Poison Pill

[usakos]

Imposing a poison pill to avoid a hostile takeover of your business?

What's a Poison Pill?

Below is the definition of the poison pill found on Investopedia.

A strategy used by corporations to discourage a hostile takeover by another company. The target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills:

1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount.

2. The "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger.

1. By purchasing more shares cheaply (flip-in), investors get instant profits and, more importantly, they dilute the shares held by the competitors. As a result, the competitor's takeover attempt is made more difficult and expensive.

2. 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.

Will you ever impose a poison pill to avoid your business hostile takeover? And, do you think that Yahoo may impose a poison pill if Microsoft decides to hostile takeover Yahoo?

[allysa]

hey, thanks for sharing some infos here..

[freedom.project]

Just curious, are "poisoned pills" announced to the public or just the share holders?

[usakos]

A poison pill is never announced, it's simply a tactic to thwart off the hostile takeover.

Yahoo is currently trying to do the same by trying to get News Corp buy a 20% stake in Yahoo and incorporate part of MySpace.com into Yahoo properties.

Yahoo is also contemplating of acquiring AOL, and all of this is simply to boost its value vs. the offer by MSFT.

This is the poison pill in action at Yahoo right now, trying to thwart off the MSFT hostile takeover.

On a different note: based on many PMs I received, it seems that many members on here want me to stay, they don't want me to leave YE as some wished.

[JLeezer]

Yahoo isn't going to impose a poison pill on themselves. The offer from MS is an excellent deal for the shareholders, but not the board of directors. The board of directors want to negotiate higher to ensure that they are viewed as having done everything they could to produce the best results possible for their shareholders. If they don't, they could be perceived as negligent to their responsibilities. But there is no reason for them to reduce the value of their company; they're not really opposed to being bought by MS, they are opposed to the price. Poison pills are usually seen in situations where the company to be bought genuinely does not want to be purchased by the hostile company.

[BusinessAdviser]

A poison pill is never announced, it's simply a tactic to thwart off the hostile takeover.

Yahoo is currently trying to do the same by trying to get News Corp buy a 20% stake in Yahoo and incorporate part of MySpace.com into Yahoo properties.

Yahoo is also contemplating of acquiring AOL, and all of this is simply to boost its value vs. the offer by MSFT.

This is the poison pill in action at Yahoo right now, trying to thwart off the MSFT hostile takeover.

On a different note: based on many PMs I received, it seems that many members on here want me to stay, they don't want me to leave YE as some wished.

Who wished you'd leave? I hope that you don't.

[BusinessAdviser]

Yahoo isn't going to impose a poison pill on themselves. The offer from MS is an excellent deal for the shareholders, but not the board of directors. The board of directors want to negotiate higher to ensure that they are viewed as having done everything they could to produce the best results possible for their shareholders. If they don't, they could be perceived as negligent to their responsibilities. But there is no reason for them to reduce the value of their company; they're not really opposed to being bought by MS, they are opposed to the price. Poison pills are usually seen in situations where the company to be bought genuinely does not want to be purchased by the hostile company.

This raises an interesting issue:

If Yahoo's Board were to try to impose a poison pill for the purpose of maintaining control of the company, might they be liable to their shareholders for breach of fiduciary duty?

[JLeezer]

This raises an interesting issue:

If Yahoo's Board were to try to impose a poison pill for the purpose of maintaining control of the company, might they be liable to their shareholders for breach of fiduciary duty?

That's a very good question...yet another reason why they would be crazy to do such a thing.

[usakos]

Yahoo finally imposes a Poison Pill like by amending their Bylaws to help fend off or prolong the Microsoft's proposed takeover.

Read the FORTUNE/CNNMoney.com article here

Read Yahoo press release here