Searching For A White Knight

Several hostile take-over bids making headlines across Canada have taken place this year. In the current market, where share prices may not accurately reflect the value of a company's assets, junior and mid-tier mining companies may be more susceptible to an unfriendly take-over. So, what can a company do when it becomes the target of a hostile bid?

In Canada, a company's board of directors cannot reject a bid without first giving shareholders their say. By contrast, in the United States, a board is permitted to reject a bid barring shareholders the opportunity to tender to the bid provided that, among other things, the board's response is reasonable and the directors are not acting in their own self-interest. This approach is amusingly known as the "just say no defence" or the "Nancy Reagan defence," crediting the former first lady for the catchphrase as part of America's war on drugs.