tender offer

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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 updated in March of 2022 by the Wex Definitions Team]