What it is:
Greenmail is an acquirer attempts to obtain a controlling interest in a target by buying at a premium from the target's shareholders.tactic whereby the
How it works/Example:
Let's assume an entity that Company XYZ considers unsavory (we'll
To avoid being purchased by Party X, Company XYZ's board of directors might to purchase Party X's shares for a price above the current . This of course makes Party X go away (and a richer, by the way), but the transaction can also be construed as Party X blackmailing (or greenmailing) Company XYZ by threatening to take over the company if it does not pay a particular premium to Party X.
Why it matters:
To avoid this situation, in which Company XYZ might make an shares, it must that premium to all shareholders. An anti-greenmail provision is a clause in a 's charter that deters the corporation's board from conducting a buyback.
Company XYZ does this in exchange for Party X's agreement not to attempt to acquire the company for a period of time. Anti-greenmail provisions are attempts to thwart takeover threats from speculators, disruptive shareholders, and other "unsavory" entities that are seeking a payoff rather than a genuine business relationship. In general, a corporation's shareholders must vote to adopt or abandon anti-greenmail provisions.