Flip-in
From Wikipedia, the free encyclopedia
The flip-in is one of five main types of poison pills, and is a common part of many modern flip-over poison pills.
The flip-in is a provision in the target company's corporate charter or bylaws. The provision gives current shareholders of a targeted firm, other than the hostile aquiror rights to purchase additional stocks in the targeted company at a discount rate. These rights to purchase occur only 1) before a potential takeover, and 2) when the acquirer surpasses the "kick-in" or threshold point of obtaining outstanding shares (usually 20 - 50%). No potential acquiror or other shareholder will risk triggering a poison pill by accumulating more than the threshold level of shares because of the threat of massive discriminatory dilution. The threshold level therefore effectively sets a ceiling on the amount of stock that any shareholder can accumulate before launching 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 of 2004 succeeded with a final bid of approximately $10.3 billion.
