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In
corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers a ...
, a tender offer is a type of public
takeover In business, a takeover is the purchase of one company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture of both, ...
bid. The tender offer is a public, open offer or invitation (usually announced in a newspaper advertisement) by a prospective acquirer to all stockholders of a
publicly traded A public company, publicly traded company, publicly held company, publicly listed company, or public limited company A public limited company (legally abbreviated to PLC or plc) is a type of public company under United Kingdom company law, som ...
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
(the target corporation) to tender their
stock In finance, stock (also capital stock) consists of all of the shares In financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities i ...
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 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 An exchange offer, in finance, corporate law and securities law, is a form of tender offer, in which securities are offered as consideration instead of cash. In a bond exchange offer, bondholders may consensually exchange their existing bond (finan ...
."


Governing law


United States


General

In the
United States of America The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States of America
, tender offers are regulated by the
Williams Act The Williams Act (USA) refers to 1968 amendments to the Securities Exchange Act of 1934 The Securities Exchange Act of 1934 (also called the Exchange Act, '34 Act, or 1934 Act) (, codified at et seq.) is a law governing the secondary trading of ...
. SE
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
Williams Act The Williams Act (USA) refers to 1968 amendments to the Securities Exchange Act of 1934 The Securities Exchange Act of 1934 (also called the Exchange Act, '34 Act, or 1934 Act) (, codified at et seq.) is a law governing the secondary trading of ...
, codified in Section 13(d) and Section 14(d)(1) of the
Securities Exchange Act of 1934 The Securities Exchange Act of 1934 (also called the Exchange Act, '34 Act, or 1934 Act) (, codified at et seq.) is a law governing the secondary trading of securities (stock Stock (also capital stock) is all of the shares into which ow ...
, a bidder must file
Schedule TOSchedule TO is a required filing form of the United States Securities and Exchange Commission. Under the United States federal Securities Exchange Act of 1934, parties who will own more than five percent of a class of a company's securities after ma ...
with the
SEC
SEC
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 file
Schedule 13D Schedule 13D is an SEC filing The SEC filing is a or other formal document submitted to the (SEC). , certain s, and s are required to make regular SEC filings. s and financial professionals rely on these filings for information about companies t ...
within 10 days of acquiring more than 5% of the shares of another company.


=Tax consequence

= The consummation of a tender offer resulting in payment to the shareholder is a taxable event triggering
capital gains Capital gain is an economic concept defined as the profit Profit may refer to: Business and law * Profit (accounting) Profit, in accounting, is an income distributed to the ownership , owner in a Profit (economics) , profitable market p ...
or losses, which may be long-term or short-term depending on the shareholder's holding period.


See also

*
Bond Tender OfferA Bond Tender Offer (BTO), also called a Debt Tender Offer (DTO), is a corporate finance term denoting the process of a firm retiring its debt by making an offer to its bondholders to repurchase a specific number of Bond (finance), bonds at a specifi ...
*
Bond exchange offer An exchange offer, in finance, corporate law and securities law, is a form of tender offer, in which securities are offered as consideration instead of cash. In a bond exchange offer, bondholders may consensually exchange their existing bond (finan ...
*
Mini-tender offerA mini-tender offer is an offer to acquire a company's shares directly from current investors in an amount less than 5% of issued stock. Subject to Only Some SEC Regulations An offer to purchase less than 5% of the company's securities is not govern ...
*
Mergers and acquisitions In , mergers and acquisitions (M&A) are transactions in which the ownership of , other business organizations, or their operating units are transferred or with other entities. As an aspect of , M&A can allow enterprises to grow or , and change ...
*
Contract awardingContract awarding is the method used during a procurement in order to evaluate the proposals (tender offers) taking part and award the relevant contract. Usually at this stage the eligibility of the proposals have been concluded. So it remains to cho ...


References


SEC FAQ on tender offersDavid 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'' {{corporate finance and investment banking Corporate finance ca:Oferta Pública d'Adquisició fr:Offre publique d'achat ja:株式公開買付け