Shareholders of General Mills (NYSE:GIS) beware. Toronto-based TRC Capital is more than willing, as best expressed in the words of cult-movie classic Strange Brew, to "relieve you of the burden of ownership." The offer, though, is not extended out of altruism, considering the proposed purchase price is $45 per share, or roughly a 3% discount to the $46.31 level where the stock is currently trading. Yes, you read correctly, TRC is indeed offering to buy your shares for considerably less than their current price.
The practice, commonly referred to as a "mini-tender," is a completely legal though highly deceptive method of coaxing shareholders into tendering, or selling their shares, at below market prices. In each case, the acquiring party offers to purchase less than 5% of the outstanding shares, thereby avoiding the filing and disclosure requirements imposed by the Securities and Exchange Commission (SEC) to protect the interests of shareholders.
Bidders seldom use the term "mini-tender," and often pressure shareholders with "Solicitation to Purchase" notices. Many investors fail to do their homework, and mistakenly assume the asking price represents a premium, as is typically the case with larger tender offers. Once their shares have been tendered, withdrawing them is usually difficult, if not impossible.
This is the latest in a series of tender offers initiated by TRC, directed at firms such as Sara Lee (NYSE:SLE), Schering-Plough (NYSE:SGP), AstraZeneca (NYSE:AZN), and Kohl's (NYSE:KSS).
For its part, General Mills responded with verbiage identical to that issued by previous mini-tender targets, urging shareholders to reject the offer and stating that no affiliation exists between General Mills and TRC Capital. Those interested in learning more should read what the SEC has to say.
Should anyone out there in Fooldom receive any unsolicited (or solicited, for that matter) tender offers, act prudently by scrutinizing both the terms and stipulations involved. Making profitable investments is challenging enough already without being confused by below-market-price tender offers.
Have you received a mini-tender offer? Warn other fools in the General Mills discussion board.
Fool contributor Nathan Slaughter prefers to sell his stocks for their full value, or more if possible. He owns none of the companies mentioned.
