What is a minimum tender condition?

A tender offer comes with conditions, and the minimum tender condition is the one about holders. Enough shares must be tendered before the buyer has to buy any.

It's usually set as a share of the outstanding shares.

Say Woodgrove offers $50.00 a share for Litware, which has 100 million shares. The minimum is a majority: more than 50 million shares.

60 million tendered

The minimum is met. If the other conditions are met too, Woodgrove buys the tendered shares.

40 million tendered

The minimum isn't met. Woodgrove doesn't have to buy any, and may extend the offer.

Until the minimum is met, a share that isn't tendered works much like a vote against.

A tender offer usually takes the place of the holders' vote. So the minimum usually matches the support a vote would need.

For a Delaware company, a merger vote usually needs a majority of the outstanding shares entitled to vote. Under Section 251(h), the merger can follow the offer without a vote.

But only if the shares bought in the offer, plus those the buyer and its affiliates already own, reach at least that majority. If the company's charter asks for a bigger vote, or a vote by each class, they must reach that instead.

Once the buyer accepts enough shares, those not tendered are usually bought out too, in the merger, at the same price.

Another rule applies at 90%. Under Section 253, a parent corporation that owns at least 90% of each voting class can generally merge without the target holders' vote.

The offer documents say what counts. The common rules:

Shares tendered and not withdrawn

They count once the depositary, the agent collecting them, has received them.

Shares the buyer already owns

Many agreements add the shares the buyer and its affiliates own.

Withdrawn shares

They stop counting. Under Rule 14d-7, holders can usually withdraw until the offer ends, extensions included.

Shares promised for later

A notice of guaranteed delivery promises shares that haven't arrived yet. Under Section 251(h), they count only if received before the offer expires.

Many agreements measure the count against the shares outstanding when the offer expires.

Gilead's 2024 offer for CymaBay, at $32.50 a share, needed one share more than 50% of the outstanding shares.

Gilead couldn't waive that minimum without CymaBay's consent.

If a condition was unmet and not waived, the agreement made Gilead extend the offer, up to 10 business days at a time. That duty lasted until the agreement ended or reached its outside date.

When the offer expired at the end of March 21, 2024, 93,682,371 shares had been tendered and not withdrawn. That was about 77.3% of the outstanding shares.

Notices of guaranteed delivery covered about 4.2% more. Shares not yet received didn't count toward the minimum.

The minimum was met. On March 22, 2024, Gilead accepted the tendered shares, and the merger closed the same day.

Holders can see how the count is going. Each extension must be announced by 9:00 a.m. Eastern time the next business day at the latest, with the approximate number of shares tendered so far.

If the minimum isn't met by the end, the buyer may extend the offer, and some agreements require it.

If the offer ends without a purchase, the buyer must return the tendered shares promptly.

Once the buyer accepts enough shares, not tendering no longer stops the deal. Holders who didn't tender usually get the same cash in the merger.

The checklist gives it as a percentage of the outstanding shares and says whether it can be waived: Buyer may waive it, Only with the target's consent, or Can't be waived.

As a condition it reads Pending until a filing says it was met or waived, then Done. When the expiry date passes with no result filed, it reads Offer was set to expire that day.