Even as takeover barriers are falling in the United States, they are rising in Japan, France and elsewhere in Europe. European and Japanese companies are seeking to insulate themselves from unsolicited offers by adopting new takeover defenses such as poison pills. Sound familiar? Yes, for those who recall the takeover wave that hit the U.S. in the 1980s -- and the poison pills spawned in that era.

Poison pills are popping up in Japan and France for the first time. France adopted legislation last year that legalizes poison pills, called bons Breton in honor of Finance Minister Breton. In Japan, poison pills were as unknown as hostile bids until two years ago. Takeover defenses last year trumped Japan's only hostile bid by a domestic blue-chip company. But how long will it take before major hostile takeovers succeed in Japan? To protect themselves from that possibility, hundreds of companies likely will place management proposals on proxy ballots in the coming weeks asking shareholders to approve poison pills.

Though poison pills, or shareholder rights plans, were first made in the USA, the nation has since developed a robust market for corporate control. American companies are increasingly eliminating or modifying poison pills – while also moving to annual board elections, thus removing another potent antitakeover device. In 2005, for the first time, the number of S&P 500 companies with poison pills, or shareholder rights plans, fell to less than half. In 2006, also for the first time ever, a majority of S&P 500 companies had annually elected boards.

The cross-border hostile takeover of Arcelor by Mittal Steel last year stirred protectionist responses in France and other European nations last year. Ironically, though, a venerable Canadian steel company accepted a takeover bid last year from none other than Arcelor – just before the latter itself became a takeover target. Foreigners last year even acquired Canada’s Hudson Bay Co., a national icon founded in 1670. But Canadians took it all in stride. Canadian calm reflects two features that define the market there for corporate control: it is remarkably open to takeover bids, and shareholders have the final say on them.

When the Delaware Supreme Court first ruled that poison pills were legitimate two decades ago, it noted that a company's adoption of a poison pill hardly ends the matter. The larger question remains of how the board will respond to actual takeover offers. Today, an analogous question looms as to how European and Japanese companies will use antitakeover devices to protect shareholder value.

For a new report on the topic, see Poison Pills in France, Japan, the U.S., and Canada (May 2007), available here.