standstill agreement (redirected from standstill agreements)

Standstill agreement

Contract by which the bidding firm in a takeover attempt agrees to limit its holdings of another firm.

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standstill agreement

A written agreement between two firms whereby the actions of one firm with respect to the other are limited until a specified date. For example, Firm A may sell Firm B a block of Firm A's stock with the stipulation that Firm B will acquire no additional shares in Firm A for five years.

Case Study In February 1996, the Chrysler Corporation reached a standstill agreement with dissident stockholder Kirk Kerkorian. Over several years, Kerkorian had accumulated nearly 13.6% of Chrysler's common stock in an unsuccessful takeover attempt. At the time of the agreement, the investor was threatening Chrysler management with a proxy fight. As part of the standstill agreement, Kerkorian said he would not accumulate additional Chrysler shares, not attempt a hostile takeover, and not launch a proxy fight for a period of five years. In turn, Chrysler management agreed to give a board seat to a Kerkorian ally. The firm also agreed to double the size of its planned 1996 share-repurchase program to $2 billion and to repurchase an additional $1 billion of Chrysler shares the following year. The standstill agreement rewarded Kerkorian with a boost in the value of his Chrysler shares, and at the same time it permitted Chrysler's management to eliminate a problem that was consuming substantial amounts of the firm's time and resources.