takeunder

takeunder definition - business

takeunder

Acquisition of controlling interest in a firm when the purchase price is less than the trading price of the target's stock. For example, a small company may encounter difficulty competing with larger competitors such that the smaller firm's management actively seeks a buyer. Takeunders often involve companies that have put themselves up for sale, causing speculators to bid up their stock prices above what acquiring firms are willing to pay.
Case Study Well-known clothing marketer OshKosh B'Gosh, Inc. agreed in May 2005 to a $312 million takeunder by Georgia-based Carter's, Inc. The 110-year-old firm had announced in February 2005 the possibility of a sale following a news leak that Goldman, Sachs & Co. had been retained to explore strategic alternatives for the Wisconsin-based firm. The news came approximately a month after an announcement of an increase in the firm's quarterly sales and a decline in its quarterly net loss. The firm's stock price increased by nearly 50%, from $19 on February 1 to $27.38 on February 17. Carter's paid $26 cash for each OshKosh B'Gosh share, a significant discount to the market price immediately preceding the buyout offer. The takeunder resulted in losses for speculators who took late positions in the stock while anticipating higher offers from interested suitors. Carter's indicated that it intended to continue marketing OshKosh B'Gosh as a separate brand and would improve profit margins by reducing offerings, outsourcing manufacturing, and closing underperforming stores.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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