Minority Blocks and Takeover Premia

30 Pages Posted: 5 Sep 2005

See all articles by Mike Burkart

Mike Burkart

Swedish House of Finance; London School of Economics and Political Science, Department of Finance; Finance Theory Group (FTG); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Denis Gromb

HEC Paris

Fausto Panunzi

Bocconi University - Department of Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2005

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 ineffcient, 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.

Keywords: corporate governance, ownership structure, takeovers, minority blockholder, post-takeover share value

JEL Classification: G34

Suggested Citation

Burkart, Mike C. and Gromb, Denis and Panunzi, Fausto, Minority Blocks and Takeover Premia (September 2005). ECGI - Finance Working Paper No. 96/2005, Available at SSRN: https://ssrn.com/abstract=796765 or http://dx.doi.org/10.2139/ssrn.796765

Mike C. Burkart (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
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London School of Economics and Political Science, Department of Finance ( email )

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London, WC2A 2AE
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Finance Theory Group (FTG) ( email )

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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI)

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HOME PAGE: http://www.ecgi.org

Denis Gromb

HEC Paris

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France

Fausto Panunzi

Bocconi University - Department of Economics ( email )

Via Roentgen 1
20136 Milan
Italy
+39 02 5836 5327 (Phone)
+39 02 5836 5343 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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