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Fair Price Provision

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Fair price provision

Fair Price Provision
A provision in the bylaws of some publicly-traded companies stating that a company seeking to acquire it must pay a fair price to targeted shareholders. The formula for determining a fair price may be indicated in the bylaws; it is often a calculation based on historic prices. Additionally, the fair price provision mandates that the acquiring company must pay all shareholders the same amount per share in multi-tiered shares. The fair price provision exists both to protect shareholders and to discourage hostile acquisitions by making them more expensive. See also: Antitakeover measure.


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During the takeover heyday, challenges centered around defensive mechanisms -- poison pills, classified boards, fair price provisions, and opt-outs of state takeover legislation.
Consistent with our 1988 survey, the ranking of the most frequently reported defenses is: -- Staggered boards (74%); -- Shareholders' rights plans (55%); -- Super majority provisions (50%); -- Poison pills (50%); -- Fair price provisions (37%).
 
 
 
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