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Minority blocks and takeover premia

Burkart, Mike and Gromb, Denis and Panunzi, Fausto (2005) Minority blocks and takeover premia. Discussion paper, 544. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Identification Number: 544

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.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2005 The Authors
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Date Deposited: 30 Jul 2009 10:07
Last Modified: 21 Feb 2017 11:49
URI: http://eprints.lse.ac.uk/id/eprint/24663

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