Why have six U.S. companies recently issued specific purpose poison pills?

Over the last two weeks, six U.S. companies adopted what we refer to as specific purpose poison pills - those adopted for a specific reason including in response to an unsolicited acquisition offer, a rapid share accumulation, after being approached by an activist investor, to safeguard a friendly merger, or to protect net operating loss carryforwards ("NOLs").

Since July 18th: The Clorox Company and Transatlantic Holdings, Inc. both adopted poison pills in response to unsolicited acquisition offers; Breeze-Eastern Corporation and Commercial Metals Company adopted poison pills in response to activist investors; The Talbots, Inc. announced a poison pill adoption after buyout firm Sycamore Partners, L.P. disclosed it had taken a 9.9% stake in the company; and Eastman Kodak Company announced an NOL poison pill adoption designed to preserve its substantial tax assets the use of which would be significantly limited if the company experiences an "ownership change" as defined under Section 382 of the Internal Revenue Code.

These examples are part of a larger trend we have written about in recent years of companies opting to eschew routine poison pill adoptions in favor of waiting for one to be specifically needed. In years past, large numbers of U.S. companies adopted routine poison pills as an inexpensive ten year insurance policy - there if needed if the company was ever put in play. The trend towards specific purpose poison pills is accelerating as evidenced by the fact that only one-third of poison pills adopted so far in 2011 are routine. As little as five years ago, routine adoptions represented over 80% of adoptions.

The data used to compile this research spolight is from the FactSet Corporate Governance database, SharkRepellent. Learn more about SharkRepellent.