Ask the Times
By TIMES WIRES
Published April 11, 2007
In the reporting of hostile takeover bids, the term "poison pill" is sometimes mentioned as a potential deterrent to the takeover. Can you explain this and give an example?
A poison pill is any means of finance used by a company to make it too costly for a hostile company to acquire it through a tender offer. Poison pills dramatically increase a company's price in the event of a hostile takeover attempt. One example is issuing preferred stock that gives shareholders the right to redeem their shares at a premium after the takeover.
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[Last modified April 11, 2007, 02:45:05]
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