Do Different Standards of Judicial Review Affect the Gains of Minority Shareholders in Freeze-Out Transactions? A Re-Examination of Siliconix

Deal Structure and Minority Shareholders

“…134 In the US, several papers have focused on whether the then-different standards of judicial review for tender offer versus merger squeeze-outs affect minority shareholder gains in squeeze-out transactions post-Siliconix. 135 Subramanian's early empirical study of controlling stockholder squeeze-out transactions in a 4 year period following the Siliconix case found that minority shareholders obtained lower cumulative abnormal returns (CARs) in tender offer squeeze-outs relative to merger squeeze-outs in that period. In another article, Subramanian argued that minority shareholders received lower premiums in tender offers than in statutory mergers, demonstrating that the decision to tender did not substitute entire fairness in protecting the minority.…”

“…The 2013 study had important policy implications for if Siliconix was a significant factor in differences in CARs between tender offers and statutory mergers, the case for unification/regulatory convergence (forwarded by Subramanian and others) would be supported. 138 On the other hand, if the reverse were true, there would be no clear reason for regulatory convergence on the basis of different transactional outcomes. The results of Restrepo's study empirically supported the case for regulatory convergence (the approach eventually adopted by the Delaware courts).…”

“…The results of Restrepo's study empirically supported the case for regulatory convergence (the approach eventually adopted by the Delaware courts). 139 In 2015, Restrepo and Subramanian furthered this research and jointly authored an article about the impact of more recent Delaware case law on deal outcomes, calling this period one of "doctrinal evolution" in judicial review of squeeze-outs executed as tender offers versus those structured as mergers. 140 The authors present empirical evidence on all squeeze-outs of Delaware targets during the shift to the "unified approach" to squeeze-outs, and find that deal outcomes have converged after the Delaware Chancery Court's decision in In re Cox Communications, which explicitly endorses the unified approach.…”