Minority Blocks and Takeover Premia
28 Pages Posted: 24 Oct 2005
Date Written: September 2005
This paper analyzes 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 inefficient, 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.
Keywords: Large shareholder, takeover premia
JEL Classification: G34
Suggested Citation: Suggested Citation