Voting Poison Pill Plan
A voting poison pill plan refers to a strategy used by a target company to foil a hostile takeover bid. This anti-takeover strategy entails a target company giving special voting rights to its shareholders by issuing more shares so that the shareholders can cause a dilution of shares and make the acquisition bid less attractive. The voting poison pill is a strategy used to dilute controlling powers from an acquiring firm.
A Little More on What is a Voting Poison Pill Plan
There are several poison pills that target companies use to foil takeover attempts by acquirers, examples include, crown jewels, shark repellents, and others. The primary purpose of a poison pill is to render a target company unattractive to buyers. Some target companies intentionally take on huge debts in an attempt to destroy itself and be unattractive to acquire.
Despite that poison pills seek to deter an acquiring company from purchasing a target firm, not all of these strategies are successful, given that some acquirers push ahead with the takeover bid regardless of the condition of the target company.
A Voting poison pill plan is an anti-takeover strategy that is designed to dilute the controlling powers or the voting rights of the acquiring company. This is achieved by issuing shares or securities or the target company to its shareholders to grant them special voting right over the takeover bid. The special voting rights are otherwise called privileges or super-voting rights through which the shareholders can vote against a hostile takeover. Given that the potential acquirer needs to receive approval from the majority shareholders of the target company before the merger and acquisition can pull through, the voting poison pill plan works well for target companies.
References for “Voting Poison Pill Plan”
Academic research for “Voting Poison Pill Plan”
Poison pill securities: Stockholder wealth, profitability, and ownership structure, Malatesta, P. H., & Walkling, R. A. (1988). Poison pill securities: Stockholder wealth, profitability, and ownership structure. Journal of Financial Economics, 20, 347-376.
Poison pill defensive measures, Dawson, S. S., Pence, R. J., & Stone, D. S. (1987). Poison pill defensive measures. The Business Lawyer, 423-439.
The effect of poison pill securities on shareholder wealth, Ryngaert, M. (1988). The effect of poison pill securities on shareholder wealth. Journal of Financial Economics, 20, 377-417.
Are shareholder proposals all bark and no bite? Evidence from shareholder resolutions to rescind poison pills, Bizjak, J. M., & Marquette, C. J. (1998). Are shareholder proposals all bark and no bite? Evidence from shareholder resolutions to rescind poison pills. Journal of Financial and Quantitative Analysis, 33(4), 499-521.
A Fresh Look at Poison Pills, Helman, R. A., & Junewicz, J. J. (1986). A Fresh Look at Poison Pills. Bus. Law., 42, 771.
The poison pill in Japan: The missing infrastructure, Gilson, R. J. (2004). The poison pill in Japan: The missing infrastructure. Colum. Bus. L. Rev., 21.
The illusory protections of the poison pill, Carney, W. J., & Silverstein, L. A. (2003). The illusory protections of the poison pill. Notre Dame L. Rev., 79, 179.
The Delaware courts, poison pills, and shareholder wealth, Choi, D., Kamma, S., & Weintrop, J. (1989). The Delaware courts, poison pills, and shareholder wealth. Journal of Law, Economics, & Organization, 5(2), 375-393.
On the use of poison pills and defensive payouts by takeover targets, Heron, R. A., & Lie, E. (2006). On the use of poison pills and defensive payouts by takeover targets. The Journal of Business, 79(4), 1783-1807.