Since my last post was removed, I'll include more details in this one.
My intent is to provide educational content.

What is a Creeping Takeover?

In mergers and acquisitions (M&A) a Creeping Takeover, also known as Creeping Tender Offer, is the gradual purchase of the target company’s shares. The strategy of a creeping takeover is to gradually acquire shares of the target through the open market, with the goal of gaining a controlling interest.

Understanding The Creeping Takeover

This method is a form of hostile takeover as it is more often than not involuntary and done without the knowledge of the public, shareholders, and board of directors. It is called "creeping" because it is a gradual and slow process. 

(In this case, EBAY is aware of the intention and "threat" of this. More below.)

This process involves the acquiring company purchasing the target company's shares on the open market little by little. Through this method, the shares are purchased at the current market price, thus removing the need to pay very high premiums. 

One of the major reasons behind going for this method is to obtain the majority stake in a company more cheaply than through a tender offer. This process can be a cheaper alternative for the acquiring company than a method like a bear hug, which requires the company to pay high premiums. 

Once the 50% equity threshold has been crossed, the target company is usually considered a subsidiary of the acquiring company. Thus, the acquiring company must account for the target company through consolidated financial statement reporting. 

The 50% is thus an important benchmark businesses need to consider while going for creeping takeovers. If the acquiring company wants to have a major chunk of the business but doesn't want the responsibility of controlling the business, it should remain below the 50% level. 

Rationale Behind a Creeping Takeover

In the US, a creeping takeover is used to get around the provisions of the Williams Act.

Key provisions of the Williams Act:

• In a tender offer, all shareholders must be offered the same price for their shares.
• An investor or a group attempting to acquire a large block of shares must file all relevant details of their tender offer with the SEC.

Therefore, with a creeping tender offer, the bidder is able to circumvent all of these provisions and purchase shares from different shareholders on the open market. Usually, only when a substantial number of shares have already been acquired through a creeping takeover strategy will the bidder file the necessary documents and offer a formal bid.

Risks in a Creeping Takeover

A failure in the takeover of the target company will leave the acquirer with a large block of shares that it may need to liquidate, possibly at a loss, in the future. However, there are ways to minimize this risk. Pressure can be applied to the target company to force them to repurchase the shares at a high price.

Example of a Creeping Takeover

A famous creeping tender offer involves Porsche and Volkswagen. From 2005 to 2008, Porsche slowly bought shares of Volkswagen before finally revealing that it was planning to take control of Volkswagen.

However, the financial crisis prevented a successful acquisition of Volkswagen Group by Porsche. In the end, Volkswagen Group bought 100% of the shares of Porsche and became its parent company in August 2012.

1. In mid-2005, Porsche began buying Volkswagen shares and announced that it had plans to acquire more than 20% of the Volkswagen Group.
2. By mid-2006, Porsche’s stake in Volkswagen reached over 25%. However, Porsche indicated that it was not attempting a takeover. Rather, Porsche wanted to protect the world’s biggest carmakers from corporate raiders. It was basically casting itself in the role of a white squire.
3. In October 2008, Porsche held a 43% stake in Volkswagen, with options to purchase another 32%. It was revealed that Porsche actually wanted to take control of Volkswagen.
4. However, in 2008, the financial crisis struck and banks were unwilling to lend Porsche more money to complete the takeover. In fact, Porsche was facing a liquidity crisis. Eventually, Porsche collapsed under pressure from creditors calling in their loans.
5.  Volkswagen ended up buying Porsche and became Porsche’s parent company in August 2012.

Other Notable Examples (From Google):

1. InBev and Anheuser-Busch (2008)

• The Strategy: The Belgian-Brazilian brewer InBev used its financial muscle to launch a hostile takeover by pursuing shares in the open market, pressuring the Anheuser-Busch board to agree to a $52 billion deal.
• Outcome: Created the world's largest brewing company (now AB InBev).

1. Schaeffler Group and Continental AG (2008)

• The Strategy: The family-owned ball-bearing manufacturer used a complex financial strategy involving equity swaps and stealth accumulation of shares on the market.
• Outcome: Schaeffler acquired a controlling stake of Continental AG, which sparked scrutiny under German takeover regulations.

1. Vodafone and Mannesmann (1999)

• The Strategy: Vodafone launched an aggressive, hostile all-stock takeover bid valued at over $180 billion, buying out Mannesmann's publicly held stock on the market.
• Outcome: Resulted in the largest corporate merger in history at that time.

eBay Has Rejected GameStop’s $56bn Offer:

eBay has rejected a $56 billion takeover approach from GameStop, citing doubts over the financing of a deal that would see a company roughly one-quarter the size of its target attempt an audacious acquisition.

“We have concluded that your proposal is neither credible nor attractive,” eBay told Cohen.

The rebuff raises the prospect of a hostile bid, with GameStop CEO Ryan Cohen having said last week that he is prepared to take the offer directly to eBay shareholders if the board did not engage.

Possible Counter (Poison Pills) To Any Type Of Creeping Takeover:

In the event of a hostile merger or acquisition, a target company has several defensive strategies at its disposal. One of the most widely used and recognized defenses globally is the poison pill. There are different types of poison pills, such as the flip-in pill, which allows existing shareholders (excluding the acquirer) to buy additional shares at a discount, diluting the acquirer’s stake, and the flip-over pill, which permits shareholders to purchase shares of the merged entity at a discounted rate after the takeover. These strategies are designed to make hostile takeovers more difficult and costly for the acquirer.

The board can implement these rights at any time, without needing shareholder approval, setting the trigger limit – typically when an entity acquires 10-20% of shares. These rights usually expire within a year but can be extended.

Flip-in vs. Flip-Over Poison Pill Defense?

There are two most common types of Poison pills – Flip-in and Flip-over:

Flip-in

Flip-in strategy is triggered when a specific event occurs, and allows all shareholders except the acquirer to buy shares of the target company at a significant discount. Key elements include:

Trigger/Event: Activated when the acquirer reaches a certain percentage of share ownership

Conversion Price: The discounted price at which shareholders can buy additional shares, regardless of the current market price

Duration: The time frame during which shareholders can exercise their rights

Flip-in Example

Woke Inc., a tech firm with valuable intellectual property, faces a hostile takeover from Hostile Inc., which offers to buy Woke’s shares at a premium. In response, Woke’s board adopts a flip-in poison pill. If Hostile acquires more than 10% of Woke’s shares, all other shareholders can buy two shares of Woke at the current market price.

Flip-over

Flip-over strategy is triggered by a specific event, it grants each shareholder, except the acquirer, the right to purchase shares of the merged or surviving entity at a significant discount. Unlike the Flip-in pill, this approach comes into play after the acquisition has occurred. Key elements include:

Trigger/Event: Activated when the acquirer reaches a certain percentage of shareholding

Conversion Price: The discounted price at which shareholders can buy shares of the merged or surviving entity, regardless of the current market price

Flip-over Example

Continuing the previous example, assume Hostile Inc. has acquired 10% equity in Woke Inc. and is pursuing a hostile takeover. Woke adopts a flip-over poison pill, granting each shareholder (except Hostile) the right to purchase two shares of the merged or surviving entity at the prevailing market price. If, post-acquisition, the surviving entity has 1,000,000 outstanding shares trading at $100 each.

Conclusion:

During fights like this, the "attacked" company is playing defense on a massive scale at the expense of its shareholders.

If their shareholders would like to buy more discounted shares at 50% the current market price, that might seem attractive to some larger investors, while small investors without more capital, will bail.

Those "cheap" shares might seem like a good purchase at first but at the same time, the huge increase in the number of shares will dilute the share price.

Depending on the "ammo" of the pursuant company, this can backfire in a massive way.

As eBay issues more shares (increasing the public float), the share price on the open market lowers to a much more attractive price for the "attacker" (Gamestop).

This also means that Gamestop requires more cash to buy shares as well. Possibly selling more of its own shares to $GME investors in exchange for purchasing power.

These fights take years and surrounding market forces determine the outcome in a big way.

$56B ($130 125 share) was the initial offer...

https://preview.redd.it/qa9no41lfh2h1.jpg?width=1100&format=pjpg&auto=webp&s=b30a7062b9f0e265ee8614edd1ba39a61a65471c

Source List:

Google.com

https://www.wallstreetoasis.com/resources/skills/deals/creeping-takeover

https://corporatefinanceinstitute.com/resources/valuation/creeping-takeover/

https://x.com/ryancohen/status/2056925698581790897

https://ca.finance.yahoo.com/news/ebay-rejects-gamestop-controversial-56bn-111409994.html

https://www.fe.training/free-resources/ma/poison-pill-defense/

DTCC Twitter

Today I ask: .@The_DTCC What would it take for #DTCC to settle each trade in milliseconds? Funds/Banks have servers arranged so nanoseconds shaved off trade times when FED numbers come out. Why does #DTCC still hours to settle trades? Isn't the tech there now to bypass brokers all together?

Not saying this is exact, just throwing some napkin math out there for the group.

GameStop’s filing shows synthetic exposure to about 29.08m eBay shares through the put call pairs, with roughly 7m paid in net premium. The strikes are somewhere between about 84.74 and 114.96, but we do not know the exact weighting, so the average strike is the big missing piece.

The rough formula I’m using is:

current eBay price minus assumed average strike, multiplied by 29.08m shares, minus the 7m premium.

With eBay now around 119, the rough unrealized gainz could look something like this:

If avg strike is 85, around 980m (wtf?!)
If avg strike is 95, around 690m
If avg strike is 100, around 540m
If avg strike is 105, around 400m
If avg strike is 110, around 250m
If avg strike is near 115, still around 100m

Again, this is not realized cash and the exact number depends on the strike weighting, but the setup looks pretty wild. Whether the deal goes through or not, GameStop may already be sitting on a massive win from the trade itself. And if that gain runs through earnings, the next report could look insane.

Just imagine something like roughly 1B in quarterly revenue and reported net income also getting anywhere near that level because of those unrealized value gain. That would be absolutely nuts.

Please correct my thinkng, if i am wrong!

Good morning to all apes around the world! Happy Thursday! Hope all is well in your world! German markets are open, and last trade for GameStop was at €19.46, which is $22.62 when using Google's currency calculator.

https://www.tradegatebsx.com/orderbuch\_umsaetze.php?lang=en&isin=US36467W1099

I hope you have a brilliant day! Best wishes from London!