What is tender offer? Which companies have opted for it recently?

Highlights 

• Under tender offers, shareholders are requested to tender their stocks at a specified price and time frame.
• A tender offer may also be a formal offer, like a takeover bid.
• The shareholders are incentivised to sell off their shares as the tender price is higher than the current stock price of the company.

The proposal made by an investor to the shareholders of a publicly traded company to buy its stocks is known as a tender offer. Typically, these offers are made publicly, inviting the shareholders of the company to sell their shares for a defined price and within a specific time frame. This price is mostly subject to the highest and lowest number of shares that are sold and is generally at a premium to the market price. 

In addition to normally inviting bids for a project, a tender offer may also be a formal offer, like a takeover bid. Tender offers may be of different types, such as an exchange offer, in which shares are exchanged for securities or related non-cash alternatives.

Through tender offers, shareholders are publicly solicited to sell shares at a relatively higher price than the current stock price of the company, which provides them with a greater incentive to sell off. In case of a takeover bid, the tender may depend on the ability of the potential buyer to get hold of a certain proportion of shares, which may be necessary for gaining a controlling interest in the company. 

Lately, many companies are opting the route of tender offers to purchase their shareholders' stock. Let’s briefly take a look at some of the UK companies going for it.

Dunedin Enterprise Investment Trust (LON:DNE)

Dunedin Enterprise Investment Trust PLC is focused on providing private equity finance. This investor in UK mid-market management buyouts has come up with a tender offer on 18 October, which is a part of its process to wind down. Under the tender offer, the company plans to return up to £26 million to its shareholders.

A discount of 1.2% will be applicable to the net asset value per share of the company as of 30 September to determine the tender offer’s price. The offer is conditional to the acceptance of shareholders at a general meeting to be held on 10 November.

Dunedin Enterprise Investment Trust PLC’s shares were trading at GBX 477.00 at 2:39 PM GMT+1 on 19 October 2021.

OneSavings Bank Plc (LON: OSB)

OneSavings Bank plc is a UK-based provider of banking services which has recently announced a cash tender offer on 27 September for its £60,000,000 fixed rate resetting perpetual subordinated contingent convertible securities. The offer is based on its tender offer memorandum, which comprises of all the terms and conditions related to the tender offer.

The company used this route to provide liquidity to its investors and manage the refinancing of its securities, with a recent issue of additional Tier 1 securities.

OSB Group PLC’s shares were trading at GBX 515.00 at 2:57 PM GMT+1 on 19 October 2021.

Fidelity Emerging Markets Limited (LON: FEML)

Fidelity Emerging Markets Limited, a fund that mainly invests in countries showing speedy development in order to maximise the value of investments in it, has released the results of its recent tender offer on 18 October.

The company tendered 103.3 million redeemable preference shares with the aim of repurchasing up to around 25% of its total capital. However, 30.4 million shares were purchased by the company on 18 October, with the price being around 98% of its net asset value per share.

Fidelity Emerging Markets Limited’s shares were trading at GBX 842.00 at 3:07 PM GMT+1 on 19 October 2021.

Santander UK plc (LON:SAN)

British bank Santander UK plc recently announced the results of its cash tender offer on 20 September. The offer was to buy any and all of the company’s outstanding 7.950% Term Subordinated Securities for cash by 26 October 2029.

The offer to purchase consists of all the terms and conditions related to the tender offer and is available online.

Santander UK plc’s shares were trading at GBX 174.50 at 3:17 PM GMT+1 on 19 October 2021.