What Is a Partial Offer?
A partial offer is a tender offer in which the acquirer seeks to purchase less than all of the target company’s outstanding shares — for example, offering to buy 51% or 30% of the shares rather than 100%. The acquirer’s objective is to gain control (or a significant minority position) at a lower total cost than a full acquisition, while allowing the remaining shareholders to retain their positions.
Partial offers are structurally distinct from full offers because they create a two-tier outcome: shareholders who tender receive the offer price, while shareholders who do not tender (or whose shares are prorated) remain minority shareholders in a now-controlled company. This raises significant fairness concerns — the remaining minorities may face reduced liquidity, diminished influence, and the risk of exploitation by the new controlling shareholder.
How Partial Offers Work
The Process
- Announce the partial offer — specify the number or percentage of shares sought and the offer price
- Proration — if more shares are tendered than sought, shares are accepted pro rata from each tendering shareholder
- Payment — accepted shares are purchased at the offer price; excess tendered shares are returned
- Post-offer position — the acquirer holds the purchased shares; non-tendering shareholders remain
Proration Example
| Item | Amount |
|---|---|
| Shares outstanding | 100,000,000 |
| Partial offer for | 51,000,000 (51%) |
| Shares tendered | 80,000,000 (80%) |
| Proration factor | 51M / 80M = 63.75% |
| Result | Each tendering shareholder has 63.75% of their shares purchased |
Regulatory Treatment
Partial offers are subject to significant regulatory scrutiny and are prohibited or restricted in many jurisdictions:
| Jurisdiction | Partial Offers Permitted? | Key Restriction |
|---|---|---|
| US | Yes (but SEC rules require equal treatment) | Must be open to all shareholders on equal terms |
| UK | Only with Takeover Panel consent | Panel consent required; rare for offers above 30% |
| Hong Kong | Only with SFC consent | Takeovers Code restricts partial offers |
| Australia | Yes (proportional takeover bids) | Must offer same proportion to all shareholders |
| India | Effectively required (mandatory offer for 26%) | SEBI regulations specify minimum offer size |
| EU | Varies by member state | Most jurisdictions restrict or require regulatory approval |
US Rules
In the US, SEC Rule 14d-8 requires that if a partial tender offer is oversubscribed, the offeror must purchase shares on a pro rata basis from each tendering shareholder. This prevents the acquirer from cherry-picking shares from favoured shareholders.
UK/Hong Kong Rules
The UK Takeover Code generally disfavours partial offers because they create a two-tier structure that may disadvantage non-tendering shareholders. The Takeover Panel will grant consent for a partial offer only if it is satisfied that the offer is fair to all shareholders and will not result in the offeror acquiring effective control without making a mandatory offer to all shareholders.
Strategic Uses
Control Without Full Ownership
Partial offers are used when the acquirer:
- Cannot afford a 100% acquisition
- Only needs voting control (51%) rather than full ownership
- Wants to maintain a public listing for the target
- Faces regulatory restrictions on full ownership (e.g., foreign ownership caps)
Mandatory Partial Offers (India)
Under SEBI’s takeover regulations, an acquirer who triggers the mandatory offer obligation must make an open offer for at least 26% of the target’s shares — a regulatory partial offer. This unique Indian requirement creates a mandatory exit opportunity for minorities without requiring the acquirer to purchase 100%.
APAC Context
Australia — the Corporations Act permits proportional takeover bids, where the bidder offers to acquire a specified proportion of each shareholder’s shares (e.g., 50% of each holder’s shares). This ensures equal treatment across the register and allows the bidder to gain control without a full acquisition.
India — SEBI’s mandatory open offer requirement of 26% is effectively a partial offer mechanism. The acquirer must offer to purchase at least 26% of the target’s shares at a minimum price determined by regulation. If the offer is fully accepted, the acquirer may still hold less than 100%, creating a continued public float.
Japan — the Financial Instruments and Exchange Act permits partial tender offers, and they are occasionally used in Japan for stake-building transactions. However, the lack of a mandatory offer rule in Japan means that acquirers can accumulate control positions without making a partial (or full) offer, reducing the practical use case.
“Partial offers create inherent tension between the acquirer’s desire for control and the minority’s right to fair treatment,” notes Daniel Bae, founder of Amafi. “In APAC, where regulatory approaches to partial offers vary dramatically, understanding the local framework is critical for any stake-building strategy.”
Planning acquisition strategies across Asia Pacific? Amafi helps investors and advisors navigate takeover regulations and deal structures. Learn more.