Standstill Agreement Definition

What Is a Standstill Settlement?

A standstill settlement is a contract that accommodates provisions that govern how a bidder of an organization should buy, get rid of, or vote inventory of the goal firm. A standstill settlement can successfully stall or cease the method of a hostile takeover if the events can not negotiate a pleasant deal.

The settlement is especially essential as a result of the bidder may have had entry to the goal firm’s confidential monetary info.

Understanding Standstill Agreements

An organization that comes underneath stress from an aggressive bidder or activist investor finds a standstill settlement useful in blunting the unsolicited method. The settlement offers the goal firm extra management over the deal course of by prescribing the bidder or investor’s capability to purchase or promote the inventory of the corporate or launch proxy contests.

A standstill settlement may also exist between a lender and borrower when the lender stops demanding a scheduled cost of curiosity or principal on a mortgage in an effort to give the borrower time to restructure its liabilities.

Within the banking world, a standstill settlement between a lender and borrower halts the contractual reimbursement schedule for a distressed borrower and forces sure actions that the borrower should undertake.

A brand new deal is negotiated through the standstill interval that often alters the mortgage’s unique reimbursement schedule. That is used as a substitute for chapter or foreclosures when the borrower cannot repay the mortgage. The standstill settlement permits the lender to salvage some worth from the mortgage. In a foreclosures, the lender could obtain nothing. By working with the borrower, the lender can enhance its possibilities of getting repaid a portion of the excellent debt.

Instance of a Standstill Settlement

A current instance of two corporations that signed such an settlement is Glencore plc, a Swiss-based commodities dealer, and Bunge Ltd., a U.S. agricultural commodities dealer. In Might 2017, Glencore made an off-the-cuff method to purchase Bunge. Shortly after, the events reached a standstill settlement that forestalls Glencore from accumulating shares or launching a proper bid for Bunge till a later date.

In 2019, the online game retailer GameStop signed a standstill settlement with a gaggle of traders who wished modifications within the firm’s governance, believing the corporate had extra intrinsic worth than the inventory’s worth mirrored.

Different Standstill Agreements

In different areas of enterprise, a standstill settlement will be just about any settlement between events by which each conform to pause the matter at hand for a selected size of time. This may be an settlement to postpone scheduled funds to assist a enterprise climate tough market circumstances, agreements to cease producing a product, agreements between governments, or many different forms of preparations.