Tender offer
In
To induce the shareholders of the target company to sell, the acquirer's offer price is usually at a premium over the current market price of the target company's shares. For example, if a target corporation's stock were trading at $10 per share, an acquirer might offer $11.50 per share to shareholders on the condition that 51% of shareholders agree. Cash or securities may be offered to the target company's shareholders, although a tender offer in which securities are offered as consideration is generally referred to as an "exchange offer".
Governing law
United States
General
In the United States, tender offers are regulated by the Williams Act. SEC Regulation 14E also governs tender offers. It covers such matters as:
- the minimum length of time a tender offer must remain open
- procedures for modifying a tender offer after it has been issued
- insider trading in the context of tender offers
- whether one class of shareholders can receive preferential treatment over another
Required disclosures
In the United States, under the
Tax consequence
The consummation of a tender offer resulting in payment to the shareholder is a taxable event triggering capital gains or losses, which may be long-term or short-term depending on the shareholder's holding period.
See also
- Bond Tender Offer
- Bond exchange offer
- Mini-tender offer
- Mergers and acquisitions
- Contract awarding
- List of largest mergers and acquisitions
References
- SEC FAQ on tender offers
- SEC regulations governing tender offers
- David Offenberg, Christo A. Pirinsky, "How do acquirers choose between mergers and tender offers?" Journal of Financial Economics, 2015.
- J. Fred Weston, Mark L. Mitchell, J. Harold Mulherin, Takeovers, Restructuring, and Corporate Governance