Internet

PSINet creates poison pill plan

PSINet has adopted a poison pill plan to ward off the possibility of a hostile takeover

Internet service provider PSINet has adopted a poison pill plan to ward off any bigger companies that might be eyeing it for a takeover.

Companies like PSINet and Netcom are now faced with the fiercest competition in their histories as the giant telcos like AT&T and MCI make their first serious forays into the ISP market. Many industry observers have speculated that both companies might start looking for partners that could back them in a more competitive market or might even be targets for hostile takeovers.

PSINet is in fact reviewing its options and has hired Merrill Lynch to help them do it. The company's alternatives include joint operating agreements; strategic alliances; and sales of minority or controlling stake in the company. But to prevent a hostile maneuver in the meantime, the company also has adopted a "shareholder rights" option, or a poison pill.

Under most circumstances, the option will be exercisable only if a person or a group acquires 20 percent or more of PSINet's common stock. PSINet shareholders would then be able to purchase additional stock for less than the currrent market price, a move intended to make a hostile takeover extremely costly.

PSINet officials say the plan was not adopted in response to any specific effort to acquire the company.

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