Tender Offer Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Tender Offer, written in plain English, along with examples of how it is used.

What is Tender Offer?

A bid to purchase a corporation’s shares at a set price.

History and Meaning of Tender Offer

A tender offer is a proposal made by a prospective buyer to purchase shares of a public company from its shareholders at a premium price. It is a public offer aimed at acquiring a significant portion or even all the outstanding shares of a company, usually to take control of the target company through ownership. Tender offers may be friendly or hostile, where hostile tenders imply that the acquiring company's management does not have the approval of the target company's management.

The first tender offer in history was made by Louis Wolfson in 1948, who launched a tender for shares of the American Household Utilities, Inc. While tender offers were initially deemed illegal, they gained legitimacy through a Supreme Court ruling in 1966, which led to their wider use in mergers and acquisitions.

Examples of Tender Offer

Here are a few examples of tender offers:

  • When Company A offers to buy all the outstanding shares of Company B at a premium, it is a tender offer.
  • A shareholder of Company C may launch a tender offer to acquire a controlling interest in the company.
  • A company may make a tender offer directly to its shareholders to repurchase some of its outstanding shares at a premium price.
  • In a competitive bid, two or more companies may make tender offers to acquire the same target company.

Legal Terms Similar to Tender Offer

Related legal terms include:

  • Proxy fight – This occurs when a bidder seeks to gain control of a publicly-traded company by appealing to its shareholders to vote for the bidder's representatives on the company's board.
  • Merger – The process of combining two companies into a single entity, often involving a tender offer.
  • Acquisition – The purchase of one company by another.
  • Poison pill – A defensive mechanism used by a company to prevent a hostile take over.
  • White Knight – A third party who offers to rescue a company from an unwelcomed acquisition by another company.