Cubic Adopts Poison Pill As Elliott Pursues Takeover Bid

Cubic Corp. said it will adopt a temporary shareholder rights plan, also known as a “poison pill” after Paul Singer-led hedge fund firm Elliott Management showed interest in a takeover bid. Shares of the defense and transportation systems provider were down 1.3% in Tuesday’s pre-market trading session after popping 34% yesterday.

Cubic (CUB) on Monday disclosed that Elliott Management had approached the company to buy a 15% interest. The hedge fund manager has partnered with an undisclosed private equity firm to pursue the interest and plans to buy the rest of Cubic’s outstanding shares.

Cubic said, “The adoption of the Rights Plan is intended to provide the Board with time to make informed decisions and prevent any third party from obtaining control of Cubic in a manner and at a price that are not in the best interests of Cubic’s shareholders.” According to the rights plan, shareholders will get one right for each common stock held. The rights plan will expire on September 19 and the record date for the distribution is set on October 1. (See CUB stock analysis on TipRanks).

Citigroup analyst Jonathan Raviv said on September 21 that Elliott Management’s acquisition interest is supportive of the company’s defense and transport business portfolio. Raviv raised the stock’s price target to $60 (0.7% upside potential) from $50 and reiterated a Buy rating.

Currently, the Street is bullish on the stock. The Strong Buy analyst consensus is based on 6 Buys and 1 Hold. With shares down nearly 6.3% year-to-date, the average price target of $56 implies further downside potential of about 6% to current levels.