poison pill

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A tactic used by a company that fears an unwanted takeover by ensuring that a successful takeover bid will trigger some event that substantially reduces the value of the company. Examples of such tactics include the sale of some prized asset to a friendly company or bank or the issue of securities with a conversion option enabling the bidder's shares to be bought at a reduced price if the bid is successful. Poison pills are used all over the world but were developed in the USA. See also porcupine provisions; staggered directorships.

Subjects: Financial Institutions and Services.

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