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tender offer

Tender offer is a public offer to buy shares of a corporation , usually at above market price and with the intention of gaining controlling interest in the target corporation. An acquirer making a tender offer for more than 5% of a corporation's shares is required to file certain disclosures with the Securities and Exchange Commission .

The term “tender offer'' is not clearly defined in the context of Section 14 (d) (1) of the Securities and Exchange Act . However, in Wellman v. Dickinson, 475 F.Supp. 783 , (para 824) the court came up with an eight factor test to determine the characteristics of a tender offer, which include:

1. “active and widespread solicitation of public shareholders for the shares of an issuer;
2. solicitation made for a substantial percentage of the issuer's stock ;
3. offer to purchase made at a premium over the prevailing market price;
4. terms of the offer are firm rather than negotiable;
5. offer contingent on the tender of a fixed number of shares, often subject to a fixed maximum number to be purchased;
6. offer open only for a limited period of time;
7. offeree subjected to pressure to sell his stock;
8. public announcements of a purchasing program concerning the target company precede or accompany rapid accumulation of large amounts of the target company's securities.”

[Last reviewed in March of 2022 by the Wex Definitions Team
]

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