A squeeze-out[1] or squeezeout,[2] sometimes synonymous with freeze-out,[2] is the compulsory sale of the shares of minority shareholders of a joint-stock company for which they receive a fair cash compensation.
They force the minority stockholders in the original corporation to accept a cash payment for their shares, effectively "freezing them out" of the resulting company.
If the tender offer succeeds, the acquirer gains control of the target and merges its assets into the new subsidiary corporation.
Hence the acquirer is able to capture almost all the value added from the merger and, as in the leveraged buyout, is able to effectively eliminate the free rider problem.
The legal community has criticized the present rules with regard to freeze-out mergers as being biased against the interests of the minority shareholders.
[12] Although it has been asserted that the law does not break the German constitution it has courted the resentment of many small investors who consider it to be the legalization of expropriation.
This decision must be taken at a meeting in this regard (4) and provide a reasonable cash compensation for minority shareholders (5).
Even while the rescission proceedings are still running the main shareholder has the right to register in the Commercial Registry if he meets the preconditions defined in §§ 327e sec.
5, 6 AktG;[13] by doing so an approval process is initiated and all shares held by minor shareholders devolve to him.