When a company decides to buy out a publicly tr

When a company decides to buy out a publicly traded firm (North Cal buying Hollund), they agree to purchase every single share outstanding, usually at a premium price (typically 20% to 30% premium over current price). For the transaction to go through, it must be approved by the board of directors of the publicly traded company. It is the board's fiduciary duty to represent the best interest of the shareholders. As a result, if the board feels that the shareholders are better off accepting the takeover bid than rejecting it (in the short term), then the board will approve the buyout. A takeover can be either friendly or hostile. However, in my opinion we can expect a friendly buyout of HIMR based on what we know today.

Keep in mind, shareholders often do not get to make many decisions in the companies in which they purchase shares. However, because shareholders are the actual owners of the publicly traded company, they do get to participate in a vote that determines if the takeover bid is accepted or not (often called a proxy vote). Shareholders will be notified by their broker that vote will be held, and typically shareholders will be provided a code which they can use to enter their vote. After the vote, it is still up to the board of directors to decide the fate of the acquisition, but typically the board goes along with the recommendation. And, if the board goes against the wishes of the shareholders, often times they end up losing their jobs. Although accepting takeovers usually earns a profit to the shareholders (20% to 30% over current price), companies do occasionally reject bids to create a bidding war or to increase the offer price from the bidder. I would not expect a bidding war situation between North Cal and HIMR. And, at the present time, we know of no other company that has expressed interest.

Should North Cal decide to buyout HIMR, they would then need to consider whether to go public themselves, or remain private. The advantage for North Cal of remaining private is that they avoid the costly regulations required of publicly traded companies. As a result, management has more time and more resources to focus on building their core business and creating sustainable growth. The advantage for shareholders of HIMR should North Cal go public, is that we would then be given shares in North Cal in exchange for our HIMR shares.

Shareholders are typically notified of an upcoming buyout around the beginning of a quarter, and before everything is finalized and payment for shares is received, a full quarter or even two may transpire.