Shareholder Wealth Effects and Bid Negotiation in Freeze-Out Deals: Are Minority Shareholders Left Out in the Cold?
Publication Date
8-24-2004
Abstract
This paper examines the shareholder wealth effects of bids by controlling shareholders seeking to acquire the remaining minority equity stake in a firm - deals commonly referred to as minority freeze-outs. Minority claimants in freeze-out offers receive an allocation of deal surplus at the bid announcement that exceeds their pro-rata claim on the firm. An analysis of bid outcomes and renegotiation indicate that minority claimants and their agents exercise significant bargaining power during freeze-out proposals. Overall, our results suggest that legal standards and economic incentives are sufficient to deter self-dealing by controllers during freeze-out bids.
Document Type
Article
Keywords
Merger, tender offer, acquisition, minority shareholder, squeeze-out, freeze-out
Disciplines
Finance
DOI
10.2139/ssrn.660422
Source
SMU Cox: Finance (Topic)
Language
English
