The Effect of Institutional Investors’ Voice on the Terms and Outcome of Freeze-out Tender Offers

We study the impact of institutional investors’ “voice” on 201 going private tender offers by controlling shareholders (“freeze-out” offers) in Israel. Israeli regulatory intervention in freeze-out tender offers is relatively mild; thus, institutional investors’ activism becomes crucial. We find tha...

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Bibliographic Details
Published in:The quarterly journal of finance 2020-03, Vol.10 (1), p.2050002
Main Authors: Lauterbach, Beni, Mugerman, Yevgeny
Format: Article
Language:English
Subjects:
Institutional investments
Investors
Negotiation
Premiums
Stockholders
Tender offers
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Summary:We study the impact of institutional investors’ “voice” on 201 going private tender offers by controlling shareholders (“freeze-out” offers) in Israel. Israeli regulatory intervention in freeze-out tender offers is relatively mild; thus, institutional investors’ activism becomes crucial. We find that institutional voice has dual effects. On one hand, when there are pre-negotiations with institutional investors’ (their voice is heard), accepted offers’ premiums increase. On the other hand, when institutional investors express their voice, yet reject the offer, these rejections appear to hurt shareholders’ value. We also document significant institutional investor exit after rejected offers, especially after offers preceded by voice (pre-negotiations with institutional investors).
ISSN:2010-1392
2010-1406
DOI:10.1142/S2010139220500020