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In my studies I learned about a bid war ending in a hostile takeover where the winner ended up paying less than the loser offered. It is a very nice demonstration of elements of game theory so I would like to reread that again and to recommend it to a friend.

Unfortunately, I cannot find it in the internet regardless of what search terms I try. I will state the details I remember. I would be very glad if the answer could tell which companies were included so I can research the interesting details.

Here we go:

  1. Two companies, A and B, competed about to acquire a third one.
  2. The bid war happened at least 10 years ago, maybe more.
  3. The bid war ended in a hostile takeover.
  4. Company A offered a fixed amount. I am not sure, but that offer might have been valid only if enough shareholders accepted it.
  5. Company B offered a higher amount regardless of enough shareholders accepting it. However, if a certain number of shares were reached, the offered price was reduced linearly.
  6. B's offer was dominating A's offer. B won the hostile takeover.
  7. In the end, shareholders received less for their shares than what A offered initially. (This is the crazy thing about this bid war).

I was unable to translate that list in sufficient search terms. Does it ring a bell for someone?

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With the help of a former fellow student I was able to find out some details.

The anecdote was about the following three companies:

Some news coverage exists:

In short, Macy's offered \$67 per share contingent on getting a majority of shares. Campeau offered \$74 per share if less than half was tendered, otherwise $\frac {0.5}{x} * \\\$74 + \frac {x - 0.5}{x} * \\\$60$ with $x$ the fraction of shares offered to Campeau. It seems as if the bidding war continued a bit after this scheme. The prices given in the blog above differ, I am sticking to these from the lecture.

I am very grateful for having had the opportunity to attend Prof. Kirste's lectures at the Universität Rostock. They were full of impressive details like this gem here.

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https://en.wikipedia.org/wiki/Pyrrhic_victory

Probably you are looking for this term. Today It describes any situation where a win is achieved at a such a large cost that it is likely that loosing was more profitable.

https://en.wikipedia.org/wiki/Dollar_bill_auction

This is somewhat similar situation in auctions

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  • $\begingroup$ I fear its not a Pyrrhic victory. As far as I remember, Company B was very proud of itself. I mean: They managed to takeover by paying less than Company A offered. $\endgroup$
    – Max Görner
    Commented Dec 11, 2020 at 8:23
  • $\begingroup$ I realised it later. I wanted to delete my answer, but didnt find how $\endgroup$
    – Surprised Seagull
    Commented Dec 11, 2020 at 13:21

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