Question

Renew Cosmetics, a large cosmetics corporation, wants to take over Organic Skin Care, a small, specialty store that that makes organic face cream. Organic Skin Care does not want to be taken over because it wants to protect its employees and customers from the changes Renew Cosmetics would make to the company. To head off this hostile takeover attempt, Organic Skin Care allows its stockholders to buy more shares of stock at prices lower than the current market value. What technique is Organic Skin Care using to avoid being taken over?a. poison pill b. shark repellant c. white knight d. tender offer e. leveraged buyout

Answer 1

The correct answer is letter "A": poison pill.

Step-by-step explanation:

A Poison Pill is a corporate maneuver established to try to avoid a hostile takeover. This strategy is used by the target corporation to make the stock less attractive to the acquirer. One strategy for a poison pill allows existing shareholders to buy more stock at a discount. This increases the number of shares that the acquirer will have to purchase.