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Orchid Adopts Shareholder Plan as Protection in Event of Takeover Bid

NEW YORK, May 22 - Orchid BioSciences said Tuesday it has adopted a stockholder rights plan in an effort to protect the company in the event of a hostile takeover attempt.

Over the past few months several companies, including Aclara,  Large Scale Biology, and Illumina , have adopted such plans amid falling stock prices.

The stockholder rights plans work by allowing current shareholders the right to buy additional stock in the company at an artificially low price, in the event a third party acquires more than a certain percentage of the company’s stock. The action in effect dilutes the stock, reducing the stake of the potential acquirer.

Under the terms of Orchid’s rights plan, rights holders would be entitled to buy common stock at a significant discount to the stock price should any person or group attempting to takeover the company acquire 15 percent or more of Orchid’s common stock.

In effect, this is designed to discourage the acquisition of 15 percent or more of the company’s common stock without negotiations with its board of directors.

Orchid of Princeton, NJ, said it did not implement the plan in response to any particular offer or takeover attempt.

Orchid’s share price was down $1.05, or 13 percent, at $7.30 in morning trading Tuesday following a steep run up in the price over the past week.

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