Suddenly, Poison Pills Are Relevant Again

by Frank Aquila for Bloomberg Business Week, February 23rd, 2011.

A Delaware judge’s decision upholding Airgas’s shareholder rights plan comes just as hostile takeover bids are heating up. Columnist Frank Aquila reviews the corporate defense practice

Shareholder rights plans, so-called poison pills, have long drawn the ire of the institutional investor community and have lost favor with Corporate America. But a Delaware judge’s recent decision to uphold Airgas’s poison pill—followed by Air Products & Chemicals’s prompt termination of its hostile bid—confirms that rights plans are still the most potent takeover defense available to targets of unsolicited bids.

The unsolicited offer by Air Products (APD) for Airgas (ARG) has been one of the longest-running hostile bids in recent memory. Seeking to bring its offer for Airgas to a resolution, Air Products asked the Delaware Chancery Court to invalidate Airgas’s poison pill. Although the case centered on the facts in that corporate saga, the Feb. 15 decision by Judge William B. Chandler III to affirm Airgas’s shareholder rights plan has broader implications at a time when unsolicited bids are again becoming a common tool for strategic buyers.

Unsolicited offers have picked up since the subprime mortgage crisis. To be sure, today’s unsolicited bids are not triggering the hostile takeover fights of days gone by, which unalterably changed Corporate America. The nomenclature that developed around the bids of the 1970s and ’80s justifiably evoked the imagery of pirates and raiders. The terminology remains the same, but the nature, tactics, and objectives of strategic buyers have little in common with those employed by the greenmailers and corporate bust-up artists of that era. (continue reading… )



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