Monday, August 31, 2009

Stalking Horse Bid

Here is a new term for many of you: "Stalking Horse Bid".

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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