Definition of a Tender Offer

 

The William Act is purposefully va regarding the definition of a tender offer. Not surprisingly, this vagueness gave rise to litigation as tender offer participants chose to adopt the definition of a tender offer that was most favorable to them. In Kennecott Copper Corporation v. Curtiss-Wright Corporation, the court found that open market purchases without a deadline and for which no premium was offered did not constitute a tender offer. However, in Wellman v. Dickinson the court set forth the Eight Factor Test. These factors are listed here and will be revisited in Chapter 6.

 

Eight Factor Test

 

1. Active and widespread solicitation of public shareholders for shares of an issuer

2. Solicitation made for a substantial percentage of an issuer's stock

3. Offer to purchase made at a premium over the prevailing market price

4. Terms of the offer are firm rather than negotiated

5. Offer contingent on the tender of a fixed number of shares and possibly specifying a maximum number of shares

6. Offer only open for a limited time period

7. Offeree subject to pressure to sell stock

8. Public announcements of a purchasing program that precede or is coincident with a rapid accumulation of shares