Tender offer (takeover bid)
A tender offer is a public offer addressed to all shareholders of a listed company to buy their shares at a set price, in cash, in shares or in a mix. It can be voluntary or mandatory (in Spain, on crossing 30% of the voting rights or appointing a majority of the board), friendly or hostile, and it carries a premium over the previous quote because otherwise nobody would accept. The regulator approves the prospectus and oversees the process.
How it is calculated
A share trades at €10 and a company offers €12 in cash for 100%: the premium is 20%. If the offer is in shares, say one share of the bidder (at €30) for every 2.5 of the target, the value offered is €12 today, but it rises or falls daily with the bidder’s price until settlement. After the announcement, the share usually trades a little below the offer price: that gap is what the market charges for the risk the bid fails, and it narrows as approvals arrive.
The figures in the example are invented and rounded so the arithmetic can be redone by hand. They are not data from any real company.
What it is NOT
It is not a done deal: the offer can be conditional on a minimum acceptance level, on competition or regulatory approvals, and it can be improved, topped by a rival bid or withdrawn. Nor does it force the shareholder to sell, except in the squeeze-out the law allows when the bidder crosses a very high threshold (in Spain, 90%). And the offer price is not an independent valuation: it is what the buyer is willing to pay, with the premium it needs to be sold to.
Formula
Takeover premium = (offer price ÷ previous quote) − 1 See also
See it on real data
Celsmar computes this from the accounts companies file with their regulator, and shows which line every figure comes from. Free to start, no card.
Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.