1:28 p.m. | Updated
With Carl C. Icahn knocking on its front door, Netflix has put up the traditional first line of defense against a corporate takeover.
The company announced on Monday that its board had adopted a shareholder rights plan, or poison pill, just days after Mr. Icahn disclosed he had acquired a 9.98 percent stake.
Netflix said the plan was meant to protect the company and shareholders from “efforts to obtain control of Netflix that the board of directors determines are not in the best interests of Netflix and its stockholders.”
In a statement on Monday, Icahn Capital said that “any poison pill without a shareholder vote is an example of poor corporate governance, and find the pill Netflix just adopted is particularly troubling due to its remarkably low and discriminatory 10 percent threshold.”
“As one of the company’s largest shareholders we are concerned about the poor corporate governance at Netflix that these and other actions reflect,” the statement added.
The poison pill is intended to make it more expensive for Mr. Icahn to accumulate more Netflix shares.
Under the plan, the company is issuing one right for every common share. Each right enables a shareholder to buy one one-thousandth of a new preferred share at the exercise price of $350 per right. But these rights can be exercised only if an investor acquires 10 percent of the company without the approval of the company’s board. (Institutional investors can acquire up to 20 percent.)
In its statement, Netflix added:
In addition, if after a person or group acquires 10 percent (or 20 percent in the case of 13G institutional investors) or more of Netflix’s outstanding common stock, Netflix merges into another company, an acquiring entity merges into Netflix or Netflix sells or transfers more than 50 percent of its assets, cash flow or earning power, then each right will entitle the holder thereof to purchase, for the exercise price, a number of shares of common stock of the person engaging in the transaction having a then-current market value of twice the exercise price. The acquiring person will not be entitled to exercise these rights.
The rights plan will expire on Nov. 2, 2015.