In September 2001, technology company Hewlett-Packard (HP) announced a proposal to acquire Compaq Computer Corporation for $25 billion in stock. It offered shareholders a deal whereby they could exchange one Compaq share for one HP share
At the time, HP shares were worth 18% more than Compaq shares. In March 2002, shareholders narrowly approved the takeover. What type of acquisition took place in this situation? Explain what happens in this type of an acquisition.
By offering Compaq shareholders a chance to exchange their shares for shares of a higher value, Hewlett-Packard made a tender offer, initiating a hostile takeover. Shareholders were persuaded to sell their shares, allowing HP to acquire Compaq against the company's wishes.
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