POISON PILL

noun (Business World) Any of a number of ploys (such as a conditional rights issue) which may be adopted by the intended target of an unwelcome take-over bid in order to make itself unattractive to the bidder. Etymology: A metaphorical application of a word-combination which is usually used in the context of combat and espionage. Whereas the spy carries a poison pill for personal use when cornered, the company facing a hostile bid uses it to give the aggressors a taste of their own medicine. History and Usage: In its literal sense, poison pill has been in use since the Second World War; the figurative use arose in the US financial markets in the early eighties, at first usually in the phrase poison pill defence or poison pill device, and was allegedly coined by US lawyer Martin Lipman in his defence of El Paso Natural Gas in 1982. It was adopted (as a device and a term) on the British Stock Exchange in the mid eighties. Despite attempts to limit the practice, it remained popular in a number of markets and generated several variants. Another name for essentially the same type of defence is a shark repellent. Lenox played hard to get...and implemented a novel anti-takeover devise to discourage Brown-Forman Distillers takeover bid. The move is called the 'Poison Pill defense'. New York Times 19 June 1983, section 3, p. 14 An American appeals court judge last week issued an important ruling against the use of...'poison pills'...which embattled corporations are adopting as a defence against hostile takeover bids. Daily Telegraph 4 Aug. 1986, p. 19 A 'poison pill', limiting shareholders' voting rights to 5% regardless of the size of their stake, killed Veba's enthusiasm for the merger. EuroBusiness June 1990, p. 7