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.

RELATED TERMS
  1. Poison Pill

    A poison pill is a tactic used by public companies to derail ...
  2. Flip-Over Poison Pill

    A flip-over poison pill is a defensive strategy used to fight ...
  3. Suicide Pill

    A suicide pill is a defensive strategy by which a company trying ...
  4. Anti-Takeover Measure

    In order to block hostile bids for control of a company, the ...
  5. Hostile Takeover

    A hostile takeover is the acquisition of one company by another ...
  6. Statutory Voting

    Statutory voting is a corporate voting procedure where each shareholder ...
Related Articles
  1. Investing

    Poison Pill

    A poison pill is a corporate maneuver put in place to try and prevent a hostile takeover. The target corporation uses this strategy to make its stock less attractive to the acquirer. This is ...
  2. Investing

    Mergers and acquisitions: Understanding takeovers

    In the language of mergers and acqusitions, battleground terms meld with bizarre metaphors to create a unique vocabulary.
  3. Investing

    What Is Tenure Voting?

    This stockholder voting structure, one of three types, has advantages and disadvantages. Here’s a look at the pros and cons of all three.
  4. Managing Wealth

    Know Your Shareholder Rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company.
  5. Managing Wealth

    Keeping Control of Your Business After the IPO

    Taking a company public doesn't mean founders must completely give up calling the shots. Before the IPO, consider these tactics to keep control after it.
  6. Investing

    Snap Excluded From S&P 500 Indices

    Snap's voting rights structure has prompted the S&P 500 to exclude it from its indices.
  7. Investing

    Why the AB InBev Miller Merger Is More at Risk

    As shareholder voting gets underway on the $100 billion merger of SABMiller (NASDAQOTH: SBMRY) with Anheuser-Busch InBev (NYSE: BUD), the risk of the deal getting blocked by a small group of ...
RELATED FAQS
  1. How can a company resist a hostile takeover?

    Learn about some of the defensive strategies a public company's board of directors might utilize to prevent a hostile bidder ... Read Answer >>
  2. 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 >>
  3. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
  4. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
Hot Definitions
  1. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  2. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  3. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  4. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  5. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  6. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
Trading Center