Self-Tender Defense

A form of takeover defense against a hostile bid, in which the target company undertakes a tender offer for its own shares, i.e. a "self tender." A self-tender defense can be triggered if management of the target company does not accede to the potential acquisition because it views the hostile bid as opportunistic or one that undervalues its shares. The objective of the self tender is to make the cost of acquiring the company prohibitively expensive to the hostile bidder, or reducing its attraction by adding debt to finance the tender, to the point where the bidder may be forced to walk away from the deal.

A self tender is usually for a limited number of shares, since there may be cash and other constraints that prevent a large-scale tender, and is seldom at a price that is higher than the hostile bid. The self tender is not used in isolation as a takeover defense mechanism, but is generally used along with other strategies to ward off unwelcome advances, such as super-majority provisions and staggered board elections.