Encore Capital Raises Control Trigger

Debt purchaser Encore Capital Group (NASDAQ: ECPG) announced yesterday a change in its definition of “change of control” of the firm following the purchase in April of 40 percent of the company’s common stock by several investors.

A stockholder must own 50.1 percent or more of Encore stock in order to trigger change of control of the company, according to an Encore filing with the U.S. Securities and Exchange Commission.

Encore previously had set the ownership trigger rate at 40 percent, Paul Grinberg, chief financial officer, tells insideARM.com

The increase was done to raise the threshold for the vesting, or payout, of various company stock option programs, stock grants or equity awards, says Grinberg. “This was done so large shareholders don’t trigger a change in control of the company and trigger other equity awards.”

This type of change of control provision is common for companies, says Grinberg. One reason is to ensure that holders of the stock award programs, typically top executives, don’t leave a firm after receiving a large payout, he says.

In April, Encore announced that J.C. Flowers & Co. and its affiliate FPK Capital had purchased about 25 percent of its stock from several investors, and that Red Mountain Capital Partners had separately purchased about 15 percent of its stock.