Green mail investopedia
A great topic!
In finance, "green mail" is a term used to describe a type of hostile takeover bid where a company's largest shareholder or a group of investors, often with a significant stake in the company, makes a tender offer to buy out the remaining shares of the company at a price that is higher than the current market price.
The term "green mail" was coined because the offer is often made in a "green" or "friendly" manner, with the intention of acquiring control of the company without resorting to a full-blown hostile takeover. The goal is to avoid a protracted and costly battle for control, which can be damaging to the company's reputation and operations.
Here are some key characteristics of green mail:
- Friendly takeover: The offer is made by a company's largest shareholder or a group of investors who already have a significant stake in the company.
- Higher price: The offer price is typically higher than the current market price of the company's shares.
- Tender offer: The offer is made through a tender offer, where shareholders are invited to sell their shares to the bidder at the offered price.
- Control: The bidder aims to acquire control of the company, often to influence its strategic direction or to realize a profit from the increased value of the company's shares.
Green mail can be an attractive option for companies that are facing a hostile takeover bid, as it allows them to avoid a costly and distracting battle for control. However, it can also be a way for large shareholders to exert their influence over the company and potentially benefit from the increased value of their shares.
Examples of green mail include:
- In 2018, activist investor Nelson Peltz made a tender offer to buy up to 2.5% of Procter & Gamble's shares, which was seen as a friendly takeover bid.
- In 2020, activist investor Elliott Management made a tender offer to buy up to 4.5% of AT&T's shares, which was seen as a friendly takeover bid.
Overall, green mail is a strategic move that can be used to acquire control of a company without resorting to a full-blown hostile takeover.