White Squire

What Is a White Squire?

A white squire is an investor or friendly company that purchases a stake in a target company to forestall a hostile takeover. This is like a white knight defense, with the exception of the target firm doesn't need to surrender its independence as it does with the white knight, in light of the fact that the white squire just purchases a partial share in the company.

How a White Squire Works

A white squire is a friendly acquirer which doesn't need a controlling interest like a white knight does. A white knight purchases the whole company to battle off a hostile takeover. A white squire purchases part of the company. Their stake is just sufficiently large to block the bidding company and gives the target company time to reexamine its strategy. The white squire might be given a seat on the board, offered discounted shares or guaranteed liberal dividends, as an incentive to do the deal.

When the unfriendly acquirer has removed its bid, the white squire will ordinarily sell its shares. To keep it from switching devotions later on, the deal might be structured with the goal that the shares given to the white squire may not be offered to the hostile bidder.

Special Considerations

Past dividends and discounted shares, white squires can likewise get different benefits, like a seat on the board. This is finished to guarantee the white squire sides with the target company and doesn't change their minds. As part of this, an agreement is generally inked requiring a white squire to vote for the target company.

Welcoming a white squire aboard can help, yet later on can hurt the company, as they currently have partial control of the company. In this way, companies might implement a standstill agreement, which keeps a white squire investor from bringing their stake up in the company.

Illustration of a White Squire

An illustration of the white squire defense happened when America Movil, owned by Mexican billionaire Carlos Slim, attempted to purchase Dutch telecoms company KPN in 2013. An independent foundation entrusted with protecting KPN had the option to block it.

In the past, Disney and CBS have utilized white squires to assist with staying away from takeovers. CBS recently had Loews Corp. take a 25% stake in the company to forestall a takeover by Ted Turner. Nonetheless, eventually, Loews was not content with CBS management and forced the chair of CBS' board to leave. While a white squire is intended to be a positive presence for the targeted company, they can push for change in the event that they see their own issues.

Other takeover defenses incorporate poison pills, greenmail, the pac-man defense, making staggered boards and supermajority rules.

Features

• A white squire just purchases a partial stake, in contrast to a white knight that purchases the whole company.
• Incentives frequently offered to a white squire can incorporate discounted shares or robust dividends.
• White squires don't take controlling interests, rather, obstructing the binding company is just adequately large.
• A white squire is an investor or company that takes a stake in a company to forestall a hostile takeover.