In addition to merger arbitrage and going private transactions, another type of special situation is tender offers. A self-tender offer is a form of share repurchase where a company offers to purchase a portion of its outstanding shares from those shareholders who vote to ‘tender,’ or turn in, their shares in exchange for cash.

This is another area where small investors have an advantage over the bigger guys. Many self-tender offers include an ‘odd-lot’ provision for shareholders holding less than 100 shares. It basically guarantees that the company will repurchase these odd-lots before the rest of the offer is fully subscribed.

One example of this sort of investment opportunity is Validus Holdings (VR).


On May 6, VR announced a Modified Dutch Auction Tender Offer for $300m of common shares. The price range for the auction was set for $24-$27.50 per share. The offer will be paid for with cash on hand (so no financing risk) and includes the important ‘odd-lot’ provision.

Entry Point

Since the tender offer announcement, the stock traded below $24 several times over the past month. A strategic entry point at or below the minimum range of the tender offer, combined with taking full advantage of the odd lot provision, will likely recent in a profitable trade, with potential for decent upside.

Return Scenarios

VR Tender Offer Return Scenarios

Final Tender Price

TBD. The tender offer expired yesterday so hopefully results will be announced in a few days.

Results – *Updated*

On June 9, 2010, the Company announced the results of the dutch auction tender offer:

Validus Holdings Announces Preliminary Results of Dutch Auction Tender Offer

“Based on these preliminary results, Validus expects to purchase 12,000,000 common shares, subject to proration, at a price of $25.00 per common share for a total cost of $300.0 million”

Obviously, this is at the lower end of the given range.  Still, if you picked up shares two weeks ago for $24, the transaction still resulted in an annualized return of 110%!


Long VR

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7 Responses so far

  1. Richard Kuklinski says:

    Terrific writeup. Will the tender offer still be available to folks buying shares now (06/11/2009)?


    • asues says:


      Unfortunately, the tender offer expired on June 8. The company announced modified results of the dutch auction, with shares tendered at $25.00.

      It wasn’t what I was hoping for but still a nice annualized return for those who managed to get in below the minimum offer price.

      • Richard Kuklinski says:

        Ok, thanks. I appreciated your writeup. Keep up the good work!

      • Yannick says:


        I think this was a pretty good idea, is there a reason why you did not write about it sooner so we could participate?

        Thank you for your work!


  2. asues says:


    Unfortunately, I’ve just been very busy with other activities and couldn’t get the writeup sooner.

    I’ll try to focus on sharing my ideas in a timely fashion. Thank you for your support!


  3. […] is another example of a special situations investment (see my writeups on the CHDN/UBET merger and VR tender offer as […]

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