DEFINITION of 'Macaroni Defense'

An approach taken by a company that does not want to be taken over. The company issues a large number of bonds with the condition they must be redeemed at a high price if the company is taken over.

BREAKING DOWN 'Macaroni Defense'

Why is it called Macaroni Defense? Because if a company is in danger, the redemption price of the bonds expands like Macaroni in a pot!

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RELATED FAQS
  1. Why would a company choose to repurchase in lieu of redeem?

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  3. What happens to the price of a premium bond as it approaches maturity?

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