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 ?
Positive market reactions have been associated with the adoption of antitakeover devices believed to protect efficient management, such as fair-price amendments and non-financial-effects amendments.
Using monthly excess returns, Linn and McConnell report positive market reactions and conclude that fair-price amendments are in shareholders' interests.
Of these 99, 60 firms had either a non-financial effects or a fair-price amendment, but no poison pill.