In business, a bear hug is an offer from one company to buy another`s shares at a price per share much higher than the value of the business on the market. This is an acquisition strategy that companies sometimes use when there are doubts that the management or shareholders of the target company are willing to sell. In late 2011 and early 2012, private equity was the subject of a series of proposals. So far, none of these proposals have been manifested in a binding proposal that shareholders can accept. The integrity of the market is now a priority for regulators. Regulators are expected to closely monitor the outcome of these virtual offering proposals and the resulting effects on market integrity. Based on these results, we can only see that the movement for regulatory change in Australia is accelerating. When a company opts for a bear brewing outlet, it offers a price well above the fair market price. This discourages other bidders from following the operation and thus evacuating, so to speak, the field of the bear brace acquired. Very often, the first shot fired in a acquisition battle is when the potential acquisition of a public company calls the CEO or target president to request a meeting to discuss a matter of “mutual interest.” One scenario is that the potential buyer will express admiration for the target company, reveal that they are already a major shareholder (perhaps just under 10%, so that no insider or early warning reports have been filed), and will propose to both parties to conduct formal discussions to determine whether a direct purchase or perhaps a merger could be in the best interests of both parties. At the end of this conversation, the potential candidate will write a letter to the target company, whose goal is to embrace the goal as firmly as possible – the so-called “bear-hug” letter. Where the first contact was made on the basis of a non-binding proposal and a request from the bidder to keep the discussions confidential until an agreement is reached, most counsel agree with the recommendation that the first contact does not constitute an “essential fact” or a “substantial change” requiring an immediate press release from the target company. It makes sense.
Securities market supervisors recognize that early disclosure may be inappropriate, as well as late disclosure for a publicly traded company. It is not desirable that the trading price of the objective action briefly draws on speculation on the opaque just to crash shortly after, in the absence of an effective transaction. In general, the preferred approach is to wait until the bidder is firmly committed to making an offer before public disclosure is made. The offer of bear braces, although generally financially favourable, is generally unsolicited by the target company. Here are some of the reasons why companies prefer to use a bear acquisition strategy over other forms of acquisitions: 29 percent of all agreements in 2011, including some of the year`s biggest deals, began with a bear hug approach that was released. In addition to these agreements, a number of proposals have been announced to embrace bears that have not resulted in an agreement. With regard to the bear-hugging proposals, which resulted in an announced transaction, 75% of the proposals that were finalized at the end of 2011 were successful. However, the increasing use of a bear cuddle approach by private equity may lead regulators to think twice about this position. As we have seen in the SABMiller offer for Foster s and Peabody/Arcelor/Arcelor Mittal for Macarthur Coal, most bidders have the means to turn the deal upside down if the accolade approach does not result in a target commitment.