Definition of bear hug

A takeover bid that is potentially so attractive to the target company's shareholders that its management has to consider it.  [1]

This is when the bidder makes a very high offer without previous warning directly to the target in an attempt to gain quick acceptance by the target’s management and board, and to prevent other bidders from attempting to take over the target.  The offer is therefore intended to be so attractive that the target’s management have no choice but to recommend to their shareholders to accept the bid.

Not all bear hugs offers results in purchases.  For example, on 1 February 2008, Microsoft offered Yahoo shareholders $31 for each of their shares, which represented a 62% premium on the closing price on the prior day.  This bear hug offer was ultimately withdrawn three months later following resistance by Yahoo. [2]

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