Posts Tagged ‘Wachtell Lipton’

European Commission Proposes to Moderate Short-termism and Reduce Activist Attacks

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.

Two articles (among several) in a comprehensive proposal to revise EU corporate governance would have a significant beneficial impact if they were to be adopted in the United States. In large measure they mirror recommendations by Chief Justice Leo E. Strine, Jr., in two essays: Can We do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law, 114 Columbia Law Review 449 (Mar. 2014) and One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term? 66 Business Lawyer 1 (Nov. 2010).

…continue reading: European Commission Proposes to Moderate Short-termism and Reduce Activist Attacks

Current Thoughts About Activism, Revisited

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Tuesday April 8, 2014 at 9:19 am
  • Print
  • email
  • Twitter
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, Steven A. Rosenblum, and Sabastian V. Niles. Wachtell Lipton’s earlier memorandum on current thoughts on activism is available here, their earlier memoranda criticizing an empirical study by Bebchuk, Brav and Jiang on the long-term effects of hedge fund activism are available here and here, and their earlier memoranda criticizing the Shareholder Rights Project are available here and here. The Bebchuk-Brav-Jiang study is available here, Lucian Bebchuk’s earlier response to the criticism of the Shareholder Rights Project is available here, and the Bebchuk-Brav-Jiang responses to the Wachtell Lipton criticisms of their study are available here and here.

We published this post last August. Since then there have been several developments that prompt us to revisit it; adding the first three paragraphs below.

First, Delaware Supreme Court Chief Justice Leo E. Strine, Jr. published a brilliant article in the Columbia Law Review, Can We Do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law in which he points out the serious defects in allowing short-term investors to override carefully considered judgments of the boards of directors of public corporations. Chief Justice Strine rejects the argument of the academic activists and activist hedge funds that shareholders should have the unfettered right to force corporations to maximize shareholder value in the short run. We embrace Chief Justice Strine’s reasoning and conclusions.

…continue reading: Current Thoughts About Activism, Revisited

Spin-Off Guide

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday April 1, 2014 at 9:02 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Gregory E. Ostling, partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz, and is based on the introduction to a Wachtell Lipton memorandum by Mr. Ostling, Deborah L. Paul, Nelson O. Fitts, and Jeremy L. Goldstein; the complete publication, including annexes, is available here.

A spin-off involves the separation of a company’s businesses through the creation of one or more separate, publicly traded companies. Spin-offs have been popular because many investors, boards and managers believe that certain businesses may command higher valuations if owned and managed separately, rather than as part of the same enterprise. An added benefit is that a spin-off can often be accomplished in a manner that is tax-free to both the existing public company (referred to as the parent) and its shareholders. Moreover, recently, robust debt markets have enabled companies to lock in low borrowing costs for the business being separated and monetize a portion of its value. For example, in connection with its $55 billion spin-off from Abbott Laboratories in 2012, AbbVie conducted a $14.7 billion bond offering, which at the time was the largest ever investment-grade corporate bond deal in the United States, at a weighted average interest rate of approximately two percent. Other notable recent spin-offs include ConocoPhillips’ spin-off of its refining and marketing business, Penn National Gaming’s spin-off of its real estate assets into the first-ever casino REIT, Sears Holding Corporation’s planned spin-off of Lands’ End, FMC’s planned spin-off of its minerals division, Rayonier’s planned spin-off of its performance fibers division, Simon Property’s spin-off of its strip center business and smaller enclosed malls into a REIT, and Darden’s planned spin-off of Red Lobster. There were 201 spin-offs announced in 2013 and 176 in 2012, with an aggregate value of $33 billion and $41 billion, respectively.

…continue reading: Spin-Off Guide

Activist Abuses Require SEC Action on Section 13(d) Reporting

Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, Andrew R. Brownstein, Adam O. Emmerich, David A. Katz, and David C. Karp. Work from the Program on Corporate Governance about about Section 13(d) and blockholder disclosure includes The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson, Jr., discussed on the forum here.

Three years ago we petitioned the SEC to modernize the beneficial ownership reporting rules under Section 13(d) of the Securities Exchange Act of 1934 (see our rulemaking petition, our memos of March 7, 2011, April 15, 2011, March 3, 2008 and our article in the Harvard Business Law Review). Since we filed our petition, activist hedge funds have grown more brazen in exploiting the existing reporting rules to the disadvantage of ordinary investors.

…continue reading: Activist Abuses Require SEC Action on Section 13(d) Reporting

Shareholder Activism in the M&A Context

Editor’s Note: David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions and complex securities transactions. This post is based on an article by Mr. Katz and Laura A. McIntosh that first appeared in the New York Law Journal; the full article, including footnotes, is available here. 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.

With M&A activity expected to increase in 2014, shareholder activism is an important factor to be considered in the planning, negotiation, and consummation of corporate transactions. In 2013, a year of relatively low deal activity, it became clear that activism in the M&A context was growing in scope and ambition. Last year activists were often successful in obtaining board seats and forcing increases in deal consideration, results that may fuel increased efforts going forward. A recent survey of M&A professionals and corporate executives found that the current environment is viewed as favorable for deal-making, with executives citing an improved economy, decreased economic uncertainty, and a backlogged appetite for transactions. There is no doubt that companies pursuing deals in 2014—whether as a buyer or as a seller—will have to contend with activism on a variety of fronts, and advance preparation will be important.

…continue reading: Shareholder Activism in the M&A Context

Compensation Committee Guide 2014

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday March 24, 2014 at 9:25 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Michael J. Segal, partner in the Executive Compensation and Benefits Department of Wachtell, Lipton, Rosen & Katz, and is based on the introduction to a Wachtell Lipton memorandum by Mr. Segal, David C. Karp, Jeannemarie O’Brien, Adam J. Shapiro, Jeremy L. Goldstein, and David E. Kahan; the complete memorandum is available here.

The past year in executive compensation has been marked by two continuing trends: (1) a continuing refinement of conceptions of so-called “best practices” advocated by certain shareholders and responses to those refinements by compensation committees, most notably in the context of the nonbinding, advisory “say-on-pay” vote required by the Dodd-Frank Act (“Dodd-Frank”) and (2) an increased desire by corporations to engage with shareholders to convince them of the appropriateness of their responses and the corporation’s compensation arrangements generally. Against this backdrop, the key challenge for compensation committee members has been to continue to approve compensation programs that directors believe are right for their corporations while maintaining a sufficient understanding of these emerging shareholder views and communicating the appropriateness of their arrangements to avoid attacks that could undermine directors’ abilities to act in their company’s best interest.

…continue reading: Compensation Committee Guide 2014

Toward a Constitutional Review of the Poison Pill: A Reply to Wachtell Lipton

Posted by Lucian Bebchuk, Harvard Law School, and Robert J. Jackson, Jr., Columbia Law School, on Monday March 17, 2014 at 9:27 am
  • Print
  • email
  • Twitter
Editor’s Note: Lucian Bebchuk is Professor of Law, Economics, and Finance at Harvard Law School. Robert J. Jackson, Jr. is Associate Professor of Law, Milton Handler Fellow, and Co-Director of the Millstein Center at Columbia Law School. They are co-authors of Toward a Constitutional Review of the Poison Pill, a Harvard Law School discussion paper that is forthcoming in the Columbia Law Review, available here and discussed on the Forum here. This post replies to the criticism of their work put forward in a Wachtell, Lipton Rosen & Katz memorandum, posted on the Forum by Martin Lipton here.

We recently placed on SSRN a draft of a new paper, Toward a Constitutional Review of the Poison Pill, which will be published by the Columbia Law Review in the Fall of 2014. Last week, six senior partners of the law firm of Wachtell, Lipton, Rosen & Katz, including founding partner Martin Lipton, published a strongly-worded response, available on the Forum here. In this post, we rebut Wachtell’s criticism.

Wachtell’s response is a twelve-page, single-spaced Memorandum that describes us as “extreme” and “eccentric,” and characterizes our paper as “tendentious,” “misleading,” and “not a work of serious scholarship.” The Memorandum also attempts to offer a substantive rebuttal of the analysis in our paper. Given that Wachtell Lipton prides itself for creating the poison pill, we understand why an article raising doubt about the validity of the state-law rules authorizing the use of poison pills touches a sensitive nerve at the Firm. Wachtell’s response, however, fails to dispel those doubts—and, indeed, shows why there are serious questions about the constitutionality of state-law poison-pill rules today.

Wachtell does not dispute the analysis in our paper showing that state-law poison-pill rules today impose tighter restrictions on tender offers than those that federal courts have viewed as preempted by the Williams Act. Instead, Wachtell’s response asserts that the “true state of the law,” about which there is “no doubt,” is that the Williams Act “governs procedure, not substance,” and that the Act therefore does not preempt any antitakeover devices that states choose to authorize. As we explain below, this is not an accurate description of the state of the law: Wachtell’s view (1) is not established by Supreme Court precedent; (2) gives undue weight to two lower federal court opinions; and (3) discounts or ignores opinions of other lower federal courts that have expressed views that differ from Wachtell’s.

…continue reading: Toward a Constitutional Review of the Poison Pill: A Reply to Wachtell Lipton

Delaware Court Endorses Business Judgment Review in Controlling Stockholder Mergers

Editor’s Note: Theodore N. Mirvis and Paul Rowe are partners in the Litigation Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Mirvis, Mr. Rowe, Igor Kirman, and William Savitt. 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 Delaware Supreme Court today affirmed that a going-private transaction may be reviewed under the deferential business judgment rule when it is conditioned on the approval of both a well-functioning special committee and a majority of the minority stockholders. Kahn v. M&F Worldwide Corp., No. 334, 2013 (Del. Mar. 14, 2014).

As described in our previous memo, the case arose out of a stockholder challenge to a merger in which MacAndrews & Forbes acquired the 57% of M&F Worldwide it did not already own. Then-Chancellor Strine granted summary judgment in favor of the defendants, finding that the record established the transaction was approved by both an independent special committee that functioned effectively and had the power to say no and the fully-informed vote of a majority of the unaffiliated stockholders, thus entitling them to business judgment review.

…continue reading: Delaware Court Endorses Business Judgment Review in Controlling Stockholder Mergers

A Response to Bebchuk and Jackson’s Toward a Constitutional Review of the Poison Pill

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, Theodore N. Mirvis, George T. Conway III, Jeffrey M. Wintner, and William Savitt. This post responds to a recent Harvard law School Discussion paper by Lucian Bebchuk and Robert Jackson that is forthcoming in the Columbia Law Review. The paper, Toward a Constitutional Review of the Poison Pill, is available here and a blog post describing it is available here.

In a recent paper, Professors Lucian Bebchuk and Robert Jackson have extended Professor Bebchuk’s extreme and eccentric campaign against director-centric governance into a new realm—that of the Constitution of the United States. They claim that “serious questions” exist about the constitutionality of the poison pill—or, more precisely, “about the validity of the state-law rules that authorize the use of the poison pill.” It is likely, they argue, that these state-law rules violate the Supremacy Clause of the Constitution, and are thus preempted, because they frustrate the purposes of the Williams Act, the 1968 federal statute that governs tender-offer timing and disclosure.

Bebchuk and Jackson cite leading academic textbooks and articles that either recognize the preeminence of the poison pill in takeover defense or demonstrate the weakness of preemption challenges to state takeover statutes. The scholars authoring these books and articles, we are told, “overlooked” or “ignored” the obvious fact that poison pills may delay tender offers for lengthy periods of time. Bebchuk and Jackson profess “surpris[e]” that the constitutional issue they discuss “has received little attention, or even notice, from commentators,” and assert that it is rather a shocking “oversight” that, despite a “large literature” on Williams Act preemption, “commentators and practitioners” have devoted “little attention to the question of whether the state-law rules with the most powerful antitakeover effect—the rules authorizing use of the poison pill—are preempted.”

…continue reading: A Response to Bebchuk and Jackson’s Toward a Constitutional Review of the Poison Pill

Court of Chancery Stresses Need for Board Monitoring of Advisors and Potential Conflicts

Editor’s Note: Paul Rowe is a partner in the Litigation Department at Wachtell, Lipton, Rosen and Katz. This post is based on a Wachtell Lipton memorandum by Mr. Rowe, David A. KatzWilliam Savitt, and Ryan A. McLeod. 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.

Last week, the Delaware Court of Chancery reached the rare conclusion that an independent, disinterested board breached its fiduciary duties in connection with an arm’s-length, third-party, premium merger transaction. The decision, In re Rural Metro Corp. Stockholders Litig., C.A. No. 6350-VCL (Del. Ch. Mar. 7, 2014), which relies heavily on findings that the board’s financial advisor had undisclosed conflicts of interest, holds the advisor liable for aiding and abetting the breaches, but does not reach the question of whether the directors themselves could have been liable, as they settled before trial. The decision sends a strong message that boards should actively oversee their financial advisors in any sale process.

…continue reading: Court of Chancery Stresses Need for Board Monitoring of Advisors and Potential Conflicts

Next Page »
 
  •  » A "Web Winner" by The Philadelphia Inquirer
  •  » A "Top Blog" by LexisNexis
  •  » A "10 out of 10" by the American Association of Law Librarians Blog
  •  » A source for "insight into the latest developments" by Directorship Magazine