Most of us probably don’t think about Revlon too often unless we’re in the market for some new nail polish or a crimping iron. But, back in 1985, Revlon, Inc. changed the face of hostile business takeovers forever, and not just by putting a bunch of makeup on it.
Back in ’85, a company called MacAndrews and Forbes Holding, Inc. (a.k.a. Pantry Pride) wanted to take over Revlon. There was a bunch of drama, but what basically happened was this: Pantry Pride tried to perform a hostile takeover. Revlon attempted to negotiate a better share repurchase plan for the shareholders. While they were negotiating with Pantry Pride, they were also discussing a friendlier takeover by another company.
Pantry Pride caught wind of this and got so annoyed that they decided to sue. The Delaware Supreme Court ruled that, in cases of an imminent takeover, the board of directors’ primary responsibility is to the shareholders, not to themselves or the ongoing operations of the company. In other words, they should’ve taken the sweet repurchase deal Pantry Pride offered, and never should’ve started talking with that other company behind their back.
This is what’s known as the “Revlon rule,” and it was a big change in legal precedent. Before this case, it wasn’t unusual for a board of directors to continue to act in the best interests of the company, even in the face of a hostile takeover and to the detriment of the shareholders. This case said acting in the interests of the company is good…right up to the minute that hostile takeover becomes imminent. Once that happens, it’s time to switch gears and focus on getting the shareholders as good of a deal as they possibly can.
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Finance: What is a poison pill?4 Views
Finance allah shmoop what is a poison pill O romeo
romeo Wherefore out the ac Well if you can't have
me nobody can have me pill lug dead dead alright
that's poison pill allah romeo and juliet and performed by
your friends here and the corporate version Well it isn't
all that different In fact there are really two flavors
of poison pill flintstones chewable lt's called flip ins which
allow current shareholders to buy a ton more shares at
a big discount toe where their shares are currently trading
flippen like if the shares are at forty bucks each
current shareholder than gets allowed to buy five shares for
ten bucks each for each share that they currently own
and have owned for the last in a year About
that would be a flipping well this flip in process
dilutes the company dramatically making it harder for an outside
takeover soldier to come in and you know just buy
the company that's a flip in the non chewable flintstone
flavor that you have to actually swallow is called ah
flip over which comes is a mandate from the board
allowing current shareholders to buy the shares of the acquirer
After the merger at a big discount it basically destroys
enormous value in the combined company making It tastes like
a bitter moth to ah hungry bat so you know
he spits it out The basic idea in these poison
pill defense strategies is to deal with hostile takeovers And
a lot of those came during the junk bond era
in the nineteen eighties when cheap high risk capital was
liquid Lee easily available almost anywhere and companies felt vulnerable
to short term quick buck wall street sharpies who looked
great in a dark suit and usually had awesome hair
So yeah people for details carefully watch wall street the
first one the good one the one with michael douglas
when he still had hair and what you don't really 00:01:54.212 --> [endTime] hear there is he said Shmoop is good yeah
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