Flip-in
Encyclopedia
In business, the flip-in is one of the five main types of poison pill
defenses against corporate takeover
s.
The flip-in is a provision in the target company
's corporate charter or bylaws. The provision gives current shareholders of a targeted company, other than the hostile acquirer, rights to purchase additional stocks in the targeted company at a discount. These rights to purchase occur only before a potential takeover
, and when the acquirer surpasses a certain threshold point of obtaining outstanding shares (usually 20 - 50%). If the potential acquirer triggers a poison pill by accumulating more than the threshold level of shares, it risks discriminatory dilution in the target company. The threshold level therefore effectively sets a ceiling on the amount of stock that any shareholder can accumulate before being required, for practical purposes, to launch a proxy contest.
In 2004, Peoplesoft
was employing the flip-in model against Oracle Corporation
's multi-billion hostile takeover bid. Andrew Bartels, a research analyst for Forrester Research
said, "The poison pill is designed to make it more difficult for Oracle to take over the organization. The customer assurance program is designed to compensate customers should there be a takeover. It's a financial liability for Oracle." Oracle attempted to pursue court dissolution of this program, and in December 2004 succeeded with a final bid of approximately $10.3 billion.
Poison pill
A shareholder rights plan, colloquially known as a "poison pill", or simply "the pill" is a type of defensive tactic used by a corporation's board of directors against a takeover...
defenses against corporate takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
s.
The flip-in is a provision in the target company
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
's corporate charter or bylaws. The provision gives current shareholders of a targeted company, other than the hostile acquirer, rights to purchase additional stocks in the targeted company at a discount. These rights to purchase occur only before a potential takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
, and when the acquirer surpasses a certain threshold point of obtaining outstanding shares (usually 20 - 50%). If the potential acquirer triggers a poison pill by accumulating more than the threshold level of shares, it risks discriminatory dilution in the target company. The threshold level therefore effectively sets a ceiling on the amount of stock that any shareholder can accumulate before being required, for practical purposes, to launch a proxy contest.
In 2004, Peoplesoft
PeopleSoft
PeopleSoft, Inc. was a company that provided Human Resource Management Systems , Financial Management Solutions , Supply Chain and customer relationship management software, as well as software solutions for manufacturing, enterprise performance management, and student administration to large...
was employing the flip-in model against Oracle Corporation
Oracle Corporation
Oracle Corporation is an American multinational computer technology corporation that specializes in developing and marketing hardware systems and enterprise software products – particularly database management systems...
's multi-billion hostile takeover bid. Andrew Bartels, a research analyst for Forrester Research
Forrester Research
Forrester Research is an independent technology and market research company that provides its clients with advice about technology's impact on business and consumers. Forrester Research has five research centers in the US: Cambridge, Massachusetts; New York, New York; San Francisco, California;...
said, "The poison pill is designed to make it more difficult for Oracle to take over the organization. The customer assurance program is designed to compensate customers should there be a takeover. It's a financial liability for Oracle." Oracle attempted to pursue court dissolution of this program, and in December 2004 succeeded with a final bid of approximately $10.3 billion.