What is a stalking horse bid? It is used in bankruptcies when there is a buyer has placed a bid to purchase in advance of a public auction. The purchase is contingent on not getting a higher bid in the auction. So in essence the stalking horse bid is just the first bid that sets the lowest price the sale will generate.
From a press-release from Huntsman Corp:
"Huntsman Corporation (NYSE: HUN) today announced that it signed a “stalking horse” asset and equity purchase agreement pursuant to which its wholly-owned subsidiary Huntsman Pigments LLC has agreed to acquire the...assets of Tronox Incorporated and its subsidiaries under Section 363 of Chapter 11 of the U.S. Bankruptcy Code......From the press release:
"A stalking horse bid is a binding proposal for a bankrupt company’s assets from an interested buyer chosen by the bankrupt company, subject to a higher offer through an auction process approved by the bankruptcy court"
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