Tender Offer

Quick Facts

Typical premium: 20-40% above current stock price

Minimum duration: 20 business days (SEC requirement)

Regulation: Williams Act (1968)

A tender offer is a public proposal to purchase some or all of shareholders' stock at a specified price, usually at a premium to the current market price. It's a common tactic in hostile takeovers where the acquirer bypasses the board and goes directly to shareholders.

In Plain English

A tender offer is basically a company saying to shareholders: "We'll buy your shares for $X each—more than they're worth right now. Interested?" It's a way to acquire a company without needing the board's approval.

How It Works

Acquirer announces offer to buy shares at premium price
Shareholders decide whether to "tender" (sell) their shares
Minimum threshold typically required (e.g., 51% of shares)
Transaction closes if enough shareholders accept

Key Terms

Offer price: Usually 20-40% premium to current stock price
Acceptance period: Minimum 20 business days (SEC requirement)
Minimum condition: Often requires majority of shares to be tendered
Proration: If oversubscribed, shares accepted on pro-rata basis

Types

Friendly Tender Offer

Board approves and recommends shareholders accept. Often follows a negotiated merger agreement.

Hostile Tender Offer

Board opposes. Acquirer goes directly to shareholders. May trigger defensive measures like poison pills.

Famous Examples

Sanofi's Hostile Bid for Genzyme (2010)

Sanofi launched an unsolicited $18.5 billion tender offer for biotech Genzyme at $69/share. After months of resistance, Genzyme eventually agreed to a sweetened deal at $74/share—a textbook example of using a tender offer to force negotiations.

Microsoft's Yahoo Threat (2008)

After Yahoo rejected Microsoft's $31/share offer, Microsoft threatened a hostile tender offer. Yahoo adopted a poison pill and the deal collapsed—costing Yahoo shareholders billions when the stock later plummeted.

Broadcom's Qualcomm Bid (2017-2018)

Broadcom launched a $117 billion hostile tender offer for Qualcomm, the largest tech deal ever attempted. The bid was ultimately blocked by President Trump on national security grounds.

Defensive Responses

Boards may counter tender offers with:

Poison pills to dilute the acquirer
White knight search for friendly alternatives
Pac-Man defense (counter-bid for the acquirer)
Litigation to delay or block the offer
"Just say no" defense (reject and wait)

Regulation

Governed by SEC rules under the Williams Act (1968):

Must file Schedule TO disclosing offer terms
Minimum 20 business days for shareholders to decide
All shareholders must receive the same price
Right to withdraw tendered shares before expiration
Material changes require extending the offer

Practical Takeaways

For founders: A tender offer is a direct appeal to your shareholders over your head. Your best response is to demonstrate why your shares are worth more than the offer price—or find a white knight willing to pay more.

For investors: Don't rush to tender. You have at least 20 days to decide, and you can withdraw tendered shares before the deadline. Watch for competing bids—they often emerge after the initial offer, pushing prices higher.

Hostile Takeover — The broader strategy behind tender offers
Poison Pill — How boards defend against hostile tender offers
White Knight — What happens when a friendly buyer enters the picture
Proxy Fight — The alternative path to gaining corporate control