Takeover bid

A public takeover bid (OPA) of shares or other securities is a commercial operation in which one or more companies (offers) make a purchase offer for shares to all the shareholders of a company listed on an official market in order, in this way, to achieve a participation in the capital with voting rights of the company (together with the one already owned, if applicable) that is significant. The price set in the OPA can be made effective by the offeror through money, shares or in a mixed way using both shares and money.

Securities that may give the right to subscribe or acquire shares include subscription rights, convertible bonds, warrants or similar.

One of the purposes of takeover bids may be to take control of the company. After submitting a takeover takeover bid, those third parties who also wish to gain control of the company have the possibility of launching a so-called "competitor" before the expiration of the term to take advantage of the first one. The OPA can also be for the purpose of delisting, when the objective is to exit the stock market by buying all outstanding shares.

Types of takeover bids

Friendly takeover bid

A friendly takeover bid is considered when it is approved by the board of directors of the offeree company or what is the same; when there is a tacit or express agreement between the offering company (offender) and the management of the offering company. A hostile takeover bid is, on the contrary, one that does not enjoy said approval.

Mandatory takeover bid

Fundamentally, to defend the rights of shareholders, the laws provide for certain cases in which it is mandatory to carry out a public offering (OPA). Normally in processes of taking control of an entity, delisting it from the Stock Market and in cases of capital reduction. If the takeover bid is launched by legal imperative, it must meet the requirements set forth by law regarding price, conditions to take advantage of it and scope.

Full takeover bid

A total OPA is one that is launched on 100% of the capital of the target company, while it will be partial if it is carried out on a percentage of the capital of the offered company. Currently in Spain, any takeover bid that is mandatory by law must be total.

Hostile takeover

A hostile takeover bid refers to a public offer to buy shares that does not have the approval of the takeover company and whose management recommends shareholders not to sell. Generally, the management of the takeover company considers that the price (or, where appropriate, the exchange of shares) offered is below the real value of the company's assets.

It is common for a hostile takeover bid to occur when investors estimate that the stock market value of a company is below the market value of its assets. There is then an incentive to offer a price per share that is higher than the stock market price and thus obtain a share in the company at a price that is lower than the value of the company's assets. In some cases, the objective of the bidders could be to resell the assets either together or in pieces and thus obtain the benefit corresponding to the difference between the acquisition price during the takeover bid and the value of the company's assets.

Defense against a hostile takeover bid

1. La crown jewel: This method of defense is based on selling the most expensive fixed asset of the company that wants to be acquired, so that the value of its actions will fall and the company will lose most of its attractiveness to the buyers. It is a high risk of loss, but in general it will allow the company to be preserved.
2. La Poisoned pill: Consists that the company that wants to be acquired is rapidly indebted, acquiring debts for loans, financing or similar procedures. With this it will make the value of your shares go down and the company lose value and attractiveness to the buyers. There is a very large risk, as much of the value of the shares will be lost, but the company will be preserved in its entirety.
3. The white knight: This mode of defense can be considered double-edged, since it is based on protecting and obtaining help from a second company considered friendly, allowing itself to be acquired by this. Thus, with this support, the initial purchasers will lose interest in buying it. But if you don't make a good choice, the new company chosen as a shelter could misuse your commitment to provide help.

Some Notable Examples