macaroni defense

Macaroni Defense

An approach taken by a company that does not want to be taken over. The company issues a large number of bonds with the condition they must be redeemed at a high price if the company is taken over.

Notes:

Why is it called Macaroni Defense? Because if a company is in danger, the redemption price of the bonds expands like Macaroni in a pot!

See also: Bankmail, Bond, Greenmail, Lobster Trap, Poison Pill, Redemption, Whitemail

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Macaroni defense

A tactic used by a corporation that is the target of a hostile takeover bid involving the issue of a large number of bonds that must be redeemed at a higher value if the company is taken over.

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macaroni defense

A defensive tactic against a hostile takeover in which the potential target company issues a large number of bonds that must be redeemed at a substantial premium to par in the event the company is taken over. The required redemption substantially expands the cost of a hostile takeover just as macaroni expands when placed in boiling water.