Riverstone Networks, a maker of optical telecom equipment for metropolitan networks, announced Friday that its board of directors has approved a shareholder rights plan that would make it more difficult for an outside group to acquire a major stake in the company without the blessing of Riverstone. The plan, also known as a "poison pill," kicks in after an individual or group acquires 15 percent or more of the company or announces a plan to do so. When that happens existing shareholders would have the right to purchase company stock at a discount, which would dilute the stake of the unwanted bidder.
The move will take the threat of a hostile takeover off of Riverstone's shoulders, which was spun off from its parent company, Cabletron Systems, in February. Cabletron will distribute its 86 percent stake in Riverstone to its own shareholders, who will receive half a Riverstone share for each share of Cabletron they own.