Earlier this year, Tilman Fertitta, the CEO of Landry's Restaurants, made an offer to buy McCormick & Schmick's Seafood Restaurants. Mr. Fertitta offered $9.25 a share which worked out to about $137 million.
The board of McCormick & Schmicks said "no thanks" and proceeded to enact a shareholders' rights plan (otherwise known as a poison pill plan) to make the company prohibitively expensive for anyone wishing to make a hostile takeover.
Now, as an aside, I like McCormick & Schmicks. The food is excellent and the service is wonderful. On the other hand, I've never been too terribly impressed with Landry's or any of Mr. Fertitta's other restaurants. Mr. Fertitta is more interested in making money than in making wonderful food. His restaurants offer overpriced dishes that aren't worth the price. A Landry's owned McCormick & Schmicks would soon become an expensive Joe's Crab Shack (oh, that's what the Aquarium already is).
Now back to our story.
McCormick & Schmicks kept looking for a suitor who wanted to buy the company but they couldn't find anyone willing to pony up the money the board sought.
On Tuesday, Mr. Fertitta announced that he was buying McCormick & Schmicks for $8.75 a share, 6% less than his original offer.
So, how did that poison pill plan work out for McCormick & Schmick's shareholders? Not so good, huh? In order to protect their own interests, the board for McCormick & Schmick's screwed their shareholders. The board had a fiduciary duty to do what was in the shareholder's best interests - not to act to protect their own.
Maybe that's why it's called a poison pill.