Stalking horse offer

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A stalking horse offer, agreement, or bid is an attempt by a bankrupt debtor to test the market for the debtor's assets in advance of an auction of them.[1][2] The intent is to maximize the value of its assets or avoid low bids, as part of (or before) a court auction.[3]


While entering a stalking horse offer, the debtor can offer bidding protections such as breakup fees to its best bidder before the auction. These incentives enhance the value of the offering for the bidder which might lead to a better price offer before the auction begins. This higher offer is now the starting offer for the auction and may result in benefiting the debtor and its estate.


On October 22, 2007, technology company SCO asked a bankruptcy court to approve a deal whereby a purchaser would acquire "substantially all assets used by the Company in connection with its SCO UNIX Business and certain related claims in litigation." [4] The agreement included a "stalking horse" provision: If the purchaser, York Capital Management, were to be designated as a stalking horse in subsequent bidding for SCO's assets, and if others outbid York, then SCO would have to pay York a $780,000 breakup fee and reimbursement of all expenses incurred by York up to $300,000. In this way, York would earn its expenses and $780,000 by acting as the stalking horse and preventing other bidders from making lowball offers.[5]

On 4 August 2008, Steve and Barry's LLC, a retailer of casual apparel, filed a stalking horse agreement with the U.S. Bankruptcy Court for the Southern District of New York. Their partner in this asset purchase agreement was BH S&B Holding LLC, a subsidiary of Bay Harbor Management.[6]

On 27 July 2009, The Wall Street Journal reported that Telefon AB L.M. Ericsson had won a stalking horse bid to acquire Nortel Networks Corp's CDMA division, for $1.13 billion. [7]

On July 8, 2010, the Texas Rangers Major League Baseball team announced a potential stalking horse deal. "'An auction with a stalking horse, or minimum, bid is more frequently used than a so-called “naked” auction without a floor price,' William K. Snyder, the court-appointed restructuring officer, said. 'Moreover, the stalking horse bidder commonly receives a “reasonable” break-up fee if unsuccessful in the auction,' said Snyder. Under the scrapped plan, the $304 million in cash portion of the Greenberg-Ryan group’s May 24 deal with owner Tom Hicks would serve as a minimum bid, with the next bid at least $20 million higher. Greenberg-Ryan would have received $15 million if it lost." [8]

On 21 February 2011, Reuters reported Blockbuster's intention to pursue a $290 million stalking horse offer with Cobalt Video Holdco. [9]

On 4 April 2011, TechCrunch reported Google's intention to pursue a $900 million stalking horse bid for Nortel's patents.[10]

In 2013, Hostess Brands used a stalking horse auction to sell off its assets in bankruptcy.[11]

On October 17, 2013, Designline, now known as Environmental Performance Vehicles the Charlotte, NC bus manufacturer, used the technique but received no offers. [12]

On April 15th, 2013 Eastman Kodak proposed a stalking horse deal of $210 million whereby Brother Industries would acquire Kodak's Document Imaging division ahead of Kodak's bankruptcy court approval slated for June 2013.[13]

Further reading

  • Owsley, Henry (2005). Distressed Investment Banking. City: Beard Books. ISBN 1-58798-267-6.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  • Hillman, William (2004). Bankruptcy Deskbook. City: Practising Law Institute (PLI). ISBN 0-87224-139-4.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>


  1. Financial Times Lexicon from the Financial Times
  2. "Stalking-Horse Bid". Retrieved 9 January 2016.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  3. The ‘Stalking Horse’ in a US Chapter 11 363 Sale, Financier Worldwide’s May 2006 Edition
  4. "The SCO Group, Inc". Form 8-K. October 22, 2007. Retrieved 2013-09-24.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  5. "SCO Has a Bid; Would Like More - Updated". Groklaw. 2007-10-23. Retrieved 2013-09-24.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  6. "Steve & Barry’s Files “Stalking Horse” Agreement", from, 4 August 2008.
  7. "Ericsson Powers Up U.S. Presence With Nortel Deal", from The Wall Street Journal, 27 July 2009.
  8. Texas Rangers' Proposed July 16 Auction Scrapped[dead link]
  9. "Blockbuster gets $290 million stalking horse bid", from Reuters, 21 February 2011.
  10. "Google Makes $900 Million Stalking-Horse Bid For Nortel Patents As It Looks To Fend Off Trolls", from TechCrunch, 4 April 2011.
  11. Milford, P., McCarty, D. (January 31, 2013). "Hostess CEO Says Stalking-Horse Bids Total $858 Million". Bloomberg. Retrieved 2013-01-31.CS1 maint: multiple names: authors list (link)<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  12. "DesignLine Stalking Horse Bidders".<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  13. Fingus, Jon (April 15, 2013). "Kodak tentatively sells its scanning business to Brother for $210 million". AOL. Retrieved 2013-04-15.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>