August 25, 2021

Poison Pills: 2020-2021 Pill Adoptions

The CII recently published this report on poison pills adopted since January 1, 2020. Nearly 100 pills were adopted during this period, and not surprisingly, the vast majority of them were put in place following the onset of the pandemic in March 2020.  But their terms were less uniform than you might expect. Here are some of the highlights from the CII’s analysis:

– Of pills adopted in January to May 2020, 37 of 46 (80%) expired in one year or less. Of all pills adopted between January 2020 and June 2021, 63 of the 97 (65%) set expiration dates of about one year or less. This dip may reflect the fact that a number of companies later extended pills that were originally adopted during the pandemic, as well as the fact that later in the pandemic companies extended existing pills that were adopted for reasons unrelated to pandemic issues.

– In total, about 40% of the pills that last more than one year will be or have been put up for a shareholder vote. There are, however, three pills that were adopted in late 2020 that will not expire for 10 years and will not be put up for a shareholder vote.

– Trigger thresholds in a significant number of 2020 and 1H 2021 poison pills have been set at low levels. A total of 28 pills would be triggered at 5% beneficial ownership or less (21 of these pills are NOL pills).  Another 39 pills set their triggers at 10% beneficial ownership.

– Remarkably, four pills include “dead hand” provisions.

– 17 pills had “acting in concert” or “Wolf Pack” provisions, although the survey notes that many of these were amended in response to the Chancery Court’s Williams Companies decision.

– A dozen pills adopted during the period were “chewable pills,” which included provisions that would make them inapplicable to “qualifying offers.”

John Jenkins