Overview

A stockholder rights plan – or “poison pill” – is a structural defence available to directors to protect stockholders against “low ball” tender offers, share accumulations and other takeover abuses.

Rights plans – which have been in use since the mid-1980s – deter these activities by exacting extreme voting and economic dilution on the raider or would-be acquiror that exceeds the plan’s ownership or triggering threshold. Used as a takeover defence, the basic objectives of a rights plan are to:

- Discourage unsolicited offers, or accumulations of significant stakes, disadvantageous to the company and its stockholders;
- Provide a board of directors time to evaluate offers and formulate a measured response;
- Encourage a bidder to negotiate with the board;
- Provide the board with an opportunity to solicit alternative offers; and
- Assist the board in achieving the highest price if it believes a sale is in the company’s best interest.

Please click “view briefing” to read more.