DEFINITION of 'Voting Poison Pill Plan'

An anti-takeover strategy in which the company being targeted for a takeover issues securities that provide special voting rights to shareholders. A voting poison pill plan is designed to create an environment that is less attractive any new owners.

BREAKING DOWN 'Voting Poison Pill Plan'

Companies use poison pill strategies in order to deter other companies from initiating a hostile takeover. They tend to be relatively drastic strategies and are designed to reduce the value of a company post-takeover, which has the effect of forcing companies looking to initiate the takeover to engage with company management rather than only engaging with existing shareholders. This is because the shareholders will be against a takeover if they will ultimately be worse off financially, which is what a poison pill strategy threatens to do.

Voting poison pill plans are designed to impact the voting rights of the potential acquirer. The company can impact voting rights by issuing securities that provide special voting rights to the security holders. The shares may have special voting rights that are triggered upon hostile takeover, but which otherwise do not carry any special voting rights. These special voting rights, called super voting rights or privileges, may allow a relatively small group of shareholders to reject a takeover bid.

Poison pill plans that affect voting rights may not elicit a positive reaction from shareholders. This is because shareholders may approve of the merger, but because of the poison pill may have to obtain a supermajority in order to push the merger through. Companies that seek to acquire a majority stake of shares – 51% - for a premium may abandon the takeover if they think that a voting poison pill plan will be enacted. Because of this, companies that include this type of defense in the company charter may see a decline in their share price.

  1. People Poison Pill

    A people pill is a defensive strategy to ward off a hostile corporate ...
  2. Poison Put

    A poison put is a takeover defense strategy in which the target ...
  3. Killer Bees

    Killer bees helped companies avoid takeovers, during the 198 ...
  4. Takeover

    A takeover occurs when an acquiring company makes a bid in an ...
  5. Lock-Up Option

    A lock-up option is a stock option offered by a target company ...
  6. Voting Trust Agreement

    A voting trust agreement transfers the voting rights of shareholders ...
Related Articles
  1. Investing

    Mergers And Acquisitions: Understanding Takeovers

    In the language of mergers and acquisitions, battleground terms meld with bizarre metaphors to create a unique vocabulary.
  2. Small Business

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  3. Investing

    Micron Technology Soars on Takeover Rumors

    Long-suffering Micron Technology (NASDAQ: MU) shareholders got a boost on Monday following its shareholder rights filing with the SEC on Friday. In what is often referred to as a "poison pill" ...
  4. Managing Wealth

    Investopedia's Oddest Business and Investing Terms

    The oddest business and investing terms found on Investopedia.
  5. Investing

    The Future of General Electric: The Red or Blue Pill?

    GE investors wonder what kind of impact new CEO John Flannery will have on the company's stock price.
  6. Small Business

    Starting a Business? Embrace the Discomfort

    There is a fine line between excitement and terror when starting a business. The key to success is finding comfort in the discomfort.
  7. Investing

    CII Wants to Bar Snap From Indexes

    The Council of Institutional Investors is not pleased with the messaging platform's voting structure.
  8. Small Business

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
  9. Tech

    Bitcoin May Go Up if Italy Referendum Votes 'No'

    If Italy votes 'No' on Sunday, the Eurozone economy may destabilize. Awesome news for Bitcoin.
  1. Why is a shareholder rights plan called a "poison pill?"

    Discover why shareholder rights plans are often called "poison pills" to fight hostile takeovers and give smaller corporations ... Read Answer >>
  2. What is the difference between a "flip-in" and "flip-over" poison pill?

    Learn about strategies used to defend against hostile takeovers, what a poison pill is and the difference between a flip-in ... Read Answer >>
  3. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  4. Do Shareholders Get a Say in a Firm's Operation?

    Stock ownership often provides a vote on board membership and other issues put out for shareholder approval. Read Answer >>
  5. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
  6. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
Trading Center