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LeoGlossary: Hostile Takeover

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A hostile takeover is a business maneuver in which one company attempts to acquire another company against the will of the target company's management. Hostile takeovers are typically carried out through tender offers, proxy fights, or stock purchases on the open market.

In a tender offer, the acquiring company makes a public offer to purchase shares of the target company at a premium to the current market price. If the acquiring company is able to accumulate a majority of the target company's shares, it can then take control of the company.

In a proxy fight, the acquiring company attempts to persuade the target company's shareholders to vote in favor of its nominees for the target company's board of directors. If the acquiring company is successful in its proxy fight, it can then gain control of the target company's Board of Directors and, in turn, the company itself.

In a stock purchase on the open market, the acquiring company simply purchases shares of the target company on the open market until it has accumulated a controlling stake.

Hostile takeovers are often controversial, as they can be perceived as being unfair to the target company's shareholders and management. However, hostile takeovers can also be beneficial, as they can lead to increased efficiency and profitability.

Here are some of the reasons why a company might attempt a hostile takeover:

  • To acquire a competitor and gain market share
  • To acquire a company with complementary products or services
  • To acquire a company with undervalued assets
  • To take advantage of a company that is in financial distress
  • To implement a new management team and turn around a struggling company

Hostile takeovers can be difficult to carry out, as they often require the acquiring company to spend a significant amount of money and to overcome the opposition of the target company's management. However, hostile takeovers can also be very lucrative, as they can allow the acquiring company to acquire a valuable asset at a discounted price.

Famous Hostile Takeovers

Here are some of the most famous hostile takeovers and what happened:

  • Kraft Foods' takeover of Cadbury (2010)

Kraft Foods offered to buy Cadbury for £11.5 billion, a premium of 30% over Cadbury's pre-bid share price. Cadbury rejected the offer, but Kraft Foods persisted and eventually won the takeover battle. Kraft Foods acquired Cadbury in February 2010 and sold its North American confectionery business to Hershey Company in order to comply with antitrust regulations.

  • InBev's takeover of Anheuser-Busch (2008)

InBev offered to buy Anheuser-Busch for $52 billion, a premium of 50% over Anheuser-Busch's pre-bid share price. Anheuser-Busch rejected the offer, but InBev persisted and eventually won the takeover battle. InBev acquired Anheuser-Busch in November 2008 and the company is now known as Anheuser-Busch InBev.

  • Sanofi-Aventis' takeover of Genzyme (2011)

Sanofi-Aventis offered to buy Genzyme for $20.1 billion, a premium of 64% over Genzyme's pre-bid share price. Genzyme rejected the offer, but Sanofi-Aventis persisted and eventually won the takeover battle. Sanofi-Aventis acquired Genzyme in June 2011.

  • Comcast's takeover of Time Warner Cable (2015)

Comcast offered to buy Time Warner Cable for $45.2 billion, a premium of 30% over Time Warner Cable's pre-bid share price. Time Warner Cable rejected the offer, but Comcast persisted and eventually won the takeover battle. Comcast acquired Time Warner Cable in May 2015.

  • Vale's takeover of Inco (2006)

Vale offered to buy Inco for $16.4 billion, a premium of 34% over Inco's pre-bid share price. Inco rejected the offer, but Vale persisted and eventually won the takeover battle. Vale acquired Inco in October 2006.

These are just a few examples of famous hostile takeovers in business. Hostile takeovers can be complex and controversial, but they can also have a significant impact on the companies involved and their shareholders.

Investors Who Wage Hostile Takeovers

A number of investors and hedge fund managers are known for waging hostile takeovers. Some of the most notable include:

  • Carl Icahn: Carl Icahn is an American activist investor who has been involved in a number of hostile takeovers, including those of TWA, Revlon, and Texaco. He is known for his aggressive tactics and his willingness to take on large companies.

  • Paul Singer: Paul Singer is the founder of Elliott Management, a hedge fund that has been involved in a number of hostile takeovers, including those of Barnes & Noble, Alon USA Energy, and NXP Semiconductors. He is known for his sophisticated investment strategies and his ability to build shareholder support for his proposals.

  • Nelson Peltz: Nelson Peltz is the founder of Trian Partners, a hedge fund that has been involved in a number of hostile takeovers, including those of Heinz, Wendy's, and DuPont. He is known for his focus on operational improvements and his ability to work with management teams to create value for shareholders.

  • Dan Loeb: Dan Loeb is the founder of Third Point Management, a hedge fund that has been involved in a number of hostile takeovers, including those of Yahoo!, Sotheby's, and Campbell Soup. He is known for his short activism and his willingness to take on corporate boards.

  • David Einhorn: David Einhorn is the founder of Greenlight Capital, a hedge fund that has been involved in a number of hostile takeovers, including those of Allied Capital, General Motors, and Topps Company. He is known for his value investing approach and his willingness to take on entrenched management teams.

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