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posted: 1/19/2013 8:03 AM

Krispy Kreme adopts poison pill to ward off potential buyers

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  • Krispy Kreme Doughnuts Inc., whose shares have jumped this year amid speculation it's an acquisition target, adopted measures to discourage investors from buying 5 percent or more of the company's stock.

      Krispy Kreme Doughnuts Inc., whose shares have jumped this year amid speculation it's an acquisition target, adopted measures to discourage investors from buying 5 percent or more of the company's stock.
    Daily Herald file

 
Bloomberg News

Krispy Kreme Doughnuts Inc., whose shares have jumped this year amid speculation it's an acquisition target, adopted measures to discourage investors from buying 5 percent or more of the company's stock.

The plan is meant to protect against an inadvertent change of ownership, which would limit the way the company's previous operating losses and other credits could be applied to future taxes, Krispy Kreme said. The company said it had about $240 million of federal net operating loss carryforwards as of January 2012.

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Krispy Kreme has become a potential takeover target since Chief Executive Officer James Morgan boosted sales with an expanded menu that includes such healthier items as oatmeal, fruit juice and smoothies. The shares had gained 26 percent this year through yesterday. Today, they fell 3.2 percent to $11.44 at the close in New York, the biggest drop since Nov. 27.

The plan announced today, which would dilute the stake of potential acquirers, amounts to a so-called poison pill to help protect against takeovers, Conrad Lyon, an analyst at B. Riley & Co., said in a telephone interview today.

Besides helping prevent a takeover, the plan is also designed to protect Krispy Kreme's net operating loss, said Lyon, who is based in Los Angeles.

Krispy Kreme, founded in 1937, said there's no guarantee that the plan will avoid an ownership change and the company may pursue other means to prevent such an occurrence.

After falling victim to headlong expansion and America's obsession with low-carb diets, the chain's quarterly sales have risen for more than two years.

Sales may increase 7.6 percent to $434 million in the fiscal year ending this month, which would be the highest since fiscal 2007, according to data compiled by Bloomberg. That's larger than the revenue increases forecast for Dunkin' Brands and McDonald's Corp. in 2012, the data show.

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