Brian Mershon declined to say if the company expects to be targeted by a hostile takeover, or provide any comment beyond what is in the press release.
The rights agreement will not halt a takeover, but should encourage anyone seeking to acquire Fluor to negotiate terms with the board of directors, according to the company. This is evidently done by diluting value of shares bought by an outside entity once it acquires 10% of the stock.
The so-called “poison pill” is a defensive measure to dissuade unwanted takeover attempts by increasing the funding and effort necessary to carry one off.
With the stock market plunging during the recent COVID-19 pandemic, Fluor is not the only company taking such a step. Natural gas company Williams announced a similar maneuver last week.
Basically, if any entity buys at least 10% of Fluor’s outstanding common stock, each right will entitle stockholders to buy one one-thousandth of a share of a new series of junior participating preferred stock at an exercise price of $50, the engineering, construction, and procurement company said in the release.
These type moves allow current stockholders the right to buy more shares at a discount, effectively watering down the ownership interest of any new, hostile party, according to the website Investopedia.
Fluor’s stock price closed Thursday at $7.28 per share, 16% above the previous day’s $6.23. That was still far below the $13.78 recorded one month earlier on Feb. 24 – prior to the New York Stock Exchange decline caused by the global spread of novel coronavirus 2019.
The ongoing stock market dive triggered by the COVID-19 pandemic marks the latest bad news for Fluor, which still has not filed its annual report for 2019.
Six months ago, on Sept. 23, 2019, Fluor stock was valued at $20.70. The share price stood at $35.49 one year ago. Major stock indexes are down roughly 20% since their February highs, with unemployment claims skyrocketing while the federal, state, and local governments tell people to stay home and avoid spreading the virus.
Carlos Hernandez became CEO in May 2019, replacing longtime chief David Seaton after the company experienced a $58 million loss during the first quarter of the year. After Fluor suffered a whopping $555 million loss in the second quarter, Hernandez said “all options were on the table,” including sale of major assets such as the government business.
In September, Fluor said the federal contracting unit was one of the businesses being placed on the sales block. Jacobs was rumored to be taking a look at one point before Fluor publicly invited offers.
However, Fluor would eventually only to pull the contracting business, which includes DOE and National Nuclear Security Administration agreements, off the market last month. Fluor said other belt-tightening, including sale of some smaller assets, largely eliminated need for the sale.
While there is never a good time for a stock market nosedive, Fluor was already hitting rough waters. The New York Stock Exchange (NYSE) said last week the company was in violation of its guidelines for failing to file a 10-K annual report for 2019.
In a press release March 19, Fluor said the notification has no impact on its NYSE listing, and it can regain compliance with stock exchange rules by filing the 10-K within six months of March 19. However, the NYSE could commence “delisting” any time it believes circumstances warrant. Fluor has not said when it expects to file the 10-K.
Fluor released only partial earnings for the first quarter of its fiscal 2020 last month, as it is under investigation by the Securities and Exchange Commission (SEC) for questions over its second-quarter 2019 financial results.
Fluor-led Savannah River Nuclear Solutions is operations and management contractor for the Energy Department’s Savannah River Site in South Carolina. The company also manages cleanup at the Idaho National Laboratory and partners with BWX Technologies for remediation at the Portsmouth Site in Ohio.
Fluor is far from the only Energy Department contractor to feel the pain on the stock market. Here is a rundown of the Thursday closing – after the Senate’s Wednesday night vote in favor of a $2 trillion stimulus — share price for several publicly trade vendors, compared to the price one month earlier.
- BWX Technologies: $48.38; down from $69.38.
- Centrus Energy: $5.38 per share; was $8.47.
- Honeywell International $137.40, was $175.27.
- Huntington Ingalls Industries: $195.29, was $234.84.
- Jacobs: $79.82; $101.95 a month ago.
- Leidos: $92.56; was $113.83.
- Parsons: $34.98; was $42.24.
