Hostile Bid: What It Is, How It Works, and an Example

Key takeaways
* A hostile bid is a takeover attempt made directly to a company’s shareholders after management rejects the offer.
* Hostile bids typically use a tender offer and may trigger a proxy fight to replace management.
* A friendly bid is the opposite: management and the board cooperate with the acquirer.

What is a hostile bid?
A hostile bid is a takeover offer presented directly to the target company’s shareholders—usually because the target’s management or board opposes the transaction. The acquirer typically offers to buy shares at a premium to market price and seeks to obtain control without the cooperation of existing management.

How hostile bids work
* Tender offer: The acquirer publicly offers to buy shares from shareholders at a specified price and for a limited period. If enough shareholders accept, the acquirer gains control.
* Proxy contest: If the board resists, the acquirer may pursue a proxy fight—campaigning to convince shareholders to vote out current directors and elect the acquirer’s nominees.
* Soliciting shareholders: The acquirer distributes disclosure materials (e.g., proxy statements or Schedule 14A in the U.S.), hires proxy solicitation firms, and contacts institutional and retail shareholders to make its case.
* Vote collection and challenges: Votes are aggregated by transfer agents or brokerages and delivered to the corporate secretary. Proxy solicitors may investigate and challenge unclear or contested votes.

Who uses hostile bids
Activist investors and corporate raiders often use hostile bids to force changes in strategy, management, or ownership. Hostile approaches are typically more adversarial and may proceed with less access to the target’s internal information than friendly transactions.

Hostile bid vs. friendly bid
* Hostile bid: Initiated despite management opposition; limited cooperation and access to internal information; may involve tender offers and proxy fights.
* Friendly bid: Negotiated and approved by the target’s board and management; involves cooperation, due diligence access, and negotiated terms.

Example: Sanofi’s bid for Genzyme (2010–2011)
In October 2010, Sanofi made a hostile bid for U.S. biotech Genzyme, offering $69 per share after repeated rejections by Genzyme’s management. Sanofi publicly sought shareholder support, claiming backing from holders of a majority of shares, but many shareholders viewed the offer as too low and did not accept it. In February 2011, Genzyme’s board ultimately approved a revised deal: $74 per share plus contingent value rights tied to the performance of an experimental drug, resulting in an agreed acquisition at a higher effective price.

Conclusion
Hostile bids are aggressive takeover tactics that bypass management by appealing directly to shareholders. They can lead to proxy fights, heightened scrutiny of shareholder votes, and ultimately either a forced ownership change or a negotiated settlement at new terms. Understanding the mechanics—tender offers, proxy solicitation, and the differences from friendly bids—helps shareholders and executives anticipate and respond to such attempts.