Lately, poison pills have been all the rage (in part because of the Airgas decision in Delaware). Iron Mountain–a document retention company–has recently adopted a pill after a hedge fund, Elliott Management, pushed Iron Mountain to convert itself into a Real Estate Investment Trust (REIT).
Under the poison pill’s terms, if any investor acquires more than 15% of Iron Mountain, Iron Mountain can issue shares to dilute the large investor’s share. The other investors would not be diluted, however, because the shares would be issues proportionally among shareholders (as opposed to sold in the open market.)
The reason for implementing the poison pill is to ward off any control Elliott Management might obtain by buying up shares and electing directors. The current board of directors’ agenda here is different from Elliott Management’s view of how the company should proceed; so they implemented the poison pill.
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