Syndicate
Mechanics of Public Bids for the Acquisition of Unregistered Shares
The procedures of these public bids are the following: first it must be formulated, then transmitted before the corresponding supervising organ in each country, the expedients that affirms the identity of the author of the offer, character of the operation, finality pursued, guarantees, etc.
The mentioned supervising organ may answer in a positive or negative way.
Before a positive answer, the subject that launches the public Bid is required to publish a pamphlet (explaining all the operation details) addressed to the companies shareholders, on which the offer is formulated if the percentage of positive answers from the share holders is equal or larger to that sought by the seller the deadline operation will definitely be done, between the launcher of the public bid and the shareholders in accordance.
In case the public bid doesn’t aspire to the totality of the shares and the number of these would be more than what the sellers demand, they will begin to allot in proportion between the shareholders that are in favor. An important part of the paper work of the public bid is the one in reference to the guarantees offered to the shareholders:
The corresponding supervising organ in each country must approve the public bid. This organ must analyze of the operation is or not done according to the standing legislation.
Transparency is sought in the operation, for it, it is required to publish a pamphlet that explains the operation in detail. This is done by the launcher f the public bid.
A possible use of privileged information is avoided by suspending temporarily these shares part of the operation from being traded at the stock market.
The offer may be paid in cash, shares or both.
The results of the operation must be informed: the number of shareholders present, and if there has been any success or not.
In reference to the financing of the public bid, there usually is a rise on the prices with respect to that of the market. In this way what they seek is to pay a determined sum in one only operation, even if they must buy at a more expensive cost.
Doing it in several successive buys, they wouldn’t know the ultimate cost immediately (surely the shares would rise at every buy) and they also wouldn’t know surely if the would have enough capital to buy enough shares the control of the company.
The truth is, that usually happens is that the use a politic of approximation: by making more acquisitions on the market until reaching a percentage nearer to the 25% and then to do a public bidding for the rest of shares needed (when the 25% is exceeded its obligatory to launch a public bid).
Before a successful public bid, the substitution of the actual management group of the company affected is produced and a new group takes control. This change may be done in two different ways:
Friendly public bid: there is an agreement with the former management group.
Hostile public bid: there is no agreement. In this case, the actual management group can protect itself, with anti public bid measures, although they are usually limited by the legislation of the country in question.
Finally, only to emphasize that there also exists public bids for selling securities. This type of operation is used when you are seeking to increase the shares of a company and in this way introduce their stock into the market.
It also has the finality of placing or informing to potential clients about a series of securities already issued in the past.