Tender Offers versus Block Trades: Empirical Evidence

In this paper, we test whether the determinants of block trade and non-partial tender offer probabilities differ and whether the relative magnitude of security and private benefits can explain the choice of transfer mode. We investigate the Swedish market for corporate control. The results emphasize the importance of investigating block trades and tender offers as two competing events. The proxies for private benefits of control, small controlling voting blocks, and separation of voting rights from cash flow rights are positively related to
the likelihood of a block trade but negatively related to the likelihood of a non-partial tender offer. Our results suggest that separation of voting rights from cash flow rights might limit the efficiency of the market for corporate control. The prevalence of block trades in the presence of greater private benefits of control highlights the disadvantages of this control transfer mode in terms of incentive alignment between the buyer and the remaining dispersed shareholders.