As a follow-on to answer Cappy's question

"I've never really understood the term "hostile takeover"

Do we have to sell?TIA."

A friendly merger/take over is much simpler to deal with, but a hostile takeover is an attemp from a company (acquirer) to buy another company (target company) without the approval of the target company's BoD. If a target company has a "poison pill" provision for a takeover scenario (which was approved by the shareholders) then the target company would have some tool to play with, e.g. issue more free/cheap shares to shareholders to make the takeover a lot more expensive for the acquirer. If the TO offer is reasonable as indicated by independent valuation. If there are existing valuations they can be used as a guide. The target company BoD, by its fudiciary duty, must look at the offer and decide if the offer can be cansidered as permitted bid. Management would send out the takeover proposal along with its recommendation (usually a rejection recommendation for the first and low-ball offer). This may go on for many rounds, until the offer is too good to be rejected. Again, shareholders would need to approve management recommendation (presumably an acceptance this time, since management would vote yes to the revised and acceptable offer). Usually, the acquirer would put on a condition of shareholder acceptance by 2/3 plus for them to proceed.

Correct me if I am wrong, but my understanding is that if the offer is bad one (not of interest to the shareholders) in their judgement they can just reject the low-ball offer from the acquirer without going to the shareholders.

Let's say that shareholders voted to accept the offer with 2/3+1 vote then the acquirer may proceed to obtain additional shares either by going to the shareholders that are still holding out, or buying the shares from the market. They may even increase the offer to get to acquire 90% plus 1 vote.

This 10% level is crutial for the acquirer and the die-hards (those who are really against the offer for whatever reasons). If the company get pass this level, then it's almost game over for the die-hards, since the acquirer could go through Court to force the die-hards to sell their shares. If the Court agrees with the company then for all practical purposes it's game over. However, in some cases some really stubborn shareholders may decide to play hard to get by digging in. For those cases, the acquirer may decide to have some private negotiation to buy off the shares from those stubborn ones (off course they would want a non-disclosure agreement...not to reveal the price?). The other option is just to play tough and let those stbborn shareholders twist in the wind...but the company would need to go through all the reporting requirements (a headache!). So normally, one way or the other (one may get tired fighting) the situation will be resolved.

Bottom-line, you don't have to sell if you want to dig in, but be prepared to spend your time fighting the battle.

We have a similar situation with KWG, and if you check that BB you will see a sharecount. Without approximately under 100 shareholders (out of a few thousand shareholders) the count is now over 8.3%. Counting management support the combined strength would be more than 10% (note CLF has 17.4% of KWG).

Just my take...please chime in with your perspective/understanding.

goldhunter