The term describes a specific type of offer to purchase some or all of a company’s shares at a price range specified by the potential buyer. Shareholders are invited to tender their shares at a price within that range. The final purchase price is then determined based on the lowest price at which the acquirer can obtain the desired number of shares. For example, a company might offer to buy back its own shares between $20 and $25 per share. Shareholders then indicate the price within this range at which they are willing to sell. If the company wants to buy 1 million shares, it will accept shares starting from the lowest offer price until it reaches the 1 million share target.
This mechanism offers shareholders a degree of control over the sale price of their shares, allowing them to potentially receive a premium over the prevailing market price. The company benefits by potentially acquiring shares at a lower aggregate cost than if it offered a fixed price. Historically, this approach has been utilized in situations where the potential buyer is uncertain about the market’s valuation of the target company’s stock or where the buyer wishes to provide flexibility to the sellers.
