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Takeover bids, unconditional offer price and investors protection

Author

Listed:
  • Hubert de La Bruslerie

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Catherine Deffains-Crapsky

    (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage)

Abstract

In this paper, we develop a contingent claim analysis on shareholders' right to sell unconditionally their shares at the acquisition bid price during a takeover bid procedure. Compared with a situation without any guarantee, this regulation brings about wealth transfer towards outside shareholders. Why, in an apparently irrational way, do outside shareholders, who may benefit from a price guarantee, not systematically sell their shares? That question emphasizes the outside shareholders' behavior. Using a real option valuation model to evaluate the price guarantee opportunity, we show that an equal treatment rule between controlling and outside shareholders may lead outside shareholders to sell their shares.

Suggested Citation

  • Hubert de La Bruslerie & Catherine Deffains-Crapsky, 2005. "Takeover bids, unconditional offer price and investors protection," Post-Print hal-01947321, HAL.
    • Handle: RePEc:hal:journl:hal-01947321
    DOI: 10.1016/j.rfe.2004.07.001
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    References listed on IDEAS

    as
    1. Ephraim Clark & Patrick Rousseau, 2010. "Strategic parameters for capital budgeting when abandonment value is stochastic," Post-Print hal-01839329, HAL.
    2. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-387, May.
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    4. Hirshleifer, David & Titman, Sheridan, 1990. "Share Tendering Strategies and the Success of Hostile Takeover Bids," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 295-324, April.
    5. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    6. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
    7. Margrabe, William, 1978. "The Value of an Option to Exchange One Asset for Another," Journal of Finance, American Finance Association, vol. 33(1), pages 177-186, March.
    8. McDonald, Robert L & Siegel, Daniel R, 1985. "Investment and the Valuation of Firms When There Is an Option to Shut Down," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 331-349, June.
    9. Mark Bagnoli, Barton L. Lipman, 1988. "Successful Takeovers without Exclusion," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 89-110.
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    Cited by:

    1. Salma Fourati, 2008. "Transferts négociés de blocs de contrôle, bénéfices privés et protection des actionnaires minoritaires," Post-Print halshs-00524890, HAL.

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