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Liquidation World eyes poison pill plan

Canadian Press

CALGARY -- Fearing an unwanted takeover during a time of unprecedented consolidation in the Canadian retail sector, Liquidation World Inc. announced yesterday it would adopt a poison pill defence strategy.

The Calgary-based merchandise liquidator said that it has received unsolicited takeover bids "from time to time" in the past.

While Liquidation World was unaware of any current attempts, the company said it is feeling vulnerable with a current stock price that fails to reflect its improving fortunes.

"There's a lot of money out there, and we just don't want to have our shareholders taken advantage of through a quick move," chief financial officer Andrew Searby said.

To protect against unwanted takeover bids, Liquidation World will adopt a shareholders' rights plan, also known as a poison pill, that comes into effect today.

The plan enables rights holders to buy common shares at half the prevailing market price should a third party acquire or announce plans to buy at least 20 per cent of Liquidation World's stock without board approval.

Last month, the liquidator reported first-quarter profit that more than doubled to $1.9-million. It was its second quarter in a row of profit following major inventory writedowns and losses last year.

While the stock has nearly doubled in value since hitting record lows of $2.80 late last year, the company is still trading below its book value, Mr. Searby said.

Liquidation World shares closed up 29 cents to $5.45 on the Toronto Stock Exchange yesterday. Liquidation World has 90 stores in Canada and 15 in the United States.

Yesterday the company also announced plans to buy back nearly 419,000 shares through a normal course issuer bid. By buying back shares, a company reduces its equity base, spreading profit over fewer shares. That increases its return on equity and earnings per share, two key ratios used to determine a company's investment rating.

© The Globe and Mail

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