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Term of the Day from the Financial Times Lexicon



Published: Tue, 16 Jun 2009 01:42:55 +0100

Last Build Date: Sat, 17 Feb 2018 14:50:24 GMT

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white squire

Fri, 06 Sep 2013 14:21:44 +0100

A white squire defence is where a friendly company or investor purchases a large enough share of the target company to stop an unwelcome bidder from achieving its aim of taking over the target company. Once that unwelcome bidder has withdrawn its bid, the white squire will then typically sell its shares. A white squire defence helps a company fend off a hostile takeover, but has no intention of taking over the company itself.

The term white squire arose in the 1980s as an alternative to white knight. The white knight is a company or individual that helps defend a company from an unwelcome bidder by buying the target itself. The problem for a target company in an M&A bid which enlists the assistance of a 'white knight' is that the target gives up its independence, albeit to a preferred bidder (the white knight) instead of the initial bidder which the target did not like.

So, in order to stop an unwelcome bidder whilst at the same time remaining independent, the concept of a white squire defence was developed.

 

white squire defence in the news

A famous example of this defence was in 2005 when the attempt of Shareholders United to stop Malcolm Glazer's bid to take over Manchester United FC fully. They would have been able to achieve this if they had purchased approximately 8 per cent of the outstanding shares, but were unsuccessful in this.

Another more recent example of a white squire defence can be found in the report: Carlos Slim’s América Móvil threatens to drop €7.2bn KPN bid

In 2013, Carlos Slim’s América Móvil group threatened to drop its €7.2bn takeover bid for KPN after being blocked by an independent foundation.

In this instance, the foundation entrusted with protecting the target company had blocking rights related to the Dutch telecoms company, KPN.

In both these cases, it was not the intention, or not expected, that the owner of the shares obtained in the white squire defence would be used to take over the respective companies.