Tender Offer

[wildcat]

I received a letter from VG Brokerage Services yesterday stating that one of the companies I own was doing a tender offer for the shares I owned & to reply by 'x' date.

I haven't called VG to get the details but is there anything else to it other than the company wanting to buy back shares? Any motive aside from that? I am assuming the incentive is either a small % above market or they guarantee a price maybe? Anyone have experience with TOs and if so, what did you do?

- Thanks

 

[jimnjana]

Depends. You probably should read the prospectus/literature from the company. Some REITs TO cumulative preferred shares because the company could not pay the dividends that were in arrears.

 

[brewer12345]

What company is it?

Usually companies do this stuff because they want to retire a bunch of shares (or debt or...) all at once rather than messing around with open market purchases. The most common structure I have seen is a modified dutch auction wheere they offer to buy $X of shares at a price between Y and Z per share. You can submit with a specific min price or just take what everyone else gets. The lowest price that gets them $X of shares is the price everyone gets.

So should you tender? If you were looking to sell anyway and you likethe price offered, its worth considering. I have owned two stocks which have done tender offers and passed on both. In both cases it turned out to be a good choice (the stock rose above the tender price range), but nothing is guaranteed.

Heh, "tender offer." Sounds like something you make to a lady of negotiable affection our for her evening constitutional.

 

[wildcat]

Stable big cap healthcare products company that has been beaten up over the last few years despite the rally off the bottoms

I didn't make a big move @ the bottoms just b/c I don't think the future is always as clear for those types of companies

So even if I hold, any share appreciation above what I have now won't move the portfolio too much but I still think it is still a decent value today

"I have owned two stocks which have done tender offers and passed on both. In both cases it turned out to be a good choice (the stock rose above the tender price range), but nothing is guaranteed."

I was kind of wondering how people have done who decided not to tender. Thanks.

 

[brewer12345]

I was kind of wondering how people have done who decided not to tender. Thanks.

Personally, I view the tender offer as a modest plus, but evaluate it like any other offer to buy my shares: is this a full valuation such that I would be happy to sell? Never seen a tender offer at what I would regard for full value of what I own.