Tender offer is a corporate finance term that typically refers to a public,
open offer (usually announced in a newspaper advertisement) by an entity to all stockholders
of a publicly traded corporation to tender their
stock for sale at a specified price for a specified time, subject to the tendering of a
minimum and maximum number of shares. In the United States, tender offers are regulated by the Williams Act.
To induce the shareholders of the target company to sell, the acquirer's offer price usually includes a premium over the
current market price of the target company's shares. For example, if a target corporation's stock were trading at a value of
$1/share, an acquiror might offer $1.15/share to its shareholders on the condition that 51% of shareholders agree. Cash or other
securities may be offered to the target company's shareholders as consideration, although a tender offer in which securities are
offered as consideration is generally referred to as an "exchange offer."
Required disclosure
In the United States, under the Williams Act,
codified in Section 13(d) and Section 14(e) of the Securities Exchange Act of
1934, a bidder must file a Schedule TO with the SEC upon commencement of the tender offer. Among the matters required
to be disclosed in the 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.
Taxable Event
The consummation of a tender offer resulting in payment to the shareholder is a taxable event triggering capital gains or
losses, which may be long-term or short-term, depending on how long since each lot of the shareholder's shares was acquired.
See also
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