Question

Little, Ltd., is a small publicly traded stock company that owns a valuable patent. Little has approximately 1,000 shareholders and about 100,000 shares authorized and outstanding. Big Company would like to use the patent, but Little has refused to grant it a license. Big offered to buy out all of Little’s assets, but Little’s board of directors refused. Big has now tendered an offer to all of Little’s shareholders to pay them U.S. $10 a share for their stock, a price that is slightly above the current fair-market price. What can Little do to prevent Big from succeeding? And could Big do to do the opposite?

Answer 1

Little can go for crown Jewel defence. It can sell the patent to a third party so that taking over will be invaluable proposition to the big. Without the patent, big will consider it unworthy to take over little as it is the main motive to takeover because previously big has approached little to use the license. Without the license Big will not go for takeover. However this strategy may call for lawsuit and big may file lawsuit on little management or directors for unfair trade practices.