What Is a White Squire?
Let me explain to you what a white squire is: it's an investor or a friendly company that steps in and buys a stake in a target company specifically to stop a hostile takeover from happening.
This approach is a lot like the white knight defense, but here's the key difference—I want you to note that the target company doesn't have to surrender its independence the way it does with a white knight, since the white squire only grabs a partial share and not the whole thing.
Key Takeaways
You should know that a white squire is essentially an investor or company that acquires a stake in another company to fend off a hostile takeover.
Unlike a white knight, which buys the entire company, a white squire only takes a partial stake.
These squires don't aim for controlling interests; they just secure enough shares to block the hostile bidder.
To make the deal attractive, the target company often offers incentives like discounted shares or substantial dividends to the white squire.
How a White Squire Works
A white squire operates as a friendly acquirer that doesn't need a controlling interest, in contrast to a white knight that takes over the whole company to ward off the threat.
Instead, the white squire purchases just part of the company, with a stake large enough to block the bidding company and buy the target some time to reassess its strategy.
As an incentive, the white squire might get a seat on the board, discounted shares, or generous dividends.
Once the hostile bidder backs off, the white squire usually sells its shares, and to avoid any future betrayal, the deal might structure those shares so they can't be tendered to the hostile party.
Special Considerations
Beyond just dividends and discounted shares, white squires can receive other perks like a board seat to make sure they stay aligned with the target company and don't flip sides.
Typically, there's an agreement in place that requires the white squire to vote in favor of the target company's interests.
While bringing in a white squire can help in the short term, it might backfire later because they gain partial control, so companies often implement a standstill agreement to stop the squire from increasing their stake.
Example of a White Squire
Take the case in 2013 when America Movil, owned by Mexican billionaire Carlos Slim, tried to acquire the Dutch telecom company KPN, but an independent foundation tasked with protecting KPN managed to block it using a white squire-like defense.
In the past, companies like Disney and CBS have employed white squires to dodge takeovers; for instance, CBS had Loews Corp. take a 25% stake to stop Ted Turner, but eventually Loews grew dissatisfied with management and pushed for the CBS board chair to resign.
This shows that while a white squire is intended to be a helpful ally for the targeted company, they can still advocate for changes if it suits their own interests.
Other Takeover Defenses
Besides the white squire, there are several other defenses against takeovers that companies can use, such as poison pills, greenmail, the pac-man defense, staggered boards, and supermajority rules.
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