‘Mini’ Tender Offer Made for SBC Shares
A new round of so-called mini tender offers for stocks has critics warning, “Caveat venditor” -- let the seller beware.
On Monday, telecom giant SBC Communications Inc. said a firm named Corporate Investments Inc. had made an offer to buy as much as 1% of SBC’s shares directly from stockholders, at $23 each.
Earlier this month, a Toronto-based firm named TRC Capital Corp. made an offer to buy as much as 2.4% of Delta Air Lines Inc. shares at $13.55 a share.
In both cases, the tender offers were made at prices below where the stocks were trading on the open market.
SBC’s shares closed at $24.18 on Friday on the New York Stock Exchange, then fell $1.05 to $23.13 on Monday. Delta’s shares were at $14.20 the day of the tender; they had fallen to $12.49 as of Monday on the NYSE.
Both SBC and Delta advised shareholders against selling their stock to the bidders.
Mini tender offers typically seek to acquire less than 5% of a company’s stock, which means the bidder can avoid many of the Securities and Exchange Commission’s disclosure and procedural requirements.
The offers have drawn cautionary bulletins from the SEC. On its Web site, the agency warns that “some bidders make mini tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer to the current market price.”
Delta said that TRC offered “no assurances that it will have the financial resources to complete the offer, and that TRC can extend the offer and delay payment beyond the scheduled expiration date or amend the offer, including the price.”
SBC said Corporate Investments indicated that acceptance of its offer is irrevocable. SBC offered no other details on the identity of the bidder.
TRC Capital’s founder, Lorne Albaum, previously has made mini tenders for shares of companies including Hershey Foods Corp. and Unocal Corp.
Albaum, a securities lawyer, told Bloomberg News in October that his offers have helped people sell their stock without paying brokerage commissions. “There’s no trickery,” he said.
