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ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Under a typical takeover code regime (such as the UK City Code), which requirement most directly protects minority shareholders when a bidder acquires a controlling stake in a listed target?

A mandatory offer rule protects minorities. Once a bidder crosses the control threshold, such as 30% of voting rights in the UK, it must offer to buy all remaining shares at an equitable price, giving minority holders equal treatment and an exit.

  1. AThe bidder must make a mandatory offer to all remaining shareholders at an equitable price once a specified control threshold is crossedCorrect
  2. BThe target must reject any offer below its book value
  3. CThe bidder must pay in cash only
  4. DThe target's board must accept the first offer received

Explanation

Takeover codes typically use a threshold (30% of voting rights in the UK) triggering a mandatory bid to all shareholders at not less than the highest price paid recently. This gives minorities equal treatment and an exit. Codes do not mandate cash-only consideration or board acceptance.

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