Macaroni Defense

In order to understand this term, you need to understand what a "hostile takeover" is. It sounds like something from a military movie, but it's basically a company targeting another that it wants. The desired (or target) company doesn't want to be taken over for whatever reason (maybe fear for their jobs, maybe they just don't like change, maybe the pursuing company isn't offering enough money to suit them). Management resists in some way, or outright declines.

The pursuing company then goes to the shareholders (people who own pieces of the company, but may not necessarily work there) and tries to get them to use their shareholder status to force the acquisition. They may tell the shareholders their company can make them (the shareholders) more money and make current management look less competent.

At some point, depending on how the details play out, the management of the desired company may decide to do more then decline, and outright fight back. One of the ways they do this is the Macaroni Defense. The targeted company issues large amounts of corporate bonds. These bonds include the condition that in the event of a takeover, they are redeemed at a high rate.This means the purusing company would have to pay them off, as well as buy the targeted company. In effect, it raises the overall purchase price. The targeted group does this in hopes that the rising price tag scares off their pursuer.