| Poison
Pill |
 |
A strategy used by corporations to discourage the hostile takeover
by another company by making its stock less attractive to the acquirer.
There are two types of poison pills:
1) A "flip-in", which allows existing shareholders (except
the acquirer) to buy more shares at a discount.
2) The "flip-over" allows stockholders to by the acquirers
shares at a discounted price after the merger. |
 |
By
purchasing more shares cheaply (flip-in), investors get instant profits
and more importantly they dilute the shares held by the competitors,
thus making their takeover attempt more difficult and expensive.
An example of a flip-over is when shareholders have the right to purchase
stock of the acquirer on a 2-for-1 basis in any subsequent merger.
This is similar to the macaroni defense except it uses equity rather
than bonds. |
|
|
|
|
Dictionary
