Melvin was attempting to gain control of Western Wood Products until he realized that the existing shareholders in the firm had the right to purchase additional shares at a below-market price given his hostile takeover attempt.Thus,Melvin decided to forego investing in this firm.What term applies to the tactic used by Western Wood Products to stave off this takeover attempt?

Question

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The tactic used by Western Wood Products is known as a share rights plan, also known as a poison pill. This plan allows existing shareholders to purchase additional shares at a discount, making a hostile takeover attempt more expensive for the potential acquirer. Pac-man defense involves the target company attempting to acquire the hostile bidder, shark repellent plan involves changing corporate bylaws to make a takeover more difficult, golden parachute provision involves providing executives with lucrative severance packages in the event of a takeover, and greenmail provision involves the target company paying a premium to the potential acquirer to cease the takeover attempt.

Melvin Was Attempting to Gain Control of Western Wood Products