dictionary of finance terms

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SHARK REPELLENT: measure undertaken by a corporation to discourage unwanted TAKEOVER attempts. Also called porcupine provision.

For example:

1. fair price provision requiring a bidder to pay the same price to all shareholders. This raises the stakes and discourages TENDER OFFERS designed to attract only those shareholders most eager to replace management.

2. GOLDEN PARACHUTE contract with top executives that makes it prohibitively expensive to get rid of existing management.

3. defensive merger, in which a TARGET COMPANY combines with another organization that would create antitrust or other regulatory problems if the original, unwanted takeover proposal was consummated. See also SAFE HARBOR.

4. STAGGERED BOARD OF DIRECTORS, a way to make it more difficult for a corporate RAIDER to install a majority of directors sympathetic to his or her views.

5. supermajority provision, which might increase from a simple majority to two-thirds or three-fourths the shareholder vote required to ratify a takeover by an outsider.

See also POISON PILL; SCORCHED-EARTH POLICY.