Rights Agreement

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Rights Agreement (aka "Poison Pill")

An anti-takeover arrangement often established by a company in anticipation of a hostile takeover attempt. The company appoints a Rights Agent who will issue Rights Certificates to each shareholder at the time of the takeover attempt. The shareholder may then exercise these rights to receive additional shares of stock and/or debentures, making the target company more expensive to acquire as a result of the additional shares outstanding, or the additional debt.

Poison Pill

An antitakeover measure stipulating that shareholders on the receiving end of a hostile takeover may buy shares in their own company at a price below fair market value. Once the acquisition is complete, the provision allows these same shareholders to buy more shares in the new company for below market value. This forces shareholders in the acquiring company to suffer a devaluation and dilution of their own shares. This is done to discourage hostile takeovers among the shareholders of the acquiring companies. It is important to note that a poison pill need not use both of these tactics; sometimes it utilizes only one or the other.
References in periodicals archive ?
decreases the purchase price payable by holders of rights issued under the Rights Agreement upon exercise of such rights from $153.
This Rights Agreement was designed to ensure that all its shareholders receive fair and equal treatment in the event that an unsolicited attempt is made to acquire the company outside of the process led by a special committee of independent directors,
Under Section 23 of this rights agreement, the company will redeem all, and not less than all, of the outstanding rights at a redemption price of USD0.
The rights agreement was not adopted in response to any proposal to acquire control of the company.
M2 EQUITYBITES-April 3, 2015-Jamba terminates stockholder rights agreement
M2 EQUITYBITES-March 27, 2014-Alnylam Pharmaceuticals to issue 344,448 unregistered common shares to Genzyme under an investor rights agreement