A publicly traded company that gets bought out (daughter company) is essentially absorbed by a mother company that buys them out. And when a company buys out another company, they essentially have to buy out the daughter company's stock in order to buy them out. And with the volume of stock of the daughter company, they would need to move in order to do that would be agronomical and so the trading world has developed a way to buy out a company without having to go that route. This is because people have to sell their stock in order for the mother company to actually be able to buy it, so when the word gets out that the company is being bought out by another company the price would jump up to more than 5x what it originally was which makes it unfair towards the mother company. So the deal is that they basically forcefully buy all the stock from the stock owners and in return the stock owners get an extra percentage of the buying price at that time. So in order for the mother company (the company buying the daughter company) to avoid dealing with a huge increase in stock price in order to buy out a company, they give the stock owners more than the current value of their stock in the daughter company. The actual percentage is based on negotiations with the majority owners of the stock whom speak and represent all the stock owners. So like if your mom owns 1,000 shares and there are over a billion shares she obviously isn't going to have much say in the deal for the added percentage. So my mom worked for Informix before it got bought out by IBM back in the 90's. So IBM was not obligated to take on all of the employees from Informix because they now owned the company and so not all the Informix employees were hired by IBM (luckily my mother was though).
But instead of buying a company, a mother company can instead make a contract with a daughter company. So that they are basically guaranteed the services of buying them out without actually having to buy them out. Some times companies will sell some of their stock to the mother company to make them a majority owner of its stock. Apple made a contracted agreement with a company from AZ that makes synthetic Sapphire Glass which they are using for their iPhone 6. Instead of buying out the company, they just decided to let the company do their thing while guaranteeing Apple gets top priority and they work together to develop what Apple needs.
So when a mother company buys out a daughter company they have sole discretion of what they do and how they do it because they basically have access and ability to all records and existing contracts. But when a mother company creates a contract with a daughter company, whether they receive a majority stock ownership or not, the daughter company has sole discretion of how they do whatever it is they do as long as they follow that "what they do" that is laid out in the contract.
Pay them 40% for what? You don't state all the facts.
you didn't ask for investment advice. Generally a buy out is done to discourage wrongful termination lawsuits and keep the moral up for any remaining employees.
sounds like the company was insolvent or bankrupt
My mothers employer just got bought out now the new company is saying they will pay everyone 40% of their salary to date. Why would a new owner do this?
