Tuesday, July 7, 2009
Steven Davidoff over at the Deal Professor has been doing a great job following the in's and out's of the legal issues related to the ongoing NRG/Exelon battle so I haven't spent much time on this trasnaction (here, here, here, and here). Fortune magazine is pitching in with a a nice "inside the boardroom" view of the transaction as well. One thing appears clear from the Fortune piece is that both parties knew from the get go that the $8.5 billion poison put would be a factor from the very beginning. Nothwitstanding that potential roadblock, Exelon has pursued NRG relentlessly since last October. Now it is all coming to a head in a familiar dance. Exelon is purusing a proxy fight and seeking to oust the NRG board. NRG's board has been urging shareholders to resist Exelon's "inadequate" offer.
All of this has started me thinking about the hostile takeover. Just a year or two ago, people thought that the combination of staggered boards and the poison pill meant the end of the hostile takeover. However, now that market capitilizations have fallen 60% of the all-time highs, there is some life in the hostile acquisition model. The EMC/NetApp/Data Domain contest is an example as is the CF Industries/Agrium transaction. This new "mini-wave" of hostile acquisitions differs from the hostile activity of the 1980s, though. This time around the acquirers are strategic buyers with cash and not LBO funds. For the time being leverage appears to be dead. One wonders whether the nature of the buyers will affect the way these hostile transactions are received in the marketplace and by the courts.