DEFINITION of Blitzkrieg Tender Offer
Blitzkrieg tender offer was a type of takeover offer that was intended to be so attractive that very few objections would arise and the takeover could occur swiftly. In German, "blitz" means lightning and "krieg" means war. Thus, a blitzkrieg referred to a surprise offensive that is both powerful and swift and effective enough to overcome any opposition. Ever fond of war analogies, Wall Street came up with the term to describe the tactic to try to quickly acquire a target without approaching the target's board.
BREAKING DOWN Blitzkrieg Tender Offer
The Williams Act of 1968 was the counteroffensive to blitzkrieg tender offers, ending this style of takeover tactic. In a conventional tender offer, which involves offering a premium to purchase shares from shareholders within a reasonable amount of time, a target's board is by-passed. The company making the tender offer hopes to collect enough shares to gain control. Before implementation of the Williams Act, which imposed additional regulations on tender offers, a would-be acquirer did not have to follow a shareholder-friendly procedure; it was free to use overwhelming force to defeat resistance to a takeover. Putting up a high premium and pressuring shareholders to tender their shares within a very short period were the two components of the blitzkrieg tender offer.
A Senator Acts
A wave of surprise takeovers took place in the 1960s that were considered detrimental and unfair to shareholders. To better protect investors, Senator Harrison A. Williams of New Jersey proposed new legislation that required mandatory disclosure of information regarding takeover bids. Senator Williams' bill became law in 1968 as an amendment to the Securities Exchange Act of 1934. Henceforth, a company that wanted to acquire via a tender offer had to provide extensive details through SEC filings on offer terms, cash source of the deal, bidder's plans for the company after the takeover, and other material disclosures. More importantly, to eliminate the fear of sudden German bombing raids, the Williams Act required that the company adhere to minimum time requirements for a tender offer. Currently, the SEC mandates that a tender offer must be open a minimum of 20 business days.