A Takeover or purchase offer is a corporate action, describing the event of companies buying each others’ shares.
In theory, you can have the following types of operations:
- Purchase offer
- Buyout offer
A takeover happens, when the initiator, does not have any existing stack in the target company.
A purchase offer happens when the initiator already holds a stack in the target company. Hence, its an attempt to control a bigger stack.
A buyout offer, is a special purchase offer that happens when the company is buying another company’s shares, with an intention to de-list those shares from the exchange.
It should be noted, that in this operation, the initiator would already have a major stack in the target company.
The compulsory acquisition is the process of taking shares from their owner with force. It does not mean that the share owners will not be paid reimbursed. The rule regulating this type of acquisition, is country specific.
For some countries, its 95%, for others it would be 85%. All these details would be provided in the source document.
Let’s take an example:
So as you can see, the initiator “Euronext” has already bought a stack in the target company “Oslo Børs VPS” through a “Purchase offer” . Following this purchase, the initiator now holds a stack equivalent to 97.8% of the share capital in the target company.
Consequently, the initiator can implement a compulsory acquisition on the remaining shares, that were not tendered to the initiator’s previous offer. This means that now, the Initiator is going to take the remaining stack by force. Nonetheless, the share owners will get the equivalent amount, that was offered during the previous purchase offer.
Rather than having those events alone, you can have a combination, so for example:
A Purchase offer followed by a compulsory acquisition in case the regulated cap is breached.
A Purchase offer followed by a buyout offer to de-list the target shares from the exchange.
A takeover to get a majority stack, followed by a Purchase offer to extend the stack, followed by compulsory acquisition.
Reason behind the takeover
Above all, it’s an interest driven event. All the companies are trying to be the single best at their activities, to drive profits higher.
It’s worth mentioning, that initiators are always, expected to get approval from the Financial Markets Authority or Regulator, before going forward with any kind of these Monopoly type events.
The key details to extract from this event would be:
- Event type
- Target company
- Offer price
- Offer period
Finally, keep in mind, that companies may be very flexible on how to approach these corporate actions.