Your broker should
let you know by e-mail of takeover action affecting
a company in which you hold shares. If a takeover
is to go ahead, the predator must obtain more
than 50 per cent of the target company’s
voting shares. Once its stake has reached 30 per
cent, it must make a formal offer to all shareholders.
If some shareholders decline to take up an offer,
a buyer can acquire their shares compulsorily
if holders of 90 per cent of the voting shares
have accepted. The acquirer pays for a target
company’s shares either with cash, its own
shares, or a combination of the two.
It is the run-up to the takeover that is the fun
bit, and it can also be very lucrative. Companies
that are takeover targets, or rumoured to be,
may see their share price soar over a short space
of time. You can sometimes make a killing if you
buy early, and sell out after the share price
has risen nicely but before the speculation has
subsided. This is a risky trading practice in
which timing is crucial and luck plays a part.
Don’t get greedy and hang on too long. If
a takeover rumour is quashed, the share price
can drop like a stone.
|
