The mini-tender offer

A mini-tender offer is a request to buy less than five percent of a company's shares. The reason for such an offer is that the buyer does not have to comply with the SEC’s filing requirements for a normal tender offer. This results in less information being sent to investors about the offer. There is also no requirement to file documents pertaining to the tender offer with the SEC or with the management of the target company. 

The use of a mini-tender offer has the following ramifications:

  • An investor may accept a mini-tender offer without realizing that the price is lower than the current market price. The investor may also be unable to withdraw his or her shares after initially agreeing to the offer.
  • The entity initiating the tender offer does not have to comply with the disclosures required by the SEC for larger tender offers.
  • The management team is not informed directly of the mini-tender offer, and so may be slow to react to it.

The mini-tender offer is generally not a good deal for stockholders, given the likelihood of a low price being offered to them. To reduce the risk of selling shares through a mini-tender offer, a stockholder should obtain and peruse a copy of the offering document, verify the current stock price, determine the ability of the bidder to pay for tendered shares, and ascertain when payment will be received from the bidder.

This approach can be a reasonable one for an acquirer, since it can purchase a modest amount of stock in a target company at a low price, which the acquirer can then use as the basis for a larger bid for more shares in the target entity.

Mini-tender offers have acquired a bad reputation, because they are sometimes used to obtain shares at below-market rates by deceiving shareholders about the terms of the tender offer. Thus, from an acquisitions perspective, many acquirers do not want to be associated with mini-tender offers, even if they can use them to acquire modest share volumes at low prices.

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