What is a 'White Knight'
A white knight is an individual or company that acquires a corporation on the verge of being taken over by a force deemed undesirable by company officials, otherwise known as a black knight. While the target company doesn't remain independent, a white knight is viewed as a preferred option to the hostile company completing their takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares.
BREAKING DOWN 'White Knight'The white knight is the savior of a company in the middle of a hostile takeover. Often, company officials seek out a white knight – sometimes to preserve the company's core business, and other times just to negotiate better takeover terms. An example of the former can be seen in the movie "Pretty Woman" when corporate raider/black knight Edward Lewis, played by Richard Gere, has a change of heart and decides to work with the head of a company he'd originally planned on ransacking.
Billionaire Patrick Soon-Shiong has been deemed as a white knight for his $70.5 million investment in May 2016 into Tribune Publishing, a newspaper company that is currently fending off a takeover attempt by Gannett Co., the United States' largest newspaper company by daily circulation. Soon-Shiong's investment makes him Tribune Publishing's second-largest shareholder.
A few of the most hostile takeover situations include AOL's $164 billion purchase of Time Warner in 2000, Sanofi-Aventis' $24.5 billion purchase of biotech company Genzyme in 2010, Deutsche Borse AG's blocked $17 billion merger with NYSE Euronext in 2011 and Clorox's rejection of Carl Icahn's $11.7 billion takeover bid in 2011.
Successful hostile takeovers, however, are rare; not a single takeover of an unwilling target has amounted to more than $10 billion in value since 2000. Most of the time, an acquiring company raises the price per share it is offering until shareholders and board members of the targeted company are satisfied. It is especially hard to purchase a large company that does not want to be sold. Mylan, a global leader in generic drugs, experienced this when it attempted to purchase Perrigo, the world's largest producer of drugstore-brand products, for $26 billion in 2015, but it was turned down. A company such as Perrigo does not need the help of a white knight when put into a hostile situation.
In addition to white knights and black knights, there is a third potential takeover candidate called a gray knight. A gray knight is not as desirable as a white knight, but it is more desirable than a black knight.