Poison pill (economy)
A poison pill ( English poison pill ) is a repellent action of the listed stock companies who are exposed to the risk through a public offer a hostile takeover to be. With a poison pill the takeover should be made far less attractive or even impossible. It's about undermining or weakening the attacker's strategy.
Strategies
The board of directors of a company in danger of being taken over can decide to give the company shares presumably intended to be sold by the acquiring buyer in the hands of third parties in advance and to legally structure this transfer in such a way that an acquirer or transferee does not have access to these shares, for example with a foundation model. One example of this is the strategy of Arcelor's board of directors to outsource the newly acquired Canadian steel producer Dofasco to a Dutch foundation. The hostile takeover wanted to sell this subsidiary for refinancing or to pay for the takeover of the entire group with it, which could possibly be thwarted as things stand today.
The threatened company can also make unilateral declarations of intent to stakeholders , which are extremely expensive for a new owner in the event of a takeover. For example, Peoplesoft promised customers who nevertheless opted for Peoplesoft products after the Oracle offer to buy shares, a drastic price refund should the manufacturer be taken over by Oracle within the foreseeable future. Such an offer appears comprehensible above all if the interested party lets it through in his statements, as in the case of Oracle, that he will stop marketing the competitor's products after a successful takeover. It would also be possible, for example , to adopt binding ethical standards , environmental protection requirements or co-determination models which, if continued by a new owner operating in the opposite direction, would no longer correlate with his business concept or would at least infect him so strongly that the takeover would no longer be justifiable is.
Another strategy is the possibility of a capital increase . The issue of new shares increases the company's value and the takeover candidate can, for example, invest heavily in areas of the company that would do more harm than good to the interested party, or, for example, buy up other competitors themselves. Last but not least, the company can also invest in new acquisitions, products or research and development with massive debt, so that on the one hand equity capitalization becomes unattractive, but on the other hand the company value increases again for shareholders when the long-term goals are achieved. If it is foreseeable that the takeover prospect will not want to bear the debt and the new business orientation, this poison pill can also work. Such actions do not harm the threatened company as long as any self-interest of the management takes a back seat to the objective concerns of the shareholders and the shareholders retain confidence in the management.
Related strategies
Of course, existing shareholders can also buy so many shares themselves that simply no more company-determining majority can be obtained on the market. The narrow interpretation of the term “poison pill” would no longer be suitable for this purpose, as this is, strictly speaking, a re-acceptance by the old owner. A similar defense strategy is the search for the White Knight , a more friendly-minded, cooperative takeover in place of the enemy attacker ( Black Knight ), as Schering AG succeeded in offering the hostile takeover of Merck KGaA by the white knight Bayer AG .
Shareholder interests
What all poison pills have in common is the danger of weakening the primary performance of the threatened company with the measures adopted and of violating the interests of the owners, i.e. the shareholders. It is therefore the task of the public relations of an affected stock corporation to inform the shareholders about the exact background and goals of such measures, or the task of corporate communications is to communicate business strategies in connection with the intended countermeasures to the known shareholders. If larger parts of the shareholding are widely dispersed and the majority of the shareholders are therefore not known by name, only the public channel of corporate communication remains, with the disadvantage that the attacker can also use this information strategically for his own market communication .
The self-interests of the management can run counter to the interests of the owners. A poison pill must always be checked against the background of whether the company is better served by being taken over by a possibly stronger competitor despite the threat of job or location loss than if it remained independent. This decision can, but does not have to, also affect moral components of corporate management or always affects its corporate behavior , i.e. the behavior of a company within the framework of its self-image and its corporate goals in the entire strategic and operational field of action.
Examples of poison pills
- Purchase of the British Orange by Mannesmann to defend against Vodafone.
- Sale of the American LaSalle Bank by ABN AMRO to defend the Royal Bank of Scotland .