Seed and chemical giant Monsanto is the latest major firm to be targeted by a lowball offer for a small chunk of its shares from a Toronto-based investment company.
TRC Capital Corp., which according to media reports is owned and solely operated by Bay Street lawyer Lorne Albaum, has put forward an unsolicited “mini-tender offer” for up to two million Monsanto shares at US$54.15 per share, Monsanto said in a release Wednesday.
Monsanto shares closed on Oct. 19, the date of TRC’s offer, at $57.30 (all figures US$), the company noted. Monsanto stock closed Wednesday on the NYSE at $57.80.
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St. Louis, Mo.-based Monsanto emphasized in its release Wednesday that it “does not endorse this unsolicited mini-tender offer, and Monsanto is not associated in any way with TRC, the mini-tender offer or the offer documentation.”
Monsanto on Wednesday also publicly urged its shareholders not to tender to TRC’s offer as it’s below the current share price. Also, it urged shareholders to consult financial advisors and “exercise caution” with respect to TRC’s bid.
TRC’s offer, Monsanto added, “is subject to the satisfaction of a substantial number of conditions, including the ability of TRC to finance the offer and no decrease in the market price of our shares.”
TRC’s tender offers in the past couple of years have included bids for small amounts of shares in Archer Daniels Midland, PepsiCo, Sanofi-Aventis, Manulife Financial, Hewlett-Packard, Johnson and Johnson, Kimberly-Clark, Rio Tinto and Canadian Tire, among others.
Monsanto, like several other companies approached in such a manner, noted in its release that the U.S. Securities and Exchange Commission (SEC) has previously issued an investor alert regarding mini-tender offers.
In making such offers at below-market prices, the SEC said in its alert, some bidders are “hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price.”
Some others, meanwhile, will make mini-tender offers at a premium, the SEC said, in which case they’re “betting that the market price will rise before the offer closes and then extending the offer until it does or improperly cancelling if it doesn’t.”
Shareholders of publicly traded companies who see such a tender are urged to ask the bidder, or a broker, what percentage of the company the bidder aims to purchase.
“If the answer is less than five per cent, you’re dealing with a mini-tender offer, and you should proceed with caution,” the SEC said.
Such small-scale offers are also not generally subject to the same procedural and disclosure requirements as larger bids, the SEC said.
According to a separate notice from the Ontario Securities Commission, “the only circumstance in which investors might benefit from tendering their securities to a mini-tender is in the circumstances where an individual investor holds less than a ‘board lot’ of securities.”
