Legal Definitions - tender offer

A tender offer is a direct, public proposal made by one company or individual to the shareholders of another company to purchase their shares. The offer typically involves buying a substantial number of shares, often at a price higher than the current market value, with the primary goal of acquiring a significant ownership stake or even full control of the target company. These offers are usually time-limited and have specific conditions, such as requiring a minimum number of shares to be "tendered" (offered for sale) by the shareholders for the deal to proceed.

Here are some examples to illustrate how a tender offer works:

• Example 1: Friendly Acquisition

  Imagine "Tech Innovators Inc." wants to acquire "Data Solutions Corp." to expand its market share and product offerings. Tech Innovators announces a tender offer to all Data Solutions shareholders, proposing to buy their shares for $75 each, which is 20% higher than Data Solutions' current stock market price of $62. The offer is open for 30 days and is contingent on at least 51% of Data Solutions' shares being tendered. This illustrates a tender offer because Tech Innovators is making a public, time-limited offer directly to Data Solutions' shareholders at a premium price, aiming to gain control (51%) of the company.

• Example 2: Hostile Takeover Attempt

  "Global Conglomerate PLC" decides it wants to acquire "Local Manufacturing Co." but Local Manufacturing's current management and board are resistant to the idea. To bypass the uncooperative board, Global Conglomerate launches a tender offer, publicly announcing its intention to buy all outstanding shares of Local Manufacturing for $50 per share, significantly above the current trading price of $35. They set a deadline of three weeks for shareholders to accept, hoping to pressure them into selling and thus gain control. This is a tender offer because Global Conglomerate is directly soliciting Local Manufacturing's shareholders with a premium offer for their shares, with the clear objective of taking control of the company, even against the wishes of existing management.

• Example 3: Strategic Investment

  "Green Energy Fund," a large investment firm, believes "Solar Panel Innovations Inc." has strong future growth potential. To secure a significant stake and influence without necessarily taking full control, Green Energy Fund announces a tender offer to Solar Panel Innovations' shareholders. They offer to buy up to 30% of the company's outstanding shares at $20 per share, which is 15% above the current market price, with the offer valid for two weeks. This demonstrates a tender offer as Green Energy Fund is publicly offering to buy a substantial percentage of shares directly from Solar Panel Innovations' shareholders at a premium, within a set timeframe, to acquire a significant strategic investment.