Incorporate finance, atender offer is a type of publictakeover bid. The tender offer is a public, open offer or invitation (usually announced in a newspaper advertisement) by a prospective acquirer to allstockholders of apublicly tradedcorporation (the target corporation) to tender theirstock for sale at a specified price during a specified time, subject to the tendering of a minimum and maximum number of shares. In a tender offer, the bidder contacts shareholders directly; the directors of the company may or may not have endorsed the tender offer proposal.
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 was 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".
In theUnited States, tender offers are regulated by theWilliams Act. SECRegulation 14E also governs tender offers. It covers such matters as:
In the United States, under theWilliams Act, codified in Section 13(d) and Section 14(d)(1) of theSecurities Exchange Act of 1934, a bidder must fileSchedule TO with theSEC upon commencement of the tender offer. Among the matters required to be disclosed in schedule TO are: (i) a term sheet which summarizes the material terms of the tender offer in plain English; (ii) the bidder's identity and background; and (iii) the bidder's history with the target company. In addition, a potential acquirer must fileSchedule 13D within 10 days of acquiring more than 5% of the shares of another company.
The consummation of a tender offer resulting in payment to the shareholder is a taxable event triggeringcapital gains or losses, which may be long-term or short-term depending on the shareholder's holding period.
