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Minority Blocks and Takeover Premia

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  • Burkart, Mike
  • Gromb, Denis
  • Panunzi, Fausto

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 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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5240.

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Date of creation: Sep 2005
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Handle: RePEc:cpr:ceprdp:5240

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Keywords: large shareholder; takeover premia;

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References

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  1. Ambrose, Brent W. & Megginson, William L., 1992. "The Role of Asset Structure, Ownership Structure, and Takeover Defenses in Determining Acquisition Likelihood," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(04), pages 575-589, December.
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  6. repec:fth:guelph:1998-3 is not listed on IDEAS
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  8. Kahan, Marcel, 1993. "Sales of Corporate Control," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 368-79, October.
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  18. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
  19. Chowdhry, Bhagwan & Jegadeesh, Narasimhan, 1994. "Pre-Tender Offer Share Acquisition Strategy in Takeovers," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(01), pages 117-129, March.
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  21. Mike Burkart & Denis Gromb & Fausto Panunzi, 2000. "Agency Conflicts in Public and Negotiated Transfers of Corporate Control," Journal of Finance, American Finance Association, vol. 55(2), pages 647-677, 04.
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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, 2011. "Security-voting structure and bidder screening," Journal of Financial Intermediation, Elsevier, vol. 20(3), pages 458-476, July.
  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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