Posts Tagged ‘Target firms’

The HSR Act’s Investment-Only Exemption for Targets and Activist Investors

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday February 23, 2015 at 9:11 am
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Editor’s Note: The following post comes to us from Barry A. Nigro Jr., partner in the Antitrust and Competition and Corporate Practices and chair of the Antitrust Department at Fried, Frank, Harris, Shriver & Jacobson LLP, and is based on a Fried Frank publication by Mr. Nigro, Philip Richter, Nathaniel L. Asker, and Alyson L. Redman.

Activist shareholder campaigns continue to grow in number and prominence. One of the largest private equity deals of 2014—the $8.7 billion buy-out of PetSmart Inc.—came about following comments by a significant shareholder. A merger of the two leading office superstores, Staples and Office Depot, and the breakup of DuPont Co., each are being promoted by activist investors. These are but three examples of recent activist campaigns; with close to $200 billion in available funds, others are sure to follow. [1] The continued rise of shareholder activism serves as a useful reminder that targets and investors should be mindful of the scope of the investment-only exemption under the Hart-Scott-Rodino Act. Whether and when particular conduct may disqualify a shareholder from the passive investment exemption is a highly fact-specific inquiry and has been the subject of several enforcement actions in recent years.

…continue reading: The HSR Act’s Investment-Only Exemption for Targets and Activist Investors

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

Delaware Legislature Clarifies Section 251(h) Second-Step Merger Provisions

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday August 1, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Abigail Pickering Bomba, partner in the corporate practice at Fried, Frank, Harris, Shriver & Jacobson LLP, and is based on a Fried Frank publication by Ms.Bomba, David N. Shine, John E. Sorkin, and Gail Weinstein. 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 following amendments to Delaware General Corporation Law (“DGCL”) Section 251(h) have been passed by the Delaware legislature, clarifying a number of issues that have arisen since adoption of the law last year. If signed by the Governor (as is expected), the amendments will apply to merger agreements entered into on or after August 1, 2014. Under Section 251(h), a merger agreement can include a provision that eliminates the need for a target stockholder vote for a merger after a tender or exchange offer if, among other conditions, the acquiror then owns at least the number of shares that would be sufficient to approve the merger under the DGCL and the target’s charter. The amendments provide for the following:

…continue reading: Delaware Legislature Clarifies Section 251(h) Second-Step Merger Provisions

Navigating Today’s Shareholder Activism Landscape

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday July 8, 2014 at 9:18 am
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Editor’s Note: The following post comes to us from Richard J. Grossman, partner concentrating in corporate governance matters and mergers and acquisitions, at Skadden, Arps, Slate, Meagher & Flom LLP, and is based on a Skadden alert by Mr. Grossman and Stephen F. Arcano.

Shareholder activism is the corporate topic du jour, be it in boardrooms, the media or Washington, D.C. While corporate boards and management need to understand the current environment and how we got here, their top priority is to develop comprehensive strategies for navigating the activism landscape. As activists have become more sophisticated, and activism more mainstream, approaches to dealing with activists are, by necessity, evolving.

…continue reading: Navigating Today’s Shareholder Activism Landscape

Hushmail: Are Activist Hedge Funds Breaking Bad?

Editor’s Note: Mark D. Gerstein is a partner in the Chicago office of Latham & Watkins LLP and Global Chair of that firm’s Mergers and Acquisitions Group. This post is based on a Latham & Watkins M&A Commentary by Mr. Gerstein, Bradley C. Faris, Timothy P. FitzSimons, and John M. Newell. 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.

Increasingly, some activist hedge funds are looking to sell their stock positions back to target companies. How should the board respond to hushmail?

The Rise and Fall of Greenmail

During the heyday of takeovers in the 1980s, so-called corporate raiders would often amass a sizable stock position in a target company, and then threaten or commence a hostile offer for the company. In some cases, the bidder would then approach the target and offer to drop the hostile bid if the target bought back its stock at a significant premium to current market prices. Since target companies had fewer available takeover defenses at that time to fend off opportunistic hostile offers and other abusive takeover transactions, the company might agree to repurchase the shares in order to entice the bidder to withdraw. This practice was referred to as “greenmail,” and some corporate raiders found greenmail easier, and more profitable, than the hostile takeover itself.

…continue reading: Hushmail: Are Activist Hedge Funds Breaking Bad?

Shareholder Activism in Germany

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday June 7, 2014 at 9:05 am
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Editor’s Note: The following post comes to us from Dirk Besse, at Morrison & Foerster LLP, and is based on a Morrison & Foerster publication by Mr. Besse and Moritz Heuser.

Over the past few years there has been a noticeable increase in the frequency of activist investors building up considerable stakes in German listed companies in the context of public takeovers. One reason for this development is what appears to be a new business model of hedge funds—the realization of profits through litigation after the completion of a takeover. To this end, the funds take advantage of minority shareholder rights granted under German stock corporation law in connection with certain corporate measures which are likely to be implemented for business integration purposes following a successful takeover.

…continue reading: Shareholder Activism in Germany

Activist Hedge Funds Find Ways to Profit from M&A Transactions

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 4, 2014 at 9:28 am
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Editor’s Note: The following post comes to us from Spencer D. Klein, partner in the Corporate Department and co-chair of the global Mergers & Acquisitions Group at Morrison & Foerster LLP, and is based on a Morrison & Foerster publication by Mr. Klein, Enrico Granata, and Isaac Young; the complete publication, including footnotes, is available here.

Activist hedge funds continue to find ways to use public M&A transactions as a tool to generate returns for their investors. As a result, market participants need to consider potential activist strategies in determining how to structure, announce and execute their deals.

Activists have used three principal strategies to extract additional value from public M&A transactions. The first strategy involves directly challenging the announced deal in an effort to extract a higher price, defeat the merger and/or pursue an alternative transaction or stand-alone strategy. The second strategy involves attempting to use statutory appraisal rights to create value for the activist. And the third strategy involves making an unsolicited offer to acquire a target, either independently or in conjunction with a strategic acquirer, to put the target in play. In this article, we discuss examples of recent uses of these strategies by activist investors and point out some general implications of these examples for transaction planners.

…continue reading: Activist Hedge Funds Find Ways to Profit from M&A Transactions

Communications Challenges of the Valeant/Pershing Square Bid for Allergan

Editor’s Note: Charles Nathan is partner and head of the Corporate Governance Practice at RLM Finsbury. This post is based on an RLM Finsbury commentary by Mr. Nathan.

The bid by Valeant and Pershing Square to acquire Allergan has made a very big splash in the M&A and corporate governance world. In brief, Pershing and Valeant have teamed up in a campaign to pressure Allergan to sell to Valeant in an unsolicited cash and stock deal. What distinguishes the Valeant/Pershing deal from a conventional public bear hug (such as Pfizer’s recent effort to acquire AstraZeneca) is that, by pre-arrangement, Pershing Square acquired a 9.7% equity stake in Allergan immediately prior to the first public announcement of Valeant’s bear hug. This unusual deal structure is a first and, if successful, may pioneer a new paradigm for unsolicited takeovers of public companies.

…continue reading: Communications Challenges of the Valeant/Pershing Square Bid for Allergan

The Activism of Carl Icahn and Bill Ackman

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Richard Lee and Jason D. Schloetzer, both of Georgetown University. The complete publication, including footnotes, is available here. Recent work from the Program on Corporate Governance about hedge fund activism includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon P. Brav, and Wei Jiang.

Activist hedge funds merit the attention of corporate directors, as the value of the assets under management increases and activist funds’ targets expand well beyond small capitalization companies. This post reviews the tactics used by two prominent activist hedge fund managers to create change in 13 companies in their portfolio and highlights four perceived governance failures at target companies that attracted activist funds’ attention. This post also includes a review of characteristics of activist hedge funds, the incentives their managers have to generate positive returns, and current research investigating whether and how hedge fund activism affects target companies.

…continue reading: The Activism of Carl Icahn and Bill Ackman

Shareholder Value Enhanced Through Sufficient Time to Generate Alternative Transaction

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday May 8, 2014 at 9:20 am
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Editor’s Note: The following post comes to us from Berl Nadler, partner at Davies, Ward, Phillips & Vineberg LLP, and is based on a Davies publication by Kevin J. Thomson and Peter Hong.

On April 2, 2014, Osisko Mining Corporation announced a superior alternative to Goldcorp Inc.’s unsolicited offer for Osisko in the form of a partnership with Yamana Gold Inc. resulting in Osisko’s shareholders receiving cash and share consideration with an implied value representing a 22% premium to Goldcorp’s offer. This transaction was announced 79 days after Goldcorp announced its intention to launch its unsolicited offer.

…continue reading: Shareholder Value Enhanced Through Sufficient Time to Generate Alternative Transaction

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