Netflix acts to fend off takeover

November 6, 2012 09.21 Europe/London By Julian Clover

Netflix has adopted a “poison pill” strategy to protect itself against a possible takeover led by billionaire investor Carl Icahn.

The online streaming service has adopted a stockholder rights plan that would dilute the new holding. The company said the rights plan was designed to protect Netflix from efforts to obtain control of the company deemed by the board of directors not to be in its best interests. It was however not intended to interfere with any offer given approval by the board.

Ican’s 10% holding emerged in an interview last week when he said he believed Netflix stock to be undervalued and that the company was ripe for takeover. It is not known whether Icahn is involved in any immediate bid for the company.

In an SEC filing, Icahn described the move as “an example of poor corporate governance” given that the plan was not put to the shareholder vote.

Under the plan if the acquisition of 10% or more of the company by an individual or 20% by an institutional investor is followed by a merger involving Netflix or the sale of all or part of the company the new purchaser will be barred from purchasing any newly issued shares.

Netflix shares on the NASDAQ market closed up 1.74% at 78.24.