Tender Offer
A tender offer is a bid to purchase some or all of shareholders' stock in a corporation. Tender offers are typically made publicly and invite shareholders to sell their shares for a specified price and within a particular window of time. The price offered is usually at a premium to the market price and is often contingent upon a minimum or a maximum number of shares sold.To tender is to invite bids for a project or accept a formal offer such as a takeover bid. An exchange offer is a specialized type of tender offer in which securities or other non-cash alternatives are offered in exchange for shares.
Tender Offer
Definition
A tender offer is a bid to purchase some or all of a company's stock. Typically, this acquisition is conducted publicly and invites shareholders to sell their shares at a specific price and within a specific time window. The offered price is usually higher than the market price and often depends on a minimum or maximum limit of the number of shares to be sold.
Origin
The concept of a tender offer originated in the mid-20th century. With the development of capital markets and the increase in corporate mergers and acquisitions, this method of acquisition gradually became a common means of corporate takeover. Key events include several large-scale mergers and acquisitions in the 1970s and 1980s, which promoted the popularity of tender offers globally.
Categories and Characteristics
Tender offers can be divided into two main categories: cash offers and exchange offers. A cash offer involves the acquirer purchasing the target company's shares with cash. An exchange offer involves the acquirer offering securities or other non-cash alternatives in exchange for the target company's shares. The characteristic of a cash offer is its directness and simplicity, making it easily acceptable to shareholders. An exchange offer may involve complex valuation and negotiation processes but can reduce the acquirer's cash outlay.
Specific Cases
Case 1: In 2008, Microsoft Corporation launched a cash tender offer for Yahoo! Inc., offering $31 per share, totaling approximately $44.6 billion. Although Microsoft's offer was higher than Yahoo's market price at the time, Yahoo's board believed the offer undervalued the company and ultimately rejected the tender.
Case 2: In 2015, Royal Dutch Shell launched an exchange tender offer for BG Group. Shell offered a combination of cash and stock, with a total value of approximately $70 billion. This acquisition was successfully completed, significantly expanding Shell's presence in the natural gas market.
Common Questions
1. Why is the tender offer price usually higher than the market price?
Answer: The tender offer price is usually higher than the market price to attract shareholders to sell their shares and ensure the success of the acquisition.
2. Are shareholders required to accept a tender offer?
Answer: Shareholders can choose to accept or reject a tender offer, depending on their satisfaction with the offer price and conditions.
