Tuesday, January 31, 2012
In its most recent Corporate Practice Newswire, attorneys at Chadborne & Parke report on their survey of 27 rights plans (commonly referred to as "poison pills") adopted during the 14 months ending on October 31, 2011 by U.S. companies with market capitalizations above $250 million . The stated purpose of the survey: to review how companies tailor their poison pills using recently developed technology. The authors reviewed the following provisions:
- Ownership Percentage Triggers
- Use of "Qualifying Offers"
- Coverage of Derivatives
- Use of a Trust to Facilitate an Exchange
- Window for Redemption or Amendment Post-Trigger
- Coverage of Persons Acting in Concert
According to the authors,
Companies that have older rights plans in effect or "on the shelf" and ready to be adopted in the event of hostile activity may find that their poison pills lack the diverse array of new provisions increasingly becoming prevalent in modern rights plans. Consequently, companies seeking to adopt a new poison pill or put one "on the shelf" need to consider whether their rights plans should be updated to take advantage of these new provisions.
The authors' goal is to demonstrate how boards can better engineer their poison pills to respond to the realities of today’s hostile acquirers.