Institutional Investors' Impact on the Terms and Outcome of Freeze-out Tender Offers

Institutional Investors' Impact on the Terms and Outcome of Freeze-out Tender Offers

Beni Lauterbach, Yevgeny Mugerman

Series number :

Serial Number: 
576/2018

Date posted :

September 24 2018

Last revised :

October 04 2018
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Keywords

  • Freeze-out transactions • 
  • Institutional Investors activism • 
  • bargaining with controlling shareholders • 
  • tender offers

We study institutional investors' impact on going private tender offers by controlling shareholders ("freeze-out" offers) in Israel, where regulation over such offers is loose and where (consequently?) about half of the offers are rejected.

In 35% of our sample firms institutional investors have no holdings, which facilitates novel analysis of the fundamental effect of institutional presence. We find that: 1) institutional presence increases the likelihood that the offer is rejected; 2) in accepted offers, when there are indications of pre-negotiations, institutional presence increases the offer premium; and 3) rejection decisions appear on average rational with or without institutional investors. Interestingly, throughout our analysis, institutional presence appears as the key variable; the exact level of institutional holdings has minute insignificant effects.

Authors

Real name: 
Yevgeny Mugerman