Often, in a buyout, here is what happens.
Someone first accumulates a large position, often 10%, sometimes more, sometimes less.
This means they have 10 percent of the votes.
They ask for a shareholder meeting, and usually the board will comply with an owner of 10 percent of the shares. It could be done at a regular annual shareholder meeting or a special meeting can be requested in some cases.
The 10 percent owner then often makes a "tender offer" for the rest (at least 51 percent, which is "controlling interest")
They dont need to get all the shareholders to vote to accept the tender offer. Just "enough" shareholders with enough shares to be convinced.
Notice of the meeting will be mailed to each shareholder. They can elect to 1) Vote, 2) not vote 3) vote by proxy, that is, by mail.
The person with 10 percent usually gets a chance to present his tender offer, and explain why he thinks they should accept it.
The tender offer is virtually always at a premium from the NASDAQ quoted price, typically the premium will be a minimum of 20% and often much more.
Its presumed that if shareholders wanted to sell at the NASDAQ quoted price, the would simply fill in an online order to sell or instruct their broker to do so.
So, the tender offer offers a premium..to gain control of the company.
Often, the tender offer means that new management will also be elected to the board, in order to preserve the interests of the "big" shareholder...he hand picks his management, or sometimes does it himself.
The shareholders then vote to accept/reject or counter offer the tender offer.
The outcome is ultimately decided by the shareholders, with those owning the most number of shares having the larger vote..one vote for each share.
Often the "big" shareholder will explain how accepting the offer will benefit all shareholders.
For example, the "big" shareholder may have a good track record at turning around failing or companies struggling with earnings, sometimes with promises that inefficiencies will be fixed.
It often works, but the government sometimes blocks M and A's for various reasons where a big one is that one company will become a monopoly or oligilopoly and it wont be good for consumers who have to pay whatever the big shareholder decides.
If you, as an individual shareholder elect "not" to sell your shares to the tender offer, you are taking some chances and are free to do so.
A few years ago, a tender offer was made by the owner and founder of Best buy, if I recall for around 14 per share. This is when the stock was trading around 10, and I was a shareholder at that time.
Shareholders, generally "voted thumbs down" on the offer as they felt the shares were worth upwards of 30 per share.
The shareholders of BBY were correct in decling the offer as the price eventually increased to the 40 dollar range.
The offer was rather informal, and he was putting out "feelers" to see how shareholders felt about selling their company back to the founder.
Based on the blogs, the general consensus was that BBY was worth a minimum of 21 per share, and they would not sell for less.
The share price fell, for a while, when the tender offer fell through, as the founder was unwilling/unable to pay 20 dollars or more per share, and no agreement was reached and the company remained in shareholder control.
I no longer own BBY, but it was one of my fairly big winners, where I correctly identified it as a come back candidate, early.
AI
