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.
References in periodicals archive ?
Furthermore, a comparison of nonfair price and fair price amendments shows no significant differences from industry means for capital spending.
Antitakeover charter amendments are classified in four categories: (i) supermajority amendments, (ii) classified boards, (iii) authorization to issue preferred stock and (iv) fair price amendments.
We examine fair price amendments and nonfair price amendments separately, because the categories may provide a different degree of job protection for managers.