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Minority Blocks and Takeover Premia


Mike Burkart


Stockholm School of Economics - Department of Finance; London School of Economics - Department of Finance & Financial Markets Group; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Denis Gromb


London Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Fausto Panunzi


Bocconi University - Department of Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)
September 2005

ECGI - Finance Working Paper No. 96/2005

Abstract:     
This paper analyses takeovers of companies owned by atomistic shareholders and by one minority blockholder, all of whom can only decide to tender or retain their shares. As private benefit extraction is ineffcient, the post-takeover share value increases with the bidder's shareholdings. In a successful takeover, the blockholder tenders all his shares and the small shareholders tender the amount needed such that the post-takeover share value matches the bid price. Compared to a fully dispersed target company, the bidder may have to offer a higher price either to win the blockholder's support or to attract enough shares from small shareholders.

Number of Pages in PDF File: 30

Keywords: corporate governance, ownership structure, takeovers, minority blockholder, post-takeover share value

JEL Classification: G34

working papers series


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Date posted: September 5, 2005  

Suggested Citation

Burkart, Mike C., Gromb, Denis and Panunzi, Fausto, Minority Blocks and Takeover Premia (September 2005). ECGI - Finance Working Paper No. 96/2005. Available at SSRN: http://ssrn.com/abstract=796765 or http://dx.doi.org/10.2139/ssrn.796765

Contact Information

Mike C. Burkart (Contact Author)
Stockholm School of Economics - Department of Finance ( email )
P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9678 (Phone)
+46 8 31 6422 (Fax)
HOME PAGE: http://www.hhs.se/Finance/People/ShowPerson.htm?personid=54
London School of Economics - Department of Finance & Financial Markets Group
Houghton Street
London WC2A 2AE
United Kingdom
HOME PAGE: http://www.lse.ac.uk/collections/finance/facultyAndStaff/profiles/mikeBurkart.htm
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://www.cepr.org/default_static.htm
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Denis Gromb
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 20 7262 5050 x3545 (Phone)
+44 20 7724 3317 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Fausto Panunzi
Bocconi University - Department of Economics ( email )
Via Roentgen 1
20136 Milan
Italy
+39 02 5836 5327 (Phone)
+39 02 5836 5343 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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