This thesis analyses squeeze-outs a deal where a controlling shareholder has the right to buy
out minority shareholders at a fair compensation. As expected the term fair can have very
different meanings depending on who you ask. On the one hand minority shareholders often argue
perceiving the squeeze-out as a legal expropriation and accordingly demand a significant
squeeze-out premium. On the other hand controlling shareholders have the clear and simple
intention to pay as little as possible when acquiring the remaining stake in the company. Even
law often seen as the last resort leaves out a clear and definite description of the
expression fair why the squeeze-out compensation turned out to be the crucial point in almost
all past squeeze-out processes. Squeeze-outs in the US called freeze-outs usually follow a
public tender offer where a shareholder has acquired the necessary shareholding (e.g. 90
percent) and consequently obtained the right to exclude the remaining minority shareholders by
paying an adequate compensation. In this context the squeeze-out rule providing the legal
framework has the intention to make public takeovers more attractive. However in the recent
years more and more minority shareholders executed their own right to challenge the proposed
fair squeeze-out compensation in court with the objective to improve the value of the initial
squeeze-out offer. For example minority shareholders of the German Hamburg-Mannheimer AG that
protested against the squeeze-out resolution and requested a judicial appraisal of majority
shareholder s initially proposed fair squeeze-out compensation in June 2002 could after a
costly lawsuit that lasted two years finally more than double the amount offered under the
terms of majority shareholder's original squeeze-out proposal. Hence squeeze-outs under
prevailing German as well as Austrian law are often seen as a free call option with exercise
price equal to majority shareholder's initially proposed fair squeeze-out compensation. This
option is almost for free since the court costs due to the appraisal are covered by the
majority shareholder and minority shareholders only have to pay for their own lawyer. Moreover
prevailing opinion assumes that the judicial appraisal can t result in a decrease of majority
shareholder's initially proposed fair squeeze-out compensation.
