CandleFocus Glossary Editor
A tender offer, sometimes referred to as a public offer to purchase, is a type of takeover bid in which a large company or private equity firm makes an offer to purchase a specific portion of a smaller company’s stock. It is usually made at a premium—a price per share greater than the existing market price. The tender offer is announced through a variety of different filtered means, such as SEC filings or the press, or through direct mail to shareholders.
Tender offers can be used to acquire companies in several ways. One way is to try and acquire a controlling stake in the target company’s stock. Another is to attempt to gain a majority stake in the company, but not sufficient to gain control. Most tender offers are set up in a so-called "Dutch auction" wherein the offeror sets a minimum and maximum price per share they are willing to pay. Shareholders are then invited to tender their shares at any price within the range.
Tender offers can also be made in exchange for a combination of cash and equity in the offeror’s company, if the target company’s shareholders are willing to accept that option. If the tender offer is successful, the company’s shares become part of the offeror's balance sheet, ultimately leaving shareholders with a stake in the now larger entity and a potentially increased investment opportunity.
Tender offers have found particular favour with acquirers looking to acquire companies via public markets. Generally speaking, because the tender offer is made at a premium price and is widely and publicly announced, there is a greater chance of successful merger or acquisition between the two companies. Tender offers are mostly regulated by the Securities and Exchange Commission and are subject to anti-takeover rules, including Williams Act provisions.
To summarise, the tender offer is an attractive takeover bid or merger route to those who want to acquire companies via public markets. The tender offer is generally made at a premium price, seeks to acquire a portion of the target company’s stock, and is subject to SEC regulations to protect the interests of shareholders. The offer (if successful) may provide shareholders with a higher price per share as well as a potential stake in the now larger company.
Tender offers can be used to acquire companies in several ways. One way is to try and acquire a controlling stake in the target company’s stock. Another is to attempt to gain a majority stake in the company, but not sufficient to gain control. Most tender offers are set up in a so-called "Dutch auction" wherein the offeror sets a minimum and maximum price per share they are willing to pay. Shareholders are then invited to tender their shares at any price within the range.
Tender offers can also be made in exchange for a combination of cash and equity in the offeror’s company, if the target company’s shareholders are willing to accept that option. If the tender offer is successful, the company’s shares become part of the offeror's balance sheet, ultimately leaving shareholders with a stake in the now larger entity and a potentially increased investment opportunity.
Tender offers have found particular favour with acquirers looking to acquire companies via public markets. Generally speaking, because the tender offer is made at a premium price and is widely and publicly announced, there is a greater chance of successful merger or acquisition between the two companies. Tender offers are mostly regulated by the Securities and Exchange Commission and are subject to anti-takeover rules, including Williams Act provisions.
To summarise, the tender offer is an attractive takeover bid or merger route to those who want to acquire companies via public markets. The tender offer is generally made at a premium price, seeks to acquire a portion of the target company’s stock, and is subject to SEC regulations to protect the interests of shareholders. The offer (if successful) may provide shareholders with a higher price per share as well as a potential stake in the now larger company.