Takeover Bid
A formal public offer by an acquirer to purchase shares of a target company at a specified price, often at a premium.
What is Takeover Bid?
A takeover bid is a formal public offer by one party (the bidder or acquirer) to purchase a controlling stake in or all of the outstanding shares of another company (the target), typically at a specified premium to the target's current market price. Takeover bids may be friendly—recommended by the target's board and announced jointly—or hostile, where the bidder approaches target shareholders directly over board objections. US securities regulations require the bidder to file a Schedule TO with the SEC, maintain the offer for at least 20 business days, and allow shareholders who previously tendered to withdraw during the offer period. The target's board may respond by recommending acceptance, seeking a higher bid from a white knight, implementing defensive measures, or pursuing litigation.
Example
In April 2022, Elon Musk launched a hostile takeover bid for Twitter, Inc. at $54.20 per share in cash—a 38% premium to Twitter's 30-day average share price prior to his initial 9.2% stake disclosure. After initially attempting to abandon the bid, Musk was compelled by Delaware courts to complete the acquisition, which closed in October 2022 at the original $54.20 per share price for a total enterprise value of approximately $44 billion.
Source: SEC EDGAR — Twitter Schedule TO