What is a poison pill? What factors favor keeping a poison pill in place?


A poison pill is a plan that would make any takeover not approved by the directors prohibitively expensive. Factors in favor of keeping a poison pill in place include (1) a tender offer that is only slightly above the market price of the stock; (2) a tender offer for less than all of the shares; (3) an active attempt by the board to solicit other offers; (4) a conscious effort by the board to allow its outside directors, deemed more disinterested, to make the decisions in this area; and (5) the fact that the tender offer is only in its early stages.

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What will be an ideal response?

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A) higher; lower B) lower; higher C) higher; higher D) lower; lower

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Indicate whether the statement is true or false.

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