Minority Blocks and Takeover Premia
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)
London Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
Bocconi University - Department of Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)
ECGI - Finance Working Paper No. 96/2005
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: G34working papers series
Date posted: September 5, 2005
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