Michael Milken Taking Another Nibble at the Poison Pill?

Is the poison pill making a comeback?

A recent item in the New York Post concerning none other than Michael Milken says it is.

If you never realized that the poison pill had receded, you are excused, because I was unaware as well. Besides, poison pills were overrated even in their day.

Here's how the pill (a kind of takeover defense) got back in the news at any rate: A somewhat incoherent item in the New York Post says that a company called "Nobel Learning Communities was asked by a shareholder to institute a poison pill." The more interesting part of the story is that that object of the pill is Michael Milken, Milken's brother, and their investment firm called Blesbok.

But if Milken is raiding a company, isn't that the big news? Wouldn't it at least potentially violate the terms of Milken's plea agreement, which included a lifetime ban from the securities business?

If it's doubtful that anyone would need a legal defense against a hostile raid by Milken, it's also doubtful that a poison pill would do it. While there are many variants, basically a poison pill allows a company to issue a lot of new shares if anyone deemed a hostile raider gets more than, say 5 percent, of the target company shares. The idea is that the raider would be defeated because his holdings would be diluted.

This kind of defense was all the rage in the '80s and the '90s. Since then, fewer takeovers are hostile. But even when the pills were popular, it was almost unheard of for any company to release the pill. Well before that happened, the target and the raider would work things out. As a result, it was never clear that a poison pill (which certainly sounds discriminatory) was lawful. In short, the poison pill was like a medicine that the FDA was never even asked to test.

(Image by *Solar ikon* via Flickr, CC 2.0)