i was just wondering why a company (or fund) does tender offer?
If I understand correctly, they do it to buy back shares from the existing shareholders by paying them premium, right?
What's the rationale behind it?
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Tender offers entice existing shareholders to sell to the acquiring party. The premium needs to be sufficient for the shareholder to sell, otherwise shareholders would elect to hold on to their shares and gain value from the acquirers revamp of the firm.
Example: Co X is currently trading for $50/share, I believe I can buy half the firm and improve it to $75/share. If i try to buy shares from existing shareholders at $50 they will not sell to me since they can hold on and have shares worth $75 after I take it over and improve. Thus, no one will sell to me and the deal won't go through and no improvements will happen. Instead I can issue a tender offer for a certain premium contingent on me acquiring 51% of shares.
Thank you for the comment.
So a firm uses tender offer when they believe that they will perform well in the future?
Question on tender offer? (Originally Posted: 05/03/2018)
Fund (the "Fund") is offering to purchase up to 30% of the net asset value, calculated prior to shares tendered pursuant to this tender offer (the "Net Asset Value"), of the Fund's shares of beneficial interest ("Shares") that are tendered by shareholders of the Fund ("Shareholders") and not withdrawn consistent with the terms of the Offer to Purchase and the Letter of Transmittal (which together with the Offer to Purchase constitutes the "Offer"). The Offer is being made to all Shareholders.
Can anyone please help me understand this paragraph? This is about the firm (fund) that I will start working next month, and I found this online. Is this a good/bad sign for the company?
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