Schweser Book three page 146 states the following regarding poison pills: “The pills are usually triggered when a shareholder’s equity exceeds some threshold level (eg 10%). Specific forms of a poison pill are a flip in pill, where the target company’s shareholders have the right to buy the target’s shares at a discount; and a flip over pill where the target’s shareholders have the right to but the acquirer’s shares at a discount” Regarding the “flip over pill”, who provides the target’s shareholders “the right” to buy the acquirer’s shares at a discount?? I’m assuming the acquirer doesn’t offer them this option…does the target firm help to subsidize this??? Probably not an exam question but just wondering…thanks
It’s the TARGET’s BOD that sets out the shareholder rights plan (I dont believe they subsidize it though). It’s confusing because it’s such a silly provision, I don’t even think it’s used much these days. In reality, from a legal standpoint it’s questionable whether the acquirer has an obligation to honor those rights, so there isn’t much additional protection IMO. hth a bit, Dubs.