A hostile public takeover bid (hostile takeover bid) is a commercial transaction in which bidding companies try to gain control of another company.
In an extended way, we can say that in a hostile takeover bid, one or several companies, called bidders, make a wide offer with the fundamental objective of acquiring the shares from all the shareholders or a good part of them to achieve optimal levels of control of the capital, the right to vote and therefore the government of a company. A fundamental feature is that hostile takeover bids occur between entities subject to official listing, that is, publicly listed companies.
It is common for companies that launch the takeover bid to already have some capital quota, at least 3%, which is the minimum level that the National Securities Market Commission requires to be able to launch a takeover bid for the majority of the capital. Likewise, each 5% increase in capital must be reported to the CNMV.
The name of hostile is derived from the non-negotiation or agreement between the offering companies and the company that is trying to be absorbed. In this way, a takeover bid is called hostile when a listed company decides to launch the massive purchase of the shares from their holders without having previously negotiated a common price, agreement or relationship.
In this case, the shareholders should consider whether or not they decide to sell their shares at the price offered by the company, and if they do not agree, they may refuse. It is in these situations that the most divergences may exist between the Board of Directors of an entity being purchased and its own shareholders, depending on the interest in the offered price and the conditions they present, since once the hostile takeover bid has begun, most of the Shareholders and the government of the acquired company can refuse or vice versa, subsequently transforming into a friendly takeover bid .
Shareholders lose when the top management of their company do everything possible to hinder the operation and so that their shareholders do not have the possibility to decide freely. On the other hand, potential buyers can incentivize (bribe!) The top management of the company they want to buy to give their approval, and ensure that the takeover bid is not hostile.
When the top managers of a company maneuver so that their shareholders cannot decide on the sale of their company or when they are bribed to accept a sale, the losers are the shareholders. That if it is hostile.
The new policy of these governments is designed to protect the directors of the companies but at the expense of the owners of these companies who are the shareholders. This should not be accepted.