Posted in Finance, Accounting and Economics Terms, Total Reads: 510
Definition: Shark Repellent
This is also known as the porcupine provision. This refers to some of the preventive measures taken by companies against a hostile takeover attempt by the bidders. A hostile or unwanted takeover refers to attempt of bidder company to acquire a controlling (generally, greater than 50% shares) or 100% acquisition without the will of the target. There are various ways like poison pill that are famous in preventive measures taken by the target companies to fend off the unwanted bidders.
In poison pill, there is a rights issue that makes it possible for present shareholders to buy shares of the bidding company at a discount (Flip over) or it gives the present shareholders of target company a right to buy back its stocks (Flip in) making the takeover very costly Basically, a poison pill makes the target less attractive or costly for the bidder.
A shark repellent also refers to some amendments to the company’s charter that become active when a takeover attempt is announced to the shareholders. It makes the target company’s shares less profitable or less attractive for the bidder and hence prevents them from hostile takeover.