By Marcy Kreiter - American Apparel (NYSE:APP) adopted a poison pill strategy Saturday to prevent former CEO Dov Charney from seizing control of the company.
The board fired Charney June 18, citing sexual harassment charges and alleged financial mismanagement.
The company, which has $250 million in debt, said the poison pill would be triggered if anyone owning 15 percent or more of the company's stock sought to increase his stake, the Financial Times reported.
"The rights plan is designed to limit the ability of any person or group, including Dov Charney, to seize control of the company without appropriately compensating all American Apparel shareholders," the statement said. "It is intended to provide the board of directors and stockholders with time to make informed judgments."
The company said the plan is not meant "to prevent or deter takeover bids that offer fair treatment and value to all stockholders. Rather, the rights plan is intended to protect stockholders from any threat of creeping control."
A Securities and Exchange Commission filing made by Charney Friday indicates he wants to acquire more than 10 percent of the company's outstanding shares. Charney currently owns 27 percent of the company, the Los Angeles Times reported.
The action sent American Apparel's shares up 30 percent in the final minutes of trading Friday. It closed at 97 cents.
Charney's firing triggered an immediate request for repayment from Lion Capital, to which American Apparel owes $10 million. The company has lost $270 million in the past four years and is $200 million in debt.
Charney has alleged wrongful termination and filed an arbitration petition Monday.