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CS Executive · Capital Market and Securities Laws · Acquisition of Shares and Takeovers - Concepts

An investor quietly buys a block of shares in Kalyani Components Ltd, threatens a hostile takeover, and then offers to sell the block back to the company at a price well above market, in return for dropping the threat. This practice is known as:

This is greenmail: the investor buys a stake, threatens a hostile takeover and then gets the target to repurchase the shares at a premium. It differs from golden parachutes, crown jewel sales and the Pac-Man defence, which are different defensive or compensation tactics.

  1. AGolden parachute
  2. BCrown jewel defence
  3. CGreenmailCorrect
  4. DPac-Man defence

Explanation

Greenmail is the purchase of a stake followed by a threat of takeover to force the target to repurchase the shares at a premium. A golden parachute is a generous payout to executives on losing their jobs after a takeover. Crown jewel defence means selling key assets, and Pac-Man defence means the target bids for the acquirer.

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