What is a tender offer?

A tender offer is a bid by an investor to purchase a company's shares at a set price from all shareholders. The aim is typically to gain control of the company or to privatize it.

1. Classification

Tender offers are classified as either mandatory or voluntary, depending on whether they are initiated at the offeror's discretion.

1.1 Voluntary Tender Offer

The offeror voluntarily decides to make an acquisition offer and determines the proportion of shares to acquire based on the target company's total share capital. The offeror then extends this offer to all shareholders of the target company within that proportion.

1.2 Mandatory Tender Offer

When an offeror gains control of a company by holding a certain percentage of its shares, the law requires the offeror to make an offer to buy all remaining shares from other shareholders.

Mandatory offers can be further classified as conditional and unconditional, depending on whether the accepted voting rights exceed 50%.

According to the Acquisition Code, when an investor or a concert party's acquisition activities trigger the obligation for a mandatory offer, but their voting rights in the company are below 50%, they may attach conditions allowed under Rule 26.2.
Rule 26.2 of the Company Acquisition and Merger Code allows only one condition: The offeror must gain over 50% of voting rights to make the offer valid. This includes rights from acceptances, combined with any rights acquired or agreed to be acquired before or during the offer period. If this condition is met, the offer is valid and becomes unconditional; if not, the offer will be deemed invalid within the specified period.

Example:  

If the total number of shares accepted by the shareholders, along with the offeror's equity, exceeds 50%, the conditional offer will become an unconditional offer. The offeror can then purchase all shares from those who accepted the offer.

If the total number of shares accepted by the shareholders, along with the offeror's equity, does not exceed 50%, the offer remains conditional and will expire. In this case, no shares will change hands, and shareholders who accepted the offer will keep their shares.

2. Client Operations

2.1 If you want to accept the tender offer, please provide your user ID, stock code, number of shares you hold, and the number of shares you want to include in the offer by the deadline. Send an email from the address you registered with Futu to cs@futuhk.com. Once the issuer and our upstream counterparty complete the offer processing, we will transfer the relevant assets to your account.

2.2 If we do not receive your email by the deadline, it will be considered a waiver of acceptance of this offer, and you will continue to hold the relevant stocks until the listed company provides further notice.

2.3 (i) Clients can continue trading after submitting an application up until the specified deadline.

(ii) If clients conduct any transactions after submitting their initial application, clients are responsible for submitting a new instruction reflecting the updated number of shares.

(iii) After the deadline, any shares involved in the corporate action will be locked from trading, and submitted applications cannot be amended or withdrawn.

(iv) At the deadline, if the client’s shareholding is insufficient to meet the number of shares indicated in their instruction, the instruction will be considered invalid and will not be processed.

2.4 In a cash offer, if the number of shares you hold is higher than the number of shares you have instructed to participate, usually only the instructed quantity will be processed, and the excess shares will remain in your account. It is recommended to confirm your final shareholding before the deadline. If there are any trading changes, you should immediately update your instructions; otherwise, the un-instructed of the shares will be considered waived for the cash offer, and the shares for which the client has applied for the offer will be locked after the deadline until the offer ends.