Godfather Offer
A Godfather offer is an irrefutable takeover bid made to a target company by an acquirer. Typically, the offer is priced at an extremely generous premium compared with the target's prevailing share price, making it difficult for management to reject the bid without angering shareholders and being accused of breaching their fiduciary duty.A Godfather offer is named after the Francis Ford Coppola movie of the same title. More specifically, the name refers to the film's famous line, "I'm gonna make him an offer he can't refuse." This line has gone on to become one of the most celebrated quotations in cinema.
Godfather Offer
Definition
A Godfather Offer refers to an acquisition proposal made by a bidder to a target company that is so generous that it is difficult for the target company to refuse without causing dissatisfaction among its shareholders and being accused of breaching its fiduciary duty. This offer is typically priced at a significant premium compared to the target company's current stock price.
Origin
The term 'Godfather Offer' originates from the movie 'The Godfather' directed by Francis Ford Coppola. Specifically, it refers to the famous line in the movie: “I’m gonna make him an offer he can’t refuse.” This line has become one of the most celebrated quotes in film history.
Categories and Characteristics
Godfather Offers typically have the following characteristics:
- High Premium: The offer is usually significantly higher than the target company's current stock price to attract shareholders' attention.
- Irresistible: Due to the attractiveness of the offer, it is difficult for the target company to refuse without causing shareholder dissatisfaction.
- Strategic: Such offers are often used for strategic acquisitions with the aim of quickly gaining control of the target company.
Specific Cases
Case 1: In 2008, pharmaceutical company Pfizer made a Godfather Offer to Wyeth. Pfizer's offer was significantly higher than Wyeth's market value, ultimately leading to a successful acquisition.
Case 2: In 2016, SoftBank Group made a Godfather Offer to British chip design company ARM Holdings. SoftBank's offer was above ARM Holdings' market value, resulting in a successful acquisition.
Common Questions
Question 1: Are Godfather Offers always successful?
Answer: While Godfather Offers generally have a high success rate, they are not always successful. The target company may refuse the offer due to other strategic considerations or legal reasons.
Question 2: What impact do Godfather Offers have on shareholders?
Answer: Godfather Offers are usually beneficial to shareholders as the high premium means they can sell their shares at a price higher than the market value.
