Fastenal is alerting its shareholders to be aware of and ignore an unsolicited “mini-tender offer” being presented by TRC Capital Corp., asking shareholders to sell shares below current market prices.
The Securities and Exchange Commission cautions investors about these offers. Their investor publication on the subject states “Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price.”
TRC, a private asset management corporation based in Canada, is offering to buy up to 2 million shares from Fastenal shareholders at a price of $48.63 per share. The offer price is $2.39 per share, or 4.7 percent below Fastenal’s closing price on April 27 of $51.02.
TRC Capital has made similar “mini-tender offers” to shareholders of Consolidated Edison, Coca-Cola, DowDuPont and Norfolk Southern, among other companies this year. All the companies have issued similar guidance as Fastenal.
A search of the SEC database shows TRC Capital has made similar mini-tender offers to other Minnesota public companies including: Target Corp. in Nov. 2014, Medtronic in 2006, Ameriprise in 2005 and General Mills in 2004. All responded quickly telling shareholders to reject the offer.
Shareholders are attracted to tender offers because they usually provide an opportunity to sell shares above current market prices. But bidders of “mini-tender offers” frequently make below market price offers.
Because TRC is offering to buy fewer than 5 percent of Fastenal’s outstanding shares they are not subject to the same disclosures and procedural protections of larger traditional tender offers.
Bidders of mini-tender offers do have to follow rules in Section 14(e) of the Securities Exchange Act and Regulation 14E – including to:
- Not engage in fraud or deceptive practices;
- Hold open tender offers for minimum time periods; and
- Make prompt payment to investors after the offer closes.
The mini-tender offers also generally come with many conditions protective of the bidder and none for selling shareholders.
Regulation 14E also requires the target company to state its position on whether shareholders should accept or reject the offers. So when companies get wind of these offers they generally issue similar dismissals of the offerings and urge shareholder to exercise caution and follow the advice of their financial advisors.
The SEC has a longer list of tips to investors regarding mini tender offers including what to watch out for at https://www.sec.gov/reportspubs/investor-publications/investorpubsminitendhtm.html