RAD Rite Aid Corp

FRED'S

Drugstore Chain Adopts Poison Pill

Pharmacy chain Fred's Inc. said Tuesday it has adopted a shareholder-rights plan, less than a week after an activist investor took a nearly 25% stake in the company.

Thursday, The Wall Street Journal reported that Alden Global Capital had quietly amassed its stake in the company.

The poison pill, as shareholder-rights plans are often called, could limit Alden's ability to add to its stake, as it would kick in to potentially dilute the company's share count if an existing large shareholder expanded its holdings or a new shareholder built a 10% stake.

Alden didn't immediately respond to a request for comment.

Last week, Fred's shares rose sharply after Fred's said it would more than double its size by purchasing 865 stores Rite Aid Corp. needs to sell to close its merger with Walgreens Boots Alliance Inc.

Fred's said Tuesday the plan reduces the likelihood for anyone to "gain control of the company through open market accumulation without appropriately compensating its shareholders for such control or providing the board sufficient time to make informed judgments."

Fred's also said it has "an ongoing dialogue with a number of shareholders and always welcomes all constructive input," but said it wouldn't comment on specific discussions with shareholders.

--Austen Hufford

AUTOS

China Weighs Easing Car-Loan Limitations

China is considering lifting the current 80% limit on the amount of a car price that consumers can borrow to finance a purchase, the central bank said Tuesday, in a fresh move by Beijing to support the auto industry.

In a statement on its website, the People's Bank of China said it and the Chinese banking regulator have moved to revise the auto-finance regulation, including making the loan-to-value ratio more flexible. Exactly how much a buyer can borrow will be set based on broader economic factors and consultations with the automotive industry, it added.

Under the current policy, in place since 2004, consumers can borrow up to 80% of a car's price from banks or other financial institutions. For used cars, the cap stands at 50% of the car price.

The central bank said it would solicit comments about the revised regulation in the coming month.

The proposed relaxation comes after China earlier this month decided to extend a tax incentive for small-engine cars into 2017, albeit at a smaller scale, to ease concerns about slowing demand in the world's largest car market.

The Ministry of Finance said it would levy a 7.5% purchase tax on vehicles with engines up to 1.6 liters from Jan. 1, an increase of the current rate of 5% but below the normal 10%.

China's auto market has significantly rebounded since the last quarter of 2015, when the government rolled out the tax break to resuscitate the car industry. From January through November this year, China's new-car sales were at 21.7 million vehicles, up 16% from the same period a year earlier, when sales registered 5.9% growth.

However, industry watchers said that the tax break has pulled demand forward as people made purchases anticipating its expiration. Even if the purchase tax were to remain at 5%, car sales would slow dramatically due to this year's rush to purchase, said Morgan Stanley in a recent report.

Auto finance has grown rapidly in China thanks to the growing number of younger consumers that prefer credit over cash. Nearly 30% of Chinese consumers bought cars on credit last year, according to a study by research company Sanford C. Bernstein, up from 18% in 2013. Deloitte expects that the ratio will rise to 50% in 2020.

Rose Yu

(END) Dow Jones Newswires

December 28, 2016 02:47 ET (07:47 GMT)

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