Just Say No: Family Dollar Rejects Takeover Offer

March 5, 2011

Earlier, I wrote about the “poison pill” as a defense for a hostile takeover.   The NY Times Dealbook is reporting on the precursor to a possible hostile takeover, with Family Dollar rejecting a friendly takeover bid from Nelson Peltz’s Trian Group, a hedge fund (as explained here).  Basically, Peltz contacted Family Dollar’s board with an offer, which the board found “substantially undervalued” and basically said “no.”

So how does this turn into a hostile takeover? Well, Peltz could decide that his bid is adequate.  And could bring the offer directly to Family Dollar’s shareholders and the shareholders, if faced with even a minimal premium, may agree with him, giving Peltz control of the company without Family Dollar’s board’s approval.

This is where the board could use the “poison pill” to try and stop any hostile takeover.

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