Do Shareholder Tender Agreements Inform or Expropriate Shareholders?
56 Pages Posted: 24 Oct 2006 Last revised: 24 Apr 2011
Date Written: September 26, 2006
By signing a Shareholder Tender Agreement (STA) a shareholder pre-commits to tender her shares to a particular bidder, forsaking the right to tender to any subsequent bidder. In a representative sample of tender offers between 1995 and 2007, 60% of the offers contain an STA. STA deals are associated with lower premiums, greater ownership concentration, greater management ownership, and greater information asymmetry. The results support the hypothesis that STAs certify value to uninformed shareholders, thereby increasing the efficiency of the tender offer process. The evidence does not support the view that STAs expropriate value from shareholders of target companies.
Keywords: Tender offer, Merger, Asymmetric information, Certification, Bid premium
JEL Classification: G34, D82
Suggested Citation: Suggested Citation