Fair value and shareholder wealth gains in going private transactions

Abstract

The firms are form to generate profit to its owner. In achieving this objective, the management will endeavor the best strategy available. However, for the public listed company any step forward for the future prospect of the company, the interest of the minority shareholders should not be neglected. Given the weight and the important of protecting minority shareholder interest, this study evaluates the fairness of the offer price offered to minority shareholder during going private transactions. The finding of this study documents that the offer price offered by six out of eight companies reflecting its intrinsic value determine by DCF valuation and above the market price of the share before the announcement date of going private and are considered to be a fair value to the minority shareholders. The findings collaborated with prior evidence that going private transaction generates positive shareholder wealth gains.