M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Saturday, May 5, 2007

The RBS Group Plays its Hand

The Wall Street Journal this afternoon reports that the RBS-led consortium (RBS, Fortis, Santander) offering to acquire ABN Amro Holding NV today made a $24.5 billion all-cash offer to acquire LaSalle Bank, the U.S. banking subsidiary of ABN Amro.  This offer is $3.5 billion higher than the current $21 billion price Bank of America has agreed to pay ABN Amro for the banking unit.  According to the Journal report, RBS's offer isn't conditional on financing but is conditional on ABN Amro recommending the consortium's offer to acquire ABN Amro and the settlement of the pending litigation between ABN Amro and BofA over LaSalle Bank (see the details here).  RBS's offer appears to meet the definition of a Superior Proposal under the BofA/ABN Amro sale agreement (though BofA is likely to argue the aforementioned conditions disqualify it).  A Superior Proposal under the agreement is required to be all cash and contain no financing condition.  If ABN Amro does deem this a Superior Proposal, ABN Amro can then terminate the BofA agreement to accept the RBS group offer.  BofA still has five business days to match RBS's higher offer after ABN AMRO accepts it.  If BofA doesn't choose to counter-bid, it is entitled to a $200 million termination fee payable by ABN Amro.  The one certainty about this and to put it politely, ABN Amro has failed to run the sale process for itself and LaSalle in an optimal manner to the benefit of its shareholders. 

May 5, 2007 | Permalink | Comments (0) | TrackBack (0)

Buffett's Party

Today is the annual meeting of Berkshire Hathaway in Omaha, Nebraska and more than 27,000 people are supposed to be in attendance at what has become the funnest shareholder meeting of the year.  Highlights of today's meeting (which is still on-going):

  • Warren Buffett asserted that Berkshire Hathaway's upcoming acquisitions are likely to be outside the United States according to Marketwatch.  He stated he's planning a "little procedure to get us better known outside the U.S. within the next six to eight months . . . . The entire world is definitely on our radar screen and we hope to be on theirs."
  • Berkshire Hathaway shareholders voted against a proposal which would have required Berkshire Hathaway to divest its lucrative $3.31 billion investment in PetroChina due to its parent company's oil ties to the Sudan.  Berkshire is the second-largest shareholder behind the Chinese government in the oil company.
  • Buffett also announced that Berkshire Hathaway's search for a new chief investment officer will be accelerated after the annual meeting.  Buffett stated, "I'm looking for somebody that's got the right balance of brains and temperament to take over."  He also stated that "I don't think it's at all impossible to think we'll find three or four" CIOs.  He continued, "[w]e will come up with, probably, a couple of people."  Those interested in the job can find Buffett's desired qualifications here.

Oh, and Jimmy Buffett made an appearance and sang a spoof of his hit “Margaritaville.” According to the Wall Street Journal, Jimmy Buffett "insert[ed] references to Berkshire subsidiary Fruit of the Loom, the Geico gecko and even Rupert Murdoch, the Australian media baron who offered last week to buy Dow Jones & Co."  Sounds like a fun day in Omaha. 

May 5, 2007 | Permalink | Comments (0) | TrackBack (0)

Friday, May 4, 2007

Bank of America Goes to Court

The Wall Street Journal has just reported that Bank of America today filed a lawsuit in U.S. District Court in New York, against ABN Amro.  The lawsuit seeks an order blocking ABN Amro from selling LaSalle Bank to anyone other than pursuant to the agreed $21 billion sale to BofA.  The lawsuit comes on the heels of yesterday's order from a Dutch Court freezing the sale.   

May 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Clear Channel's Lessons

It now appears that the tortured $26 billion buy-out offer for Clear Channel Communications, Inc. by a private equity group comprising Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. is heading towards an ignominious death.   Yesterday, Clear Channel's board of directors announced that tabulated proxies received currently reflect a vote against the merger of more than the required 1/3 of the outstanding shares necessary to defeat the merger proposal under Texas law (where Clear Channel is organized).  The actual meeting will be held on May 8, 2007.  A history of the deal is on Dealscape here.  So, I thought it was time to now look at some lessons that we might be able to learn from the (probably) failed transaction. 

1.  The Ephemeral Nature of Go-Shops.  The Clear Channel agreement had a 50-day "go-shop". Under the provision, Clear Channel could solicit proposals for alternative acquisitions for a 50-day period after the execution of the merger agreement. This is the third big management buy-out transaction in a year which had the provision and in which no subsequent bidder emerged (the other two were Columbia HCA and Freescale: see their announcement press releases here and here).  In light of this, investors are increasingly likely to see "go-shop" provisions as cover for unduly large break-up fees and the significant advantage and head-start provided by management participation.

2.  The Coming Hedge Fund/Private Equity wars.  Mutual and hedge funds were leaders in the fight against the Clear Channel bid, led by by Clear Channel’s major shareholders, Fidelity Investments and Highfields Partners.  The role of investment funds, particularly hedge funds, in private equity/management buy-outs is likely only to increase as more and more hedge funds invest in equities in their hungry search for value (see a related Financial Times article here).  This is more likely to result in conflict between the two groups and a more vocal minority shareholder voice in these transactions.

3.  The Stink Stays on a Bad Deal.  Yesterday, the Clear Channel board of directors rejected a proposed increase of $.20 per share in offered consideration made by the private equity group. Clear Channel justified the rejection since it would delay yet again the currently scheduled May 8, 2007 shareholders meeting and tabulated proxies already showed that the merger proposal would not be approved.  In their proposal yesterday, the private equity group also offered to permit the current shareholders to receive up to 30% of the outstanding shares of the newly private company.  This is a mechanism that Harman International is using in its own buy-out (see my post on this here).  It might have worked with Clear Channel initially, but by the end of the deal there appeared to be so much bad blood that it was likely perceived only as a gambit for the private equity group to delay a losing vote.

4.  Law Matters.  Under Texas law (TBCA sec. 5.03), the affirmative vote of the holders of two-thirds of the outstanding shares of Clear Channel entitled to vote were required to approve the Agreement.  If Clear Channel were organized in Delaware it would have only been a majority of those required to vote thereon (DGCL sec. 251).  This made the private equity group's bid much tougher, and it may have changed the result. 

5.  Know your Financial Advisers.  Both Goldman Sachs & Co. and Lazard Frères & Co. LLC, provided fairness opinions to Clear Channel opining that the initially offered consideration was fair from a financial point of view.  Goldman was the primary financial adviser; Lazard was hired in addition to Goldman, because Goldman was conflicted in the transaction.  Goldman also agreed to provide financing to the private equity group to make the acquisition.  The fact that the price was heavily criticized highlights the limitations of a fairness opinion.  It is the practice of subjective valuation and cannot predict the highest price that can be paid (for more see my article on fairness opinions here).    More troublesome is that Clear Channel's primary adviser on the deal, Goldman, was heavily conflicted; they had a clear stake in seeing the private equity group acquire Clear Channel at the lowest price possible in order to make the repayment of Goldman's loan easier.  And while everyone knew what was going on, you still can't help but wonder if it made a difference. 

But don't feel too bad for the losing private equity group.  According to the merger agreement, even if Clear Channel's shareholders vote against the merger, the group is still entitled to be reimbursed by Clear Channel for its fees and expenses up to $45 million.

May 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Microsoft/Yahoo -- Reuters/Thomson?

Two possible big deals in the press today:

Microsoft is reportedly interested in buying Yahoo! or parts thereof.  Shares of Yahoo were up more than 15% on the news.  If it is not just wishful thinking and occurs, it would be the latest and most significant step towards consolidation of the on-line advertising industry (preceded by Google's announced $3.1 billion acquisition of Doubleclick).

Update:  Looks like the Microsoft/Google tie-up rumor was a bit overstated

Reuters Group, the U.K. based news and data servicing company, made a statement to the London Stock Exchange on Friday that it's received a third-party acquisition approach reported to be from Thomson Corp., the Canadian media company.  Shares of Reuters were up more than 27% on the news.  For those who are wondering, U.K. rules are much stricter on disclosure of acquisition approaches in light of share price movements than the U.S. stock exchange and securities rules.  The U.S. rules typically allow for a no comment on these matters as opposed to the U.K. where affirmative disclosure is required. 

May 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, May 3, 2007

Taxing Private Equity

Reuters reported yesterday on statements by Senate Finance Committee Chairman Max Baucus, a Montana Democrat, acknowledging that the committee is looking into revising the federal tax treatment of private equity manager compensation.  The issue is this.  The bulk of compensation for private equity managers comes in the form of carried interest (typically 20% of profits over a given threshold; there is also a 2% administration fee -- this is the so-called two and twenty).  Carried interest is currently treated as capital gains and taxed at a 15% rate, rather than as income and taxed at a higher rate.  This is a boon worth billions to private equity firms, and Blackstone recently went well out of its way to set up a post-ipo structure to preserve this treatment (Professor Victor Fleischer has ably deconstructed this structure on his blog).

The Finance Committee staff is scheduled to hold another closed-door session on the issue on Monday.  One of the speakers will be Professor Victor Fleischer.  For those who cannot attend the hearing, his latest article on the subject is Two and Twenty: Taxing Partnership Profits in Private Equity Funds; in it he offers his own proposals for reform.  Not scheduled to speak at this hearing but certainly bending the Senators and staff ears are the private equity firms themselves and their newly-formed Private Equity Council.  Any change to the tax code is likely to raise political opposition given private equity's power and influence, and, if passed, is likely to spur private equity managers to restructure their fees to preserve capital gains treatment and avoid the new tax.  But one never knows.  Stay-tuned.

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Friday Culture: The Accidental Investment Banker by Jonathan A. Knee

The week's recommendation is The Accidental Investment Banker by Jonathan A. Knee, a quasi-memoir of Knee's investment banking career.  Knee, a media banker and veteran of Goldman, Sachs & Co., Morgan Stanley and now at Evercore does a fine job of explaining the industry shift from relationship to transactional banking as well as spinning the gossip on the in-fighting at Morgan Stanley which led to John Mack's downfall/Philip J. Purcell's downfall/John Mack's return.  The book is also notable for being a tell-all/score-settler in an industry of few talkers (e.g., he speaks at one point of Joseph Perella's flatulence and really doesn't like Mary Meeker).  The N.Y. Times review is here.  Enjoy your weekend!

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Friday Deal News

Lots of deal news today.  My favorite concerns the insider trading charges brought by the SEC yesterday against a Credit Suisse investment banker.  The SEC alleges he made his illegal tips from his office phone (details below). 


Binariang GSM Sdn Bhd, a company controlled by Malaysian billionaire T. Ananda Krishnan and his partners, offered to take private Maxis Communications Bhd., Malaysia's largest cell-phone company, for 15.8 billion ringgit ($4.6 billion).  Krishnan and his partners already own 60% of Maxis.

Capitol Energy Resources Ltd., a Canadian oil and gas exploration and production company, yesterday announced that it had entered into an agreement to be acquired by Provident Energy Trust in a cash deal valued at $508 million

CEVA Logistics, a Dutch logistics and supply-chain management company controlled by the private equity group Apollo Management, yesterday announced that it has raised its offer to acquire EGL, Inc. to $1.8 billion, or $43 per share, in cash.  EGL previously agreed to be acquired by a group led by James Crane, its CEO and largest shareholder, and including CenterBridge Partners and The Woodbridge Company Limited, for $38 a share.

CVC Capital Partners and PAI Partners today offered $17.4 billion for Altadis, the Spanish cigarette maker.  This offer trumps Imperial Tobacco Group’s pending bid.

The Enterprise Chamber of the Amsterdam Court of Appeal yesterday enjoined the $21 billion sale of LaSalle Bank by ABN Amro to Bank of America.

Clear Channel Communications, Inc. yesterday announced that its board of directors had rejected an increase of $.20 per share in offered consideration to be paid in the proposed merger between it and a company controlled by a private equity group comprising Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P.  Clear Channel justified the rejection since it would delay yet again the currently scheduled May 7,2007 shareholders meeting and tabulated proxies received by the company’s board of directors currently reflect a vote against the merger of more than the required 1/3 of the outstanding shares necessary to defeat the merger proposal.

Ion Media Networks yesterday approved an offer to be acquired by NBC Universal and Citadel Investment Group, a hedge fund.  The offer was opposed by three board members and a dissident stockholder group, the N.Y. Post reports.

OAO Norilsk Nickel, the Russian mining company, yesterday announced an all-cash offer valued at CDN5.3 billion Canadian dollars and topping or nickel miner LionOre Mining International Thursday.  The offer tops a rival offer from U.K.-based Xstrata Plc.


A Credit Suisse Group investment banker was yesterday charged by the SEC for insider trading by leaking confidential takeover information, including information about the $32 billion buy-out of TXU Corp. 

One Equity, the U.S. private equity group affiliated to JPMorgan, has approached EMI about a takeover which could value the British music group at more than $6 billion, the FT reports.

And showing that he has the mettle to take on any investment banker, President Hugo Chavez threatened to take over Venezuela’s private banks and its largest steelmaker yesterday, the FT also reports.  The threat comes only two days after he seized the last of the country's private oil operations.   

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Suspect Options Trading in Dow Jones Offer

Those fine bloggers at the White Collar Crime Law Prof blog have the story

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Dutch Court Halts Sale of LaSalle Bank

The Enterprise Chamber of the Amsterdam Court of Appeal today enjoined the $21 billion sale of LaSalle Bank by ABN Amro to Bank of America (I had predicted this on Saturday).  The suit to enjoin the transaction was brought by the Dutch shareholders association, VEB, which demanded that the transaction be put to a shareholder vote by ABN Amro.  According to Bloomberg:

Judge Huub Willems of the Amsterdam district court's Enterprise Chamber said today it was ``unacceptable'' for ABN Amro to sell the unit without shareholder approval, backing a complaint by the Dutch investor group VEB. ``ABN Amro management has misjudged its task,'' said Willems in his ruling, adding that he will prevent the sale of LaSalle ``until the shareholders have spoken their mind.''

The LaSalle Bank sale was part of ABN Amro's agreement to recommend an offer to be acquired by Barclays plc.  ABN Amro had come under withering criticism for agreeing to the LaSalle Bank sale as a means to frustrate the competing, higher bid for ABN Amro put forth by the consortium of Royal Bank of Scotland, Fortis and Santander. 

The action may lead to a higher bid by Barclays for ABN Amro.  Others speculate it may actually bring BofA to bid for ABN Amro itself.  But whatever the outcome of the ABN Amro transaction, the Dutch court action today is a big step towards the enforcement of shareholder rights in Continental European M&A. 

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Paging the Bancroft Family (Where are those 13D Amendments?)

Still lots of ink today (electronic and otherwise) on News Corp.'s $5 billion dollar offer to acquire Dow Jones, publisher of the Wall Street Journal.  My favorite is that both the New York Times and the Wall Street Journal run pieces on possible life for the Journal under News Corp.'s CEO and controlling shareholder, Rupert Murdoch (see also Dealscape's more clever comment on branding). 

The New York Times can sleep safer under the protective aura of the Sulzberger family who, through a dual-class voting scheme, control the New York Times.  The Sulzberger's have a stockholder voting arrangement which ensures that they vote in harmony on such decisions. The Bancroft family which controls 62% of the voting interests in Dow Jones does not have such arrangement.  But yesterday, Dow Jones issued a statement that Bancroft family members controlling 52% of the voting interests in Dow Jones opposed the offer; therefore the Dow Jones Board was not acting at this moment.  The family is not obligated under Delaware law (where Dow Jones is organized) to initiate a sale process; and, given that a majority of the family refuses to do so, the Dow Jones Board was not in Revlon- mode and its refusal to act justified under the business judgement rule (though this point is a bit more nuanced than I am putting it, see posts on this at Bainbridge, Truth on the Market and the Conglomerate). 

The media is now rife with speculation over whether Murdoch can pick off some of the Bancroft family shareholders (and some WSJ staffers are mounting a counter-attack according to Dealbreaker).  My question is, where are the 13D amendments (an SEC filing required by any shareholder who owns more than 5% of the voting interests in a company)?  Much of the Bancroft holdings are held in trusts administered by the small Boston law firm of Hemenway & Barnes.  A number of these Bancroft trusts hold more than 5% of the company and have filed Schedule 13Ds.  These require under item 4 disclosure of any plans or proposals with respect to the securities held by the trust.  Any change of intentions must be promptly disclosed.  A quick look at Edgar shows that no 13D amendments have been filed since the offer was announced (and looking at the family's previously filed 13Ds shows some poor choice of drafting language for this disclosure:  see an example here). 

If the family is indeed having discussions, it would be prudent for them to amend their 13Ds (the amendments must be filed promptly after a change of intent).   If they have not, this is a good time to amend and update their disclosure (message to Wachtell who is representing the family).  In any event, watch those 13Ds to see if some of the larger family members are actually picked off . . . .

NB.  Another practice point that some of the more experienced may have picked up.  The family has not yet filed as a "group" for purposes of Schedule 13D.  They (and their trusts) file individually and largely disclaim that they are acting as a group.  However, depending on their actions they may subsequently be deemed to be acting in concert and so required to file a collective 13D (in fact, they may colorably already be doing so in their collective response to the Dow Jones board).  Avoiding this trap is another way for those fine Wachtell lawyers to earn their fee. . . .

Update:  The day after I posted this the Bancroft family did indeed file their 13D Amendments (the link is to one of them).  The full language of the amendment is worth setting out:

Since the time that members of the Bancroft family and trustees of trusts holding shares of the Issuer for the benefit of members of the Bancroft family were first advised of the possibility of a proposal by News Corporation to acquire the Issuer, various members of the family and trustees have been discussing whether they would be interested in the transaction proposed by News Corporation. To aid the family members and trustees in their decision-making process, on April 24, 2007, Merrill Lynch made a presentation to members of the family and trustees. Various discussions and communications among family members and trustees continued to ensue as to whether they would be interested in the proposed transaction. On May 1, 2007, it became apparent that family members and trustees holding a majority of the voting power of the Issuer were not interested in the News Corporation proposal and would vote the shares of the Issuer over which they have voting control against any transaction reflecting the terms of the proposal. The Issuer and its board of directors were so advised, and the Issuer made an announcement to that effect on May 1, 2007.

As a result of the matters described above, the undersigned may be deemed to constitute a "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) with other members of the Bancroft family and Bancroft trustees who were not interested in the News Corporation proposal. The undersigned hereby (i) disclaims any membership in any such group, (ii) does not affirm the existence of such a group, and (iii) except as otherwise may be expressly indicated in this Schedule 13D, disclaims any beneficial ownership of any shares of the Issuer that may be or are beneficially owned by, among others, other members of the family or trustees.

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday Deal News

Announced Deals

Ahold NV, the Dutch supermarket group, yesterday announced an agreement to sell U.S. Foodservice, its subsidiary at the center of a 2003 accounting scandal, to Clayton, Dubilier & Rice Fund VII LP and Kohlberg Kravis Roberts & Co in a deal valued at $7.1 billion.  Ahold is seeking shareholder approval of the deal at an Extraordinary General Meeting to be held on June 19, 2007.

The Airline Partners Australia consortium comprising Macquarie Bank Ltd. and TPG Inc. (formerly known as Texas Pacific Group) making a AUD10.82 billion takeover offer Australia's Qantas Airways Ltd. announced that it had purchased 32.96% of Qantas in their offer, below the 70% required for its bid to succeed. The group is likely to extend their offer for another two weeks.

Cablevision Systems Corp. yesterday announced an agreement with the the Dolan family to take the cable operator private for $36.26 per share in a deal valued at $22 billion (see my posts from yesterday commenting on the deal here and here).

The Dow Jones board yesterday announced that it would take no action with respect to the News Corp.s' $5 billion dollar proposal to acquire the company in light of the opposition of its controlling shareholders, the Bancroft Family.

OAO Norilsk Nickel, the Russian mining company, today announced an all-cash offer valued at CDN5.3 billion Canadian dollars and topping or nickel miner LionOre Mining International Thursday.  The offer tops a rival offer from U.K.-based Xstrata Plc.

Urban American Management Corp. and City Investment Fund have purchased a series of buildings in Harlem and one on Roosevelt Island that total nearly 4,000 apartments for $940 million according to the New York Observer.

VWR International, Inc., a laboratory supply company owned by private equity shop Clayton, Dubilier & Rice, Inc., yesterday announced a definitive agreement to be acquired by another private equity shop, Madison Dearborn Partners.  Terms of the transaction were not disclosed though CDR payed $1.7 billion for the company two years ago.


Biosite, Inc., the medical diagnostic equipment maker, yesterday announced that it has entered into a revised merger agreement with Beckman Coulter, Inc. raising Beckman Coulter's offer to acquire Biosite’s to $90.00 per share, or approximately $1.67 billion in total, an increase of $5.00 per share.  The raised offer bests one made by Inverness Medical (Reports say Inverness is likely to counter)

Jones Apparel Group, Inc. announced that it has made the strategic decision to exit or sell some of our moderate product lines by year end 2007. These product lines represent 2007 net revenues in 2007 of approximately $300 million.

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 2, 2007

More on Cablevision and Going-Private (in New York)

Today's big deal news is the agreement by Cablevision Systems Corp. to a $22 billion buyout offer made by its controlling shareholders, the Dolan family, to take the cable operator private for $36.26 per share. This will be the third time that the Dolan family has tried to take the company private -- the previous bids were nixed due to complaints about too low an offered price (see a history here). 

In connection with the agreement to go private, the lawyers representing Cablevision's shareholders agreed to request dismissal of their pending going private action in Nassau County Supreme Court. This will pave the way for the plaintiffs' attorneys in the action to receive attorneys fees, and in fact, I would suspect that a fee was agreed to by all the parties in connection with today's announcement.  I blogged about this point earlier and thought it worthwhile to flesh out this issue.   

Vice Chancellor Strine of the Delaware Chancery Court has previously criticized these practices in In re Cox Communications for doing little to help shareholders but a lot to earn plaintiffs' lawyers hefty fees.  In sum, plaintiffs' lawyers rush to bring suit when a going-private transaction is announced.  They then attempt to piggy-back on special committee negotiations with the controlling shareholder to agree a price.  When it is agreed between the special committee and the controlling shareholder, the plaintiffs' lawyers will then concurrently agree to request dismissal of the suit based on the higher price gleaned.  The plaintiffs attorneys will then claim success fees pointing to this higher price as justifying their fee.  Yet, their work has been little and shareholders are often left without true enforcement of their legal rights.   

But it is more suspect in this instance.  The New York law on going-privates (where Cablevision is incorporated) is probably stricter than in Delaware.  Given this and the Dolan's history, the plaintiff's lawyers may have folded a much stronger hand than they usually have.  First, let's look at Delaware.  In Delaware, a going private merger transaction is subject to review under "entire fairness".  This subjects a transaction to review for fair price and fair dealing.  If a special committee is formed, as it was for Cablevision, then the burden of proof on this matter shifts to the complaining shareholder. 

New York is likely different.  I say likely, because there has been little case-law in New York on going privates.  However, in two cases from the 1970s New York law set forth a two-part test (People v. Concord Fabrics, Inc., 83 Misc.2d 120, 371 N.Y.S.2d 550 (N.Y. Sup. 1975), affd. 50 A.D.2d 787, 377 N.Y.S.2d 84 (1st Dept. I975), and Tanzer Economic Associates, Inc. Profit Sharing Plan v. Universal Food Specialties, Inc., 87 Misc. 2d 167, N.Y.S.2d 472 (N.Y. Sup. 1976)).  This test requires that the transaction (1) be reviewed for entire fairness, and (2) must have a valid business purpose.  The second prong is where New York is now different than Delaware (Delaware dropped the second prong in 1983 in Weinberger v. UOP, Inc. 457 A.2d 701 (Del. 1983)).

While the parameters of the business purpose test have not been fleshed out in New York they have in other jurisdictions, and the test has typically acted to bar a transaction whose real purpose is to get rid of an unwanted minority (to the chagrin of Bill Sullivan when he took private the New England Patriots and was later found by a Massachusetts court to lack such purpose in Coggins v. New England Patriots Football Club, Inc., 492 N.E.2d 1112 (Mass. 1986)).  Given the facts of this deal as I understand them, it would likely have been a test that the Dolans might have found hard to meet.  One could make a strong case that New York should not have such a strict test (or even a test akin to Delaware's).  But it likely does.  The plaintiffs' lawyers actions here may well have cost their clients a very real legal cause of action and a chance to obtain even more money for their forced decision to sell.       

May 2, 2007 | Permalink | Comments (0) | TrackBack (0)

Cablevision (Third Times a Charm)

Cablevision Systems Corp.'s board of directors has, according to CNBC, agreed this morning to a buyout offer by the Dolan family to take the cable operator private for $36.26 per share.  The price is a 21 percent premium to their $30 per share offer on January 12, 2007. This will be the third time that the Dolan family has tried to take the company private.  Dealscape has a history of the tortured deal here.

Update:  The Cablevision/Dolan family joint press release is here.  Note the following language in the press release:

Lawyers representing shareholders in the pending going private action in Nassau County Supreme Court actively participated in the negotiations, which led to improvements to the financial terms of the transaction as well as significant contractual protections for shareholders. Included in the monetary benefits provided to shareholders in the transaction is additional merger consideration payable directly to the shareholders in exchange for succeeding to Cablevisions and shareholders rights in connection with claims involving alleged options backdating. The parties have agreed in principle to the dismissal of the pending going private litigation, subject to approval by the Nassau County Supreme Court.

For those reading between the lines, it likely means that the Dolan family has agreed to pay and support an award of attorneys fees to the plaintiffs' attorneys for their acquiescence to the deal and dropping the suit (I would guess that the attorneys were probably even nice enough to suggest this language).  Instead of commenting, I'll link to Vice Chancellor Strine's opinion in In re Cox Communications about the perils of such practice under Delaware law and the possibility of selling minority shareholders short, particularly here where the Dolan family has been repeatedly accused of underbidding for Cablevision.   

May 2, 2007 | Permalink | Comments (0) | TrackBack (0)

April is a Good Month

FT Alphaville reports that Thomson and Mergermarket have published world-wide M&A activity for the month of April.  Mergermarket calculates $482.6 billion worth of M&A activity during the month, while Thomson puts the figure at $626.3 billion.  The difference is mainly due to Thomson’s inclusion of the  informal bid by the RBS-consortium for Dutch bank ABN Amro. Mergermarket only includes formally announced offers.  This is the highest month for M&A activity in history.  For those who keep track of such things, you can also view the first quarter league tables for financial and legal advisors here (hint:  its a good year for Davis Polk). 

May 2, 2007 | Permalink | Comments (0) | TrackBack (0)

Wednesday Takeover News


Bisys, a financial outsourcing company, today announced that Citi (the financial services giant previously known as Citigroup) has agreed to acquire it in a transaction valued at approximately $1.45 billion.

Blockbuster, the movie rental chain, today announced it sold its U.K. video game retailer, Game Station, to U.K. Game Group for $150 million in cash.

Countrywide, the UK property company, received an increased bid from Apollo Management on Tuesday  after Countrywide received another bid from an undisclosed party believed to be 3i say reports.

MAFBancorp, the Chicago-based bank, yesterday announced an agreement to be acquired by National City Corporation for $1.9 billion.

News Corp., the news company controlled by Rupert Murdoch, yesterday disclosed a $5 billion offer for Dow Jones, the publisher of The Wall Street Journal. The controlling shareholders of Dow Jones, the Bancroft family, quickly issued a statement opposing the offer.


The Dolan family is close to a deal to for their third attempt to take private Cablevision Systems, the New York-based cable operator, for approximately $10.5 billion say reports.

Institutional Shareholder Services recommended that shareholders of Clear Channel vote against a $27 billion agreement for Clear Channel to be acquired by private equity firms Bain Capital and Thomas H. Lee Partners.  ISS said the offer was still too low despite being raised once already. 

May 2, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 1, 2007


Andrew Ross Sorkin over at the New York Times was kind enough to make six posts today on News Corp.'s news-breaking, unsolicited (and apparently already ill-fated) offer to purchase the Wall Street Journal's publisher, Dow Jones.  In fact, for eight hours it was the only thing those Times bloggers could write about.  For those who are counting, the posts (in reverse chronological order) were:

News Corp. Bids $5 Billion for Dow Jones

Newspaper Stocks Feel the ‘Murdoch Effect’

Will $5 Billion Persuade Dow Jones’s Owners to Sell?

Murdoch’s Dow Jones Bid: Reading Between the Lines

Bancroft Family Votes Against News Corp. Offer

Advisers Suit Up for Dow Jones Showdown

Compare that to only three posts at the normally hard-working Wall Street Journal Blog, one of which focused on other potential buyers and another on how Murdoch should have known the Bancroft family would quickly reject any solicitation (being part of a media group that includes Fox News and the N.Y. Post may not sit well with those Wall Street Journal bloggers).  The WSJ posts were:

Of Dow Jones, Voting Rights and New Yorker Foreshadowing

Sizing Up Possible Rival Dow Jones Suitors

A Preannouncement Leak for Traders of Dow Jones Options?

By the way, according to the N.Y. Times the advisers on the yet-to-be agreed deal (recruited so fast!) are:

News Corp.: J.P. Morgan Chase, Allen & Company, Centerview Partners (Investment Bankers); Skadden Arps Slate Meagher & Flom (Legal)

Bancroft family: Merrill Lynch (Investment Bank); Wachtell Lipton Rosen & Katz (Legal)

Dow Jones: Goldman Sachs (Investment Bank); Fried Frank Harris Shriver & Jacobson (Legal)

May 1, 2007 | Permalink | Comments (0) | TrackBack (0)

A Really Hostile Takeover

The New York Times reports today that President Hugo Chavez's government took over Venezuela's last privately run oil fields.

May 1, 2007 | Permalink | Comments (0) | TrackBack (0)

TXU's Winner

It was disclosed in a Form 10K/A filing yesterday that TXU Corp. Chief Executive John Wilder will accrue compensation worth $279.6 million if the Texas power company's $32-billion purchase by Kohlberg Kravis Roberts & Co. and TPG is completed.  The compensation is mainly due to accelerated option vesting although it includes $2.5 million in cash severance, $60,000 in office-related services and $20,410 in health and welfare benefits.  NB. The Form 10K/A was remarkable for its long justification of Mr. Wilder's salary and change-of-control compensation and also disclosed, among other things, that his compensation for last year included $365,916 to install a security system at Mr. Wilder's Dallas home.  I wish I was so safe.

The disclosure is likely to add more fire to an already politicized acquisition (more details here).  But is it really too much?  According to TXU, the market capitalization of TXU has grown 224% during Wilder's tenure creating 10s of billions of dollars of value for shareholders.  TXU realized a 60% total return in 2005, but according to the Wall Street Journal returned only 11% last year.  It is still not decided whether Wilder will continue as CEO once the acquisition is completed -- if he is then this would make his change-of-control compensation more problematical due to his conflicted nature and double-dipping (this is Clear Channel's controversial problem). 

Disputes over change-of-control payments date from the 1980s and for those who want more on the theoretical justifications for these arrangements, I'll refer you to the following excellent comment from those days, Kenneth Johnson, Golden Parachutes and the Business Judgment Rule: Toward a Proper Standard of Review, 94 Yale L.J. 909 (1985) (there hasn't been much legal scholarship on this issue since then).  But, I'll also close by linking to a recent study which found that target shareholders tend to receive lower acquisition premia in transactions that involve extraordinary change of control payments for the CEO. 

May 1, 2007 | Permalink | Comments (0) | TrackBack (0)

Murdoch's New, New Thing

Dow Jones' stock this morning surged $20.86, or 57 percent, to $57.19 on a televised news report that News Corp. made an unsolicited $60 a share cash bid for the Wall Street Journal publisher.  Trading has now been halted in the stock pending an announcement by Dow Jones (and no WSJ post on it yet! but see a brief news report here).  I'll spare you the jokes on N.Y. Post/Wall Street Journal synergies. 

News Corp., controlled by Murdoch, can't launch a full hostile here because, according to Dow Jones' latest proxy, the Bancroft family controls 62% of the company's voting stock (through a dual-class stock scheme that has gotten the N.Y. Times into so much trouble).  The deal, if agreed to by the Bancroft family and completed, would mark the latest in a national newspaper consolidation/acquisition wave which began in 2005 with the sale of Knight-Ridder (according to the WSJ here) and was recently marked by the agreed purchase of the Tribune Co. by Sam Zell (well actually Tribune Co.'s Employee Stock Option Fund and Sam Zell in a nice tax-dodge strategy).

Given the topicality, I'll post more later today or tomorrow on the powerful antitakeover effect of dual-class stock.

Update:  Read Dow Jones comment here.  Read News Corp.'s press release here.

Further Update:  The Bancroft family is coming out against the proposal according to another release today by Dow Jones. 

May 1, 2007 | Permalink | Comments (0) | TrackBack (0)