Reflection Paper #1 Hostile vs. Friendly Takeovers
In our first class, we reviewed merger, consolidation and acquisition. With these information in mind, I rethink about hostile and friendly takeovers.
In my language, friendly takeover happens when a company (A) wants to buy another company (B). Company A firstly informs company B's board of directors, then company A offers a price. Hopefully, company B will consider this offer carefully and make a decision whether to be bought. Usually not so many companies will take offers, because a lot of people will lose their jobs, such as the managers or CEOs in company B. Also the shareholders should give up their shares, which are sometimes against their expectation. To make an example, IBM have a list of mergers and acquisitions: http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_IBM. Some of them are traded in private, with price not announced, such as Varicent in April 13, 2012.
On the contrary, hostile takeover means company A forces to "takeover" company B in such ways like mandatorily buying a lot of company B's stock, even though the board of directors of B are not willing to be bought. It reminds me of something I knew when I was in college. In last April, 2012, there was a company called Coty wanted to buy Avon, offering a $10 billion buyout bid. "The Coty all-cash bid values New York-based Avon at $23.25 a share, representing 20.1% premium on its friday closing price." (FOX) Avon even stated "Coty's indication of interest substantially undervalues Avon and is opportunistically timed." Even though Coty considered it was not a hostile takeover and was trying to up the price, I still think it is a hostile takeover action. As a commenter Ronald Barusch said: "Nevertheless, just because there is no hostile tender offer does not make this anything like a friendly deal." (WSJ), I think coty adds pressure with other competitors about the price war. So I still think it acts like hostile takeover....
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