At a time when the controversial clauses known as poison pills have come under fire – the revised Novo Mercado rules forbid them – the second guidance letter published by the Brazilian Institute of Corporate Governance (IBGC) counterweights the critics' understanding that these anti-takeover mechanisms are always harmful to the market.

The document, released on October 22, acknowledges that poison pills could be of benefit to shareholders. By imposing an any-and-all bid at a fixed price, the clause eliminates control premiums and protects companies from hostile bids when share prices are down and from coercive takeovers with abusive terms.

The case of a telecommunications company, GVT, revealed a poison pill that was beneficial while it lasted. Upon receiving two interesting acquisition offers – from Vivendi and Telefonica – the company's heads called a meeting for November 3, aiming to vote the pill's removal. "The poison pill protected the company from 'adventurers' who might have acquired control on the stock market", comments Ana Carolina de Salles Freire, a partner with Tozzini Freire. On September 30, GVT's free float was 69.97% and its largest shareholder held 15.05% of the company's shares.

The IBGC recommends dosing the poison carefully. The entity condemns entrenched clauses and setting a priori prices without any relation to the company's fundamentals. According to the institute, the point of equilibrium appears to lie in the shares’ economic value and in securing the reversibility of any mechanism whenever the shareholders believe it no longer benefits the company. (Silvio Muto)