Minority Blocks and Takeover Premia
Journal of Institutional and Theoretical Economics, Vol. 162, No. 1, pp. 32-49, 2006
Posted: 1 Mar 2006
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 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: Takeover Premia, ownership concentration, free-rider problem
JEL Classification: G34
Suggested Citation: Suggested Citation