What's a Hostile Takeover?

A friendly takeover involves one company agreeing to be bought by another, and is often referred to as a "merger" rather than a "takeover." Managers from each firm will typically meet and freely share information about the companies. As you might imagine, in a hostile takeover, the acquisition target is not too thrilled or cooperative.

In a hostile takeover, a would-be acquirer typically sees some strategic value in another company. It may make friendly overtures about a possible merger and be rebuffed. If so, it may then move on to dealing directly with the target's shareholders, by offering to buy their shares for either a certain amount in cash or an exchange of stock. If enough shareholders respond, the acquirer can gain control. To entice shareholders, the offer will certainly be for a price significantly higher than the target's current stock price. Companies whose share prices have slumped are extra-vulnerable to takeovers.

Some high-profile hostile takeover bids have included IBM (NYSE: IBM  ) for Lotus, Johnson & Johnson (NYSE: JNJ  ) for Cordis, and Hilton (NYSE: HLT  ) for ITT.

In the news more recently have been Oracle's (Nasdaq: ORCL  ) pursuit of PeopleSoft and the possibility of a hostile takeover of Rupert Murdoch's News Corp. (NYSE: NWS  ) by Liberty Media (NYSE: L  ) .


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 491242, ~/Articles/ArticleHandler.aspx, 4/16/2014 9:08:43 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement