Barnes & Noble Education adopts poison pill, gets $95M investment

Shares of Barnes & Noble Education (NYSE:BNED) are in a free-fall Tuesday morning after the company approved a short-term stockholder rights plan, or poison pill, intended to prevent a hostile takeover of the company.

The rights plan will be triggered if a person or group acquires 10% or more of the company’s outstanding stock. Each right will entitle existing Barnes & Noble (BNED) shareholders to buy one-thousandth of a share of a new series of junior participating preferred stock at $5, thereby diluting the stake acquired by a person or group.

BNED has also declared a dividend distribution of one preferred share purchase right on each outstanding share of common stock. The distribution will be made on April 29.

The company also said it entered into an agreement with Immersion Corp (IMMR) along with certain shareholders and strategic partners to receive $95M of new capital through a $50M equity investment and $45M fully backstopped equity rights. After costs, the transactions will infuse ~$75M of net cash and will eliminate $34M of debt through equitization of a second lien term loan.

The company’s existing second lien lenders will convert ~$34M of outstanding principal and any accrued and unpaid interest to BNED common stock and has received commitments to refinance its existing asset-backed loan facility, providing Barnes & Noble Education (BNED) with access to $325M.

Shares were down as much as 74% to a record low of $0.18.