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Minority Blocks and Takeover Premia

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  • Mike Burkart
  • Denis Gromb
  • Fausto Panunzi

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 inefficient, the posttakeover 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 so that the posttakeover 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.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 162 (2006)
Issue (Month): 1 (March)
Pages: 32-49

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200603)162:1_32:mbatp_2.0.tx_2-a

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References

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Citations

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Cited by:
  1. Mike Burkart & Samuel Lee, 2010. "Signaling in Tender Offer Games," FMG Discussion Papers dp655, Financial Markets Group.
  2. At, Christian & Burkart, Mike & Lee, Samuel, 2007. "Security-Voting Structure and Bidder Screening," CEPR Discussion Papers 6241, C.E.P.R. Discussion Papers.
  3. Ferreira, Daniel & Ornelas, Emanuel & Turner, John L., 2007. "Unbundling Ownership and Control," CEPR Discussion Papers 6257, C.E.P.R. Discussion Papers.

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