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Minority Blocks and Takeover Premia

Author

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

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.

Suggested Citation

  • Gromb, Denis & Panunzi, Fausto & Burkart, Mike, 2005. "Minority Blocks and Takeover Premia," CEPR Discussion Papers 5240, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5240
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    Cited by:

    1. 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.
    2. Mehmet Ekmekci & Nenad Kos, 2016. "Information in Tender Offers With a Large Shareholder," Econometrica, Econometric Society, vol. 84, pages 87-139, January.
    3. Eva-Maria Steiger, 2006. "Minority Blocks and Takeover Premia. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(1), pages 53-56, March.
    4. Burkart, Mike & Lee, Samuel, 2010. "Signalling in tender offer games," LSE Research Online Documents on Economics 119085, London School of Economics and Political Science, LSE Library.
    5. Riccardo Ferretti & Pierpaolo Pattitoni & Alex Castelli, 2019. "Security-voting structure and equity financing in the banking sector: ‘one head-one vote’ versus ‘one share-one vote’," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(4), pages 1063-1097, December.
    6. Mike Burkart & Samuel Lee, 2022. "Activism and Takeovers," The Review of Financial Studies, Society for Financial Studies, vol. 35(4), pages 1868-1896.
    7. Daniel Ferreira & Emanuel Ornelas & John L. Turner, 2015. "Unbundling Ownership and Control," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(1), pages 1-21, March.
    8. Mike Burkart & Samuel Lee, 2015. "Signalling to Dispersed Shareholders and Corporate Control," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 922-962.

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    More about this item

    Keywords

    Large shareholder; Takeover premia;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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