Question

In case of an acquisition (lets assume all stock for arguments sake), what happens to the shareholder when he has 1 share sitting in a portfolio with his bank (legally and in terms of numbers) ? Lets assume current shareprice 10. Premium by bidder of 20%.

Answer 1

Assuming the company's stock trades publicly, there are specific rules. Buyer will usually tender/offer to buy shares at a price - $12 in your case. Buyer may receive say 95% of share through the tender. Once buyer reaches 90%, buyer can squeeze out small, minority shareholders by forcing those shareholders to receive "fair" consideration, ie shares in buyer in your case. There will be an exchange ratio whereby your investor will get x shares of buyer for each share of target. If the buyer can't get to 90%, then the buyer's tender may automatically cancel - or the tender may result in an ownership % less than 100%.

Answer 2

So, if the buyer reaches 90% of the shares amount of the total stockholders he can squeeze out the rest of the other stockholders (i.e. minority shareholders) through legal means, even though the last 10% of the shareholders do not want to sell the shares? Is this a law applicable to specific countries (e.g. US/NYU) or does this apply to overseas (e.g. Hong Kong) too? Will the exchange ratio of stock swap differ from case to case or is there a general rule, according to the FASB?

"Fair" consideration means a basic stock swap, right?