Working Paper: CEPR ID: DP5240
Authors: 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 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: large shareholder; takeover premia
JEL Codes: G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| presence of a passive minority blockholder (G34) | bid price (D44) |
| bid price (D44) | post-takeover share value (G34) |
| presence of a passive minority blockholder (G34) | post-takeover share value (G34) |
| small shareholders' willingness to tender their shares (G34) | bid price (D44) |
| number of shares tendered by blockholder (G34) | small shareholders' willingness to tender their shares (G34) |
| blockholder's presence (Y70) | likelihood of a takeover occurring (G34) |