E*TRADE Adds A Rights Plan

E*TRADE Group Inc., the big online securities and personal finance firm, installed a poison pill to join the growing list of technology and Internet-related companies erecting defenses to avert being taken over on the cheap. Like the other firms, E*TRADE fears that it has become vulnerable to takeover because its stock has been pounded to depressed levels. In early July, the shares were selling at just over $6 a share, down sharply from the 52-week high of $20.19 on the New Yor/k Stock Exchange. Yet, E*TRADE departs from the crowd because it is profitable and has a large shareholder in SOFTBANK Ltd., the Japanese technology and investment firm. E*TRADE’s stockholder rights plan is an especially extensive defense mechanism that touches a lot of bases, including the position of SOFTBANK within the fold. The pill is a common stock purchase plan with flip-in and flip-over features, triggered if a hostile buyer acquires a 10% stake or plans a tender offer of that much. If the flip-in part kicks in, E*TRADE shareholders can buy two common shares for the price of one. If the hostile buyer succeeds or the company sells or transfers 50% of its assets or earning power, E*TRADE holders can buy stock in the “other party.” And in a feature becoming more common in rights plans, stockholders may get additional shares without shelling out any money. After the 10% hostile interest threshold has been reached, the company has the option to issue one share for each right held. SOFTBANK is exempt from the plan provided that it doesn’t acquire more than 5 million additional shares. The June slate of companies installing pills, studded with technology companies and smaller banks, includes: Aerogen Inc.; Agrium Inc.; BFK Capital Group; BNCCORP Inc.; City Holding Co.; Dyax Corp.; First Financial Bancorp; Genzyme Transgenics Corp.; InforMax Inc.; Inhale Therapeutic Systems Inc.; InterTrust Technologies Corp.; Luminex Corp.; MIIX Group Inc.; Mallon Resources Corp.; Modern Media; Powerwave Technologies Inc.; ProsoftTraining.com; REMEC Inc.; Redback Networks Inc.; and TriCo Bancshares. FMC Technologies Inc., a carve-out of FMC Corp., went public with a pill in its structure. The parent expects to spin off its remaining interest.