Also known as: target companies · acquiree · target
Written by attorneys · grounded in primary & secondary sources — see below
A corporation that is the object of a tender offer or other acquisition attempt by a bidder seeking control. The designation identifies the entity whose shares or assets are sought in the transaction and whose shareholders receive the offer or merger consideration.
Threshold Capital's CEO drives to the offices of Target Company Torchlight Media carrying a signed merger agreement and a check for the premium price. He stops short of presenting the documents after learning that a rival bidder has already secured a lockup. Under the proximity test the CEO's conduct remains mere preparation and does not constitute an attempt to acquire the target company.
A lawyer sends a letter to True North Logistics proposing to represent it in defending against a hostile bid from Threshold Capital. True North Logistics had previously emailed the lawyer stating it did not wish to be contacted about takeover defense work. The lawyer's letter violates the rule because the target of the solicitation had made known its desire not to be solicited.
Select any source to read its text and confirm it supports the definition.
Trailblazer Airlines announces a tender offer for all shares of target company Torchlight Media. Illinois officials require registration under the state takeover statute because Illinois shareholders own more than ten percent of Torchlight Media stock. The target company challenges the statute as preempted by federal law.
Target company NCS Health Care grants Genesis a stock option covering thirty percent of its shares in exchange for a firm merger commitment. Omnicare later offers a higher price but the NCS board refuses to terminate the lockup. The court holds that the lockup is enforceable because it provided the target company with the certainty needed to secure the transaction.
A printer at Pandick Press learns the names of the acquiring company and target company from unmarked takeover documents. He purchases shares of the target company before the bid is announced and sells after the price rises. The printer is convicted because he traded on material nonpublic information obtained through his employment.
Chris-Craft loses its tender offer battle for Piper Aircraft after Bangor Punta acquires control of the target company. Chris-Craft sues for damages alleging false statements in the competing offer. The Supreme Court holds that an unsuccessful bidder lacks standing to recover damages under the Williams Act provisions protecting target shareholders.
A target company is the entity whose shares are sought by a bidder through a tender offer or other takeover mechanism. The acquiring company is the bidder making the offer and seeking control. The distinction determines which party's shareholders receive the premium and which board owes fiduciary duties in responding to the bid.
Supporting sources
The Williams Act primarily imposes disclosure and procedural requirements on bidders and on persons acquiring more than five percent of a target company's shares. Target companies must respond to tender offers under Regulation 14D-9 but are not required to make the initial Schedule 13D or 14D-1 filings.
A target company board may grant a lockup when it reasonably concludes that the certainty provided by the lockup enables a higher or more reliable transaction price. The lockup must not preclude the board from fulfilling its duty to obtain the best value reasonably available for shareholders.
Edgar v. MITE held that state takeover statutes imposing registration and hearing requirements on offers for target companies are preempted by the Williams Act and may violate the Commerce Clause. The decision limits the ability of states to regulate tender offers directed at target companies with shareholders in multiple states.
…materiality standard to preliminary merger discussions is not self-evident. Where the impact of the corporate development on the target's fortune is certain and clear, the TSC Industries materiality definition admits straightforward application. Where, on the other hand, the event is contingent or speculative in nature, it…