Oil industry services specialist Baker Hughes (NYSE:BHI) is recommending shareholders reject an unsolicited "mini-tender" offer to purchase up to 2.5 million shares, about 0.56% of its common stock.

The company said yesterday that it had received notification of an offer by TRC Capital to purchase up to 2.5 million shares for $42 per share, about 4.6% below shares' $44.03 closing price last Wednesday, the day before the offer. Shares are trading at $44.63 as of this writing.

Baker Hughes recommended that stockholders who have not responded to the offer reject it as being too low of a price for their shares. The company suggested stockholders who already tendered shares in response to TRC Capital's offer withdraw their shares in writing.

As Baker Hughes explains, mini-tender offers seek to acquire less than 5% of a company's stock. Because they are for less than 5% of the company's securities, they only have to comply with antifraud regulations and not other sections of securities law that provide protections for investors.

The SEC has issued a warning about mini-tender offers, saying they have been increasingly used to catch investors off guard. Says the SEC: "Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers."

TRC Capital has made mini-tender offers its forte and in recent weeks has made similar offers for Express Scripts, Apache, and First Solar.

Baker Hughes is a leading supplier of oilfield services, employing more than 58,000 people in more than 80 countries.


Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Apache and Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.