crown jewel defence
The Crown Jewel Defence is when a firm sells its best asset to stop an unwanted takeover.
In plain English
"Wait, so you sold the Lekki warehouse just so they will leave us alone?" Tunde asked his partner over lunch. "Yes," Femi smiled into his water glass, "because without that piece of land, they do not even want us anymore."
That is the whole trick. In corporate boardrooms, when a hostile buyer turns up uninvited to swallow a company whole, the board looks for what that predator loves most. It might be a valuable patent, a profitable retail arm, or prime real estate.
Then, the company sells that specific treasure or spins it off into a separate business. In the United Kingdom, companies sometimes park such prime assets with a friendly third party under an agreement to buy them back later, once the hostile suitor walks away.
The buyer wanted the soup because of the choice meat inside it. Once you scoop out the meat, the hungry guest puts down their spoon and leaves the table.
It is a drastic move, though. You save the company from an unwanted master, but you might wake up the next morning smaller, poorer, and missing your favourite money maker.
To avoid a forced buyout, an Abuja firm sold its ₦400,000,000 data centre.
Questions people ask
Why would a company sell its best asset on purpose?
Because directors believe running an independent business without that asset is better than letting a hostile buyer take over the entire firm.
Can the shareholders stop this defence?
Yes. Shareholders can take directors to court if selling the asset damages the value of their shares without a genuine commercial benefit.
Does the company ever get the sold asset back?
Sometimes. Firms often sell the asset to a friendly partner with a legal option to repurchase it once the takeover danger has passed.
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