US independent EOG has urged its stakeholders to reject a share purchase offer by TRC Capital, which has made a name for itself – not necessarily a good one – for its unsolicited “mini-tender” bids in a range of industries, including energy.
EOG is the latest in a laundry list of large energy companies that TRC has targeted with a mini-tender offer – a tender offer for less than 5% of a company’s shares – including Duke Energy, Anadarko and Apache. TRC Capital has put in an unsolicited offer to buy 0.37% of the company’s common stock for $162.75 per share, more than 4% less than its closing price on November 14.
The US Securities and Exchange Commission description of mini-tender offers seems to suggest that they are not always above board. “Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers,” says the SEC website, “but they later learn that they cannot withdraw from the offer and may end up selling their securities at below-market prices”.
The SEC adds that mini-tenders do not tend to provide the same level of disclosure that traditional tender offers do, such as disclosing offer terms and information about themselves, or filing offering documents with the SEC. They also do not give stockholders protections that they would have under traditional offers, such as the right to withdraw from the deal while the offer is still open.
What TRC is doing is not illegal, but it does sound pretty shady. An article in Investing Daily, entitled “TRC Capital and the Mini-Tender Menace,” describes TRC’s strategy:
“TRC’s trademark strategy is to launch an unsolicited ‘mini-tender’ offering to buy a small percentage of a company’s stock BELOW the market price. TRC then sells any shares tendered and pockets the difference. If the share price sinks below the offer price, TRC can walk away. In fact, it can legally keep investors from backing out, literally locking up their shares until it’s profitable to buy them out.”
