Tender Issue

A tender issue refers to the issuance of a formal offer by a company to purchase a specified number of shares or bonds from investors at a particular price, typically at a premium over the current market value. It is often part of a strategy for mergers, acquisitions, or corporate restructuring. The goal is to acquire enough shares to gain control or retire part of the company's debt.

Example

A corporation issues a tender to buy back a portion of its bonds from investors at a premium price, aiming to reduce its outstanding debt and lower interest expenses.

Key points

• A formal offer to purchase shares or bonds at a specific price, often above market value.

• Typically used in mergers, acquisitions, or corporate restructuring.

• Aims to gain control of a company or reduce outstanding debt.

Quick Answers to Curious Questions

Why would a company issue a tender for bonds or shares?

A company might issue a tender to reduce outstanding debt, consolidate control, or restructure its financial obligations.

How does a tender issue differ from an open-market buyback?

A tender issue offers shareholders or bondholders a set price, typically above market value, while an open-market buyback happens at current market prices.

What happens if investors do not respond to a tender issue?

If insufficient investors accept the offer, the company may not reach its desired control or debt reduction goals, or it may raise the tender price to encourage participation.