Freeze-out mergers: the case of shareholders with multiple shares

Abstract

This paper investigates the role of freeze-out mergers in mitigating the free-rider problem in tender offers. In contrast to a framework in which each shareholder owns exactly one share, our model allows shareholders to have multiple shares. We find that a more aggressive freeze-out clause forces shareholders to tender more shares. Therefore, raiders capture a greater amount of surplus when the requirement for freeze-out mergers becomes easier to satisfy.