The Pricing Effects of Interfirm Cash Tender Offers

Sanjai Bhagat, James A Brickley and Uri Loewenstein

Journal of Finance, 1987, vol. 42, issue 4, 965-86

Abstract: The tools provided by option pricing theory of tender offer analysis provides evidence consistent with the "synergy" theory of corporate takeovers and has implications conce rning the economic effects of regulations of cash tender offers. The analysis further suggests that the market prices information uncertai nty in a manner not captured by the standard Capital Asset Pricing Mo del. The study introduces a technique for unbundling the prices of a primary asset and a contingent claim when only the prices of the comb ination are observed. Copyright 1987 by American Finance Association.

Date: 1987
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