takeover bid

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Takeover Bid

An offer in which an investor or company attempts to buy a publicly-traded company, or, more commonly, most of the shares in that company. For example, if Corporation A offers to buy 51% or more of Corporation B, then Corporation A is making a takeover bid. Takeover bids are made for cash, stock, or both. Likewise, they may be friendly or hostile; a friendly takeover bid occurs when the board of directors supports the acquisition and a hostile takeover bid occurs when it does not. See also: Antitakeover measure, Greenmail.

takeover bid

an attempt by one or a number of companies to achieve the TAKEOVER of another company by bidding for (see BID) all or the majority of voting SHARES in the target company A number of terms are used to describe the various tactics available to the bidding and defending firms, including:
  1. black knight; a firm that launches an unwelcome (contested) takeover bid for some other firm;
  2. concert party; a number of investors who each buy shares in a company with a view to pooling their shareholdings and acting in concert to take over the company;
  3. dawn raid; an attempt to buy up as many shares in a company as possible on the STOCK MARKET over a short period of time, as a prelude to making a full takeover bid for the company;
  4. golden parachute; any generous severance terms written into the employment contracts of the directors of a firm that makes it expensive to sack the directors if the firm is taken over;
  5. greenmail; a situation in which a firm's shares are being bought up by a (potential) takeover bidder, who is then headed off from making an actual bid, by that firm's directors buying these shares from him at a premium price;
  6. leveraged bid; a takeover that is financed primarily by the issue of LOAN CAPITAL rather than share capital, which increases the CAPITAL GEARING of the enlarged firm. (see JUNK BOND);
  7. pac-man defence; a situation in which the firm being bid for itself now makes a bid for the acquiring firm (see REVERSE TAKEOVER);
  8. poison pill; a tactic employed in a takeover bid whereby the intended victim itself takes over or merges with some other firm, in order to make itself financially or structurally less attractive to the potential acquirer;
  9. porcupine; any complex agreements between a firm and its suppliers, customers or creditors that make it difficult for an acquiring company to integrate this firm with its own business;
  10. reverse takeover; an attempt by a smaller firm to take over a larger firm. Since the smaller aggressor company has a smaller capital than the victim, it must usually issue additional shares or raise loans to finance the takeover (see pac-man defence);
  11. shark repellent; any measures specifically designed to discourage takeover bidders; for example, altering the company's ARTICLES OF ASSOCIATION to increase the proportion of shareholders' votes needed to approve the bid above the usual 50% mark;
  12. white knight; the intervention in a takeover bid of a third firm which itself takes over or merges with the intended victim firm to rescue it from its unwelcome suitor. See also ARBITRAGEUR, MERCHANT BANK.

takeover bid

an attempt by one FIRM to TAKE OVER another by acquiring the majority of shares in a public JOINT-STOCK COMPANY. The financial terms of the bid may involve a straight cash offer or a mix of cash and shares in the bidder. The price being offered per share in the target company will generally exceed the value of that company's physical assets and the current stock exchange price of its shares. The price premium being offered by the takeover bidder reflects its valuation of the underlying value of that company's physical assets, brands, trade contacts, etc., and if these could be more effectively managed as part of the bidder's overall business. A number of terms are used to describe the various tactics available to the bidding and defending firms, including:
  1. black knight: a firm that launches an unwelcome (contested) takeover bid for some other firm;
  2. golden parachute: any generous severance terms written into the employment contracts of the directors of a firm that make it expensive to sack the directors if the firm is taken over;
  3. greenmail: a situation in which a firm's shares are being bought up by a (potential) takeover bidder who is then headed off from making an actual bid by that firm's directors buying these shares from him at a premium price;
  4. leveraged bid: a takeover that is financed primarily by the issue of LOAN CAPITAL (often in the form of‘junk bonds) rather than SHARE CAPITAL, which increases the CAPITAL GEARING of the enlarged firm;
  5. pac-man defence: a situation in which the firm being bid for itself now makes a bid for the acquiring firm (see REVERSE TAKEOVER);
  6. poison pill: a tactic employed in a takeover bid whereby the intended victim firm itself takes over or merges (see MERGER) with some other firm in order to make itself financially or structurally less attractive to the potential acquirer;
  7. porcupine: any complex agreements between a firm and its suppliers, customers or creditors that make it difficult for an acquiring company to integrate this firm with its own business;
  8. shark repellants: any measures specifically designed to discourage takeover bidders - for example, altering the company's articles of association to increase the proportion of shareholder votes needed to approve the bid above the usual 50% mark; (i) white knight: the intervention in a takeover bid of a third firm, which itself takes over or merges with the intended victim firm to ‘rescue’ it from its unwelcome suitor. See CITY CODE.
References in periodicals archive ?
On 4 August 2015, ASIC released Consultation Paper 234 Remaking ASIC class orders on takeovers and schemes of arrangement (CP 234), which outlined our proposals to remake Class Order CO 05/850 Unsolicited offers under a regulated foreign takeover bid, Class Order CO 02/259 Downstream acquisitions: foreign stock markets, Class Order CO 00/2338 Relief from the minimum bid price principles621(3), Class Order CO 02/249 Approved overseas financial marketss257B(7), Class Order CO 04/523 Investor directed portfolio services takeover relief and Class Order CO 09/459 Takeovers relief for accelerated rights issues with minor changes, including:
By contrast, the United States, and particularly Delaware, affords more deference to the business judgment of directors, providing them with a great deal of flexibility in responding to takeover bids. (36) Under Delaware law, if a court determines that a board of directors acted in good faith and in accordance with its fiduciary duties, the board is legally entitled to preserve the long-term strategic goals of the corporation.
--The rationale behind adopting a single set of rules governing company takeover bids, something that has now been in the pipeline for 14 years originally known as the draft 13th Company law Directive, is to encourage companies in Member States to become more pan-European so that they can better compete with other global firms, particularly from the US.
Lenovo's acquisition of IBM's PC business and TCL-Thomson Electronics' strategic alliance in 2004, as well as Haier's aborted takeover bid of Maytag in 2005, illustrate a trend shift in Chinese corporates' globalization strategy.
German industry is especially unhappy with the fact that the previous proposal did not give enough flexibility on the defensive measures that a company can use to frustrate takeover bids.
THE Bank of Scotland saw its value nosedive by more than pounds 1billion yesterday in the wake of its failed takeover bid for NatWest.
said Wednesday they will jointly consider measures against hostile takeover bids amid growing industry consolidation in the world.
A level playing field for takeover bids.Jaap Winter, Chairman of the High Level Group - which began its work in September 2001 - recommended, on January 10, that any European company law regulation aimed at creating a level playing field for takeover bids should be guided by two principles:- Shareholder decision-making: In the event of a takeover bid, the ultimate decisions must be with the shareholders.
22 so that it could implement longer-term strategies for raising its corporate value without worrying about hostile takeover bids or the short-term performance of its business standing.
Pokka went ahead with the management buyout so that it could carry out longer-term strategies for raising its corporate value without worrying about possible hostile takeover bids.
It seems more likely that 12 years of work by the EU institutions will have been for nothing.--The draft 13th Company Law Directive on takeover bids was first proposed by the European Commission on January 19, 1989.
In light of protecting investors, the law stipulates that bidders can retract their takeover bids only when serious obstacles such as bankruptcies or mergers are found in achieving the takeover goals.