ANTI-TAKEOVER STRATEGIES

• CROWN JEWELS:  Section 23 of SEBI takeover regulations indicate that the company calls its precious assets as crown jewels to depict the greed of the acquirer under the takeover bid. These precious assets attract the raider to bid for the company’s control. The company sells these assets at its own initiative leaving the rest of the company intact (Instead of selling the assets, the company may also leases them or mortgage them so that the attraction of free assets to the predator is suppressed.

• GOLDEN PARACHUTES: (or first Class passenger strategy). This envisages a termination package for senior executive and is used as a protection tool against the takeover.

• GREEN MAIL: A large block of shares is held by an unfriendly company, which forces the target company to repurchase the stock at a substantial premium to prevent the takeover. (This could prove to be an expensive deal to the raider)

• PACMAN STRATEGY: The target company attempts to take over the hostile raider. This happens when the target company is larger than the predator.

• POISON PILL: An anti takeover defence, which creates securities, that provides their holders with special rights. The exercise of these rights would make it more difficult and/ or costly for an acquirer to take over the target against the will of its Board of Directors.

• STAGGERED BOARD: An ant takeover measure which divides a firm’s Board of Directors into several classes only one which is up for election in any given year, thus delaying the effective transfer of control to a new owner in a takeover. Also called classified board.

• STANDSTILL AGREEMENT: A voluntary contract by a large group of shareholders not to make further investments in the target company for a specified period of times.

• WHITE KNIGHTS: White knight enters the fray when the target company is raided by a hostile suitor. The clause 25 of SEBI takeover regulations gives the provision to the white knight to offer a higher price than the predator to avert the takeover bid. (with the higher bid offered by the white knight, the predator might not remain interested in acquisition and hence the target company is protected from  the raid.): A third party friendly to management who helps a company avoid  an unwanted takeover without taking over the company on its own.

• POISON PUT: A covenant allowing the bond holder to demand repayment in the event of hostile takeover.