Practical Lessons to Be Learned Concerning Poison Pills in the Chancery Court's Decision in 'Air Products v. Airgas'

Donald J. Wolfe, Jr., Kevin R. Shannon, Berton W. Ashman, Jr.

The Delaware Supreme Court first upheld the legality of a shareholder rights plan, or "poison pill," as a takeover defense in its 1985 decision in Moran v. Household International Inc. While also finding that the target board would remain subject to enhanced judicial scrutiny in determining whether and when to redeem the rights and withdraw the defense when confronted with a hostile acquisition bid, the contours of that constraint were left largely undefined. As a result, corporate law practitioners and scholars have hotly debated the topic over the course of the ensuing 25 years. During that same time, there has been no lack of challenges to the use of the pill, but the critical question has remained unresolved: how long can a board maintain a pill in the face of a structurally noncoercive offer that it deems inadequately priced?

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