Poison Pill Use Declines

Poison Pill Use Declines

                                 Professor Brian JM Quinn, Boston College School of Law 

A Reuters piece cites FactSet SharkRepellent data to note that the number of shareholder rights plans in effect is at the lowest since 1990.

The number of U.S. incorporated companies with a poison pill in effect hovered at 1,000 on Tuesday, hitting the lowest level since 1990, according to FactSet SharkRepellent. In comparison, the number of poison pills in force at the end of 2001 totaled 2,218.  ...

The drop in poison pills has mirrored a drop in other takeover defenses, such as having a board of directors with staggered election terms. At the end of 2009, only 164 companies in the S&P 500 had a staggered board, down from 294 at the end of 2001, according to FactSet SharkRepellent.

Interesting, but as Prof. Jack Coffee notes in the article, just because a board doesn't have a pill in place, doesn't mean it can't adopt one in about five minutes.   The drop in staggered boards, I think, is more significant.  Without the combination of the pill and the staggered board, the rights plan can delay, but not prevent, a hostile bid that is undertaken in conjunction with a proxy contest.  

On that front SharkRepellent notes on its website that the number of proxy fights has soared recently.

The number of proxy fights against U.S. companies has soared from 42 in 2004 to last year's record total of 133. 

Visit the M&A Law Prof Blog, hosted by Brian JM Quinn, for blogs on legal developments in corporate governance and mergers & acquisitions.

 

Brian JM Quinn is a professor at Boston College Law School. Professor Quinn teaches Corporations, Mergers & Acquisitions, and Deals, and his research focuses on corporate law, the structuring of transactions, and private ordering.