Posts Tagged ‘Bidders’

“Just Say No”

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Tuesday December 9, 2014 at 9:17 am
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Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton and Sabastian V. Niles.

On October 22, 2014, Institutional Shareholder Services issued a note to clients entitled “The IRR of ‘No’.” The note argues that shareholders of companies that have successfully “just said no” to hostile takeover bids have incurred “profoundly negative” returns. In a note we issued the same day, we called attention to critical methodological and analytical flaws that completely undermine the ISS conclusion. Others have also rejected the ISS methodology and conclusions; see, for example, the November analysis by Dr. Yvan Allaire’s Institute for Governance of Public and Private Organizations entitled “The Value of ‘Just Say No’” and, more generally, a December paper by James Montier entitled “The World’s Dumbest Idea.” Of course, even putting aside analytical flaws, statistical studies do not provide a basis in individual cases to attack informed board discretion in the face of a dynamic business environment. The debate about “just say no” has been raging for the 35 years since Lipton published “Takeover Bids in the Target’s Boardroom,” 35 Business Lawyer p.101 (1979). This prompts looking at the most prominent 1979 “just say no” rejection of a takeover.

…continue reading: “Just Say No”

The Allergan Aftermath

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday December 4, 2014 at 9:15 am
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Editor’s Note: The following post comes to us from Philip Richter, partner and co-head of the Mergers and Acquisitions Practice at Fried, Frank, Harris, Shriver & Jacobson LLP, and is based on a Fried Frank publication by Mr. Richter, John E. Sorkin, David N. Shine, and Gail Weinstein.

Valeant’s failed acquisition bid for Allergan has underscored longstanding M&A principles—even as the involvement of shareholder activists in the M&A arena has introduced new technologies, opportunities, and challenges. In the aftermath of the Allergan saga, it is clear that Pershing Square was richly rewarded for having crafted a novel bidder-activist collaboration model. The outcome for Valeant, however, notwithstanding the creative collaboration, is that its bid ultimately failed, and in the most conventional of ways (losing to a superior offer from an alternative bidder).

…continue reading: The Allergan Aftermath

The Future of the Bidder-Activist Collaboration Model

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday December 1, 2014 at 9:05 am
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Editor’s Note: The following post comes to us from Philip Richter, partner and co-head of the Mergers and Acquisitions Practice at Fried, Frank, Harris, Shriver & Jacobson LLP, and is based on a Fried Frank publication by Mr. Richter, John E. Sorkin, David N. Shine, and Gail Weinstein.

On November 17, 2014, Allergan, Inc. announced a $66 billion merger agreement with Actavis plc, thwarting the pending $53 billion bid for Allergan by Valeant Pharmaceuticals International Inc. Valeant had teamed up with Pershing Square, a fund run by activist investor Bill Ackman, to facilitate an acquisition of Allergan by Valeant. Although the Valeant bid has failed, Pershing Square apparently will recognize a gain of well over $2 billion on consummation of the Actavis merger.

The distinguishing feature of Valeant’s now-failed pursuit of Allergan was the bidder-activist collaboration itself, which was the focal point for public attention throughout the saga. Corporate America’s initial reaction to the Pershing Square-Valeant model was fear that the model would be followed by others, unleashing a new wave of hostile takeover activity in a context that appears to make target companies particularly vulnerable. Now, at the end-point of Valeant’s bid for Allergan, we note the following:

…continue reading: The Future of the Bidder-Activist Collaboration Model

Illinois Court Approves Single-Bidder Sale Strategy

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday October 8, 2014 at 10:00 am
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Editor’s Note: The following post comes to us from William Savitt, partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz, and is based on a Wachtell Lipton firm memorandum by Mr. Savitt, David C. Karp, and Adam S. Hobson. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

The Circuit Court of Cook County, Illinois yesterday [October 2, 2014] confirmed that a Delaware board may employ a single-bidder process in a cash sale governed by the Revlon standard. Keating v. Motorola Mobility Holdings, Inc., No. 11-CH-28854 (Ill. Cir. Ct. Ch. Div. Oct. 2, 2014).

The case arose from the 2011 transaction in which Google acquired Motorola Mobility for $40 per share in cash. The transaction elicited the now-conventional multiforum litigation in both Delaware (Motorola Mobility’s place of incorporation) and Illinois (its principal place of business). But the stockholder plaintiffs in Delaware dismissed their case and so only the Illinois action proceeded. Even though the merger price represented a 63% premium for Motorola Mobility’s shares and over 99% of the Motorola Mobility shares voting approved the merger, these plaintiffs attacked the deal, principally on the ground that the Motorola Mobility board should have conducted a broad auction rather than confidentially negotiate the deal with Google.

…continue reading: Illinois Court Approves Single-Bidder Sale Strategy

Two New Cases Cast a Shadow Over Credit Bidding

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday July 13, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Marshall S. Huebner, partner and co-head of the Insolvency and Restructuring Group at Davis Polk & Wardwell LLP, and is based on an article by Damian S. Schaible and Darren S. Klein that first appeared the New York Law Journal; the full article, including footnotes, is available here.

Two recent bankruptcy court decisions have increased uncertainty over the right of secured creditors to credit bid in sales of debtors’ assets. Relying on and expanding a rarely used “for cause” limitation on a secured creditor’s right to credit bid under §363(k) of the Bankruptcy Code, these decisions may ultimately affect credit bidding rights in a broad swath of cases.

…continue reading: Two New Cases Cast a Shadow Over Credit Bidding

Corporate Takeovers and Economic Efficiency

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday May 1, 2014 at 9:18 am
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Editor’s Note: The following post comes to us from B. Espen Eckbo, Professor of Finance at the Tuck School of Business at Dartmouth College.

In the paper, Corporate Takeovers and Economic Efficiency, written for the Annual Review of Financial Economics, I review recent takeover research which advances our understanding of the role of M&A in the drive for productive efficiency. Much of this research places takeovers in the context of industrial organization, tracing with unprecedented level of detail “who buys who” up and down the supply chain and within industrial networks. I also review recent research testing the rationality of the bidding process, including whether the sales mechanism promotes a transfer of control of the target resources to the most efficient buyer. This literature draws on auction theory to describe optimal bidding strategies and it uses sophisticated econometric techniques to generate counterfactuals, exogenous variation, and causality. The review is necessarily selective, with an emphasis on the most recent contributions: half of the referenced articles were drafted or published within the past five years.

…continue reading: Corporate Takeovers and Economic Efficiency

A New Takeover Threat: Symbiotic Activism

Editor’s Note: Trevor Norwitz is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz, where he focuses on mergers and acquisitions, corporate governance and securities law matters. The following post is based on a Wachtell Lipton firm memorandum by Martin Lipton, Adam O. Emmerich, Mr. Norwitz, and Sabastian V. Niles.

The Pershing Square-Valeant hostile bid for Allergan has captured the imagination. Other companies are wondering whether they too will wake up one morning to find a raider-activist tag-team wielding a stealth block of their stock. Serial acquirers are asking whether they should be looking to take advantage of this new maneuver. Speculation and rumor abound of other raider-activist pairings and other targets.

Questions of legality are also being raised. Pershing Square and Valeant are loudly proclaiming that they have very cleverly (and profitably) navigated their way through a series of loopholes to create a new template for hostile acquisitions, one in which the strategic bidder cannot lose and the activist greatly increases its odds of catalyzing a quick profit-yielding event, investing and striking deals on both sides of a transaction in advance of a public announcement.

…continue reading: A New Takeover Threat: Symbiotic Activism

Chen v. Howard-Anderson: Delaware Court Issues Guidance Regarding M&A Transactions

Editor’s Note: The following post comes to us from Eduardo Gallardo and Robert B. Little, partners in the Mergers and Acquisitions practice at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn client alert by Mr. Little, Gregory A. Odegaard, and Chris Babcock. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On April 8, 2014, Vice Chancellor Laster of the Delaware Court of Chancery issued an opinion addressing the reasonableness of a “market check” as well as required proxy disclosures to stockholders in M&A transactions. In Chen v. Howard-Anderson, [1] the Vice Chancellor held that (i) evidence suggesting that a board of directors favored a potential acquirer by, among other things, failing to engage in a robust market check precluded summary judgment against a non-exculpated director, and (ii) evidence that the board failed to disclose all material facts in its proxy statement precluded summary judgment against all directors. The opinion addresses the appropriate scope of a market check, the necessary disclosure when submitting a transaction to stockholders for approval, the effect of exculpatory provisions in a company’s certificate of incorporation, and the potential conflicts faced by directors who are also fiduciaries of one of the company’s stockholders.

…continue reading: Chen v. Howard-Anderson: Delaware Court Issues Guidance Regarding M&A Transactions

To-may-to To-mah-to: 10 Surprises for a US Bidder on a UK Takeover

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday April 4, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from Stephen Cooke, partner and head of the Mergers and Acquisitions practice at Slaughter and May, and is based on a Slaughter and May publication by Mr. Cooke.

“You like to-may-to and I like to-mah-to…
Potato, potahto, tomayto, tomahto
Let’s call the whole thing off”

(“Let’s Call The Whole Thing Off” by George & Ira Gershwin, 1937)

Two nations divided by a common tongue. In M&A, as in so many spheres, common language and terminology often give rise to the assumption that the architecture is similarly homogenous. Although the US and the UK have a number of similarities in terms of capital markets and business practices, there are fundamental divergences in approach to public takeover practice and regulation.

Consistent with the title of this post, I have used the great American songbook as an entry point to this guide to the ten principal differences between takeover practice and regulation in the US and the UK.

…continue reading: To-may-to To-mah-to: 10 Surprises for a US Bidder on a UK Takeover

Do Mandatory ‘Auctions’ Increase Gains of Target Shareholders in M&A?

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday February 21, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Fernan Restrepo of Stanford Law School. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Several years ago, the Delaware Supreme Court held, in Revlon v. MacAndrews & Forbes Holdings, that when a “sale” or “break-up” of a company becomes “inevitable,” the duty of the board of directors is not to maintain the independence of the company or otherwise give priority to long-term considerations, but rather to obtain the highest price possible for the shareholders in the transaction (that is, to maximize short-term value). To satisfy that duty, when confronted with these situations, the board is generally supposed to conduct an auction (or, as clarified in subsequent decisions, a “market check”) that ensures that the final buyer is, in fact, the best bidder available. In the words of the court, in this “inevitable” “break-up” or “sale” scenario (which, however, the court did not precisely define), the directors’ duties shift from “defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders.”

…continue reading: Do Mandatory ‘Auctions’ Increase Gains of Target Shareholders in M&A?

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