in Part 4.1, two freeze-outs (Kontron Mobile and Ticketmaster) cannot be readily classified as
either merger freeze-outs or tender offer freeze-outs and therefore are omitted from the analysis
in this Part. The results reported in this Part do not change if these transactions are classified
according to the controller’s initial expression of interest to the target (merger for Kontron
Mobile, tender offer for Ticketmaster).
MINREQ is a scalar variable that measures the percent of minority shares that the controller
needed in order to close the transaction. For tender offer freeze-outs, MINREQ is a monotonic
transformation of the controller’s pre-deal stake (CONTROL), as described in Part 3.2, and
ranges from 45% (for a controller with a large pre-deal stake and no MOM condition in the deal)
to 83% (for a controller with a small pre-deal stake). For merger freeze-outs, MINREQ ranges
from 0 for merger freeze-outs without a MOM condition in which the controller holds more than
50% of the voting shares, to 50 for mergers with a MOM condition. Hypothesis H2 predicts that
the MINREQ coefficient will be statistically significant and positive.
I control for other deal characteristics, such as the size of the deal (LNVAL, defined as the
natural log of deal value) and whether the consideration is stock or cash (STOCK, set to 1 for
stock deals). I also control for two aspects of the target shareholder profile. First, I control for
the size of the controller’s pre-deal stake, between 35 and 90. Larger controlling shareholders
may have more influence over the bargaining process independent of its implications for the
minority shareholder approval required. Indeed, in merger freeze-outs with MOM conditions,
the requisite minority approval is entirely uncorrelated with the controller’s pre-deal stake.
Second, I control for the concentration of the minority stake using two proxies: the percent held
by institutional investors, and the number of large-block institutional holders, defined as
institutional holders with a 3% or larger stake. Institutions may have greater bargaining power