M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Saturday, October 31, 2009

Oracle withdraws Russian Antitrust Filing re Sun

That's according to eWeek and the English translation of a notice from the Russian Antritrust authority.  I have no idea why Oracle would pull its pre-merger approval application.  The "reasonable best efforts" language in the merger agreement would suggest that they don't pull it.  I'm open to ideas.


Update:  Smarter people than me have pointed out that the reason for Oracle pulling its Russian filing may simply be a function of dealing with the Russian bureaucracy.  Here's an explanation from Dow Jones that makes sense:

The Russian antitrust hitch is largely due to "procedural" issues, people familiar with the matter said. In Russia, once the antitrust body has been notified of a deal the companies involved have a maximum of 90 working days to get the deal done. The system is rigid, and Oracle was told it either had to withdraw its notification or face a blocking decision from the Russians, one person said.

The Russian authorities basically want to see how Europe is going to deal with the issue first, the person added.

October 31, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, October 30, 2009

Pfizer gives shareholders "say-on-pay"

Pfizer is kind of forward-looking when it comes to these kinds of governance issues.  By that I mean - they get pushed, they resist, then they rethink their position.  Last time around they adopted a majority-voting policy very early on.  Now, it's say-on-pay.  Here's the release:

Pfizer Inc. announced that its Board of Directors has approved giving shareholders an advisory vote on executive compensation. The vote will first occur at Pfizer’s Annual Meeting of Shareholders in 2010 and will take place on a biennial basis thereafter.

“The Board’s action continues Pfizer’s long tradition of seeking and responding to shareholder input on compensation and other corporate governance topics,” said Matthew Lepore, Pfizer’s vice president and chief counsel for Corporate Governance. “The advisory vote is an additional means of obtaining feedback from our shareholders about executive compensation, which is set by the Compensation Committee of the Board and is designed to link pay with performance. This feedback will supplement our ongoing investor outreach activities on a broad range of corporate governance topics, which will not diminish with the adoption of this advisory vote.”

Timothy Smith, Senior Vice President Environment, Social and Governance Group for Walden Asset Management, and Stephen Viederman of The Christopher Reynolds Foundation said, “We commend Pfizer for taking this step. Once again, Pfizer has exhibited leadership in responding to investor concerns, a proactive approach to investor communications, and strong corporate governance.” The Christopher Reynolds Foundation sponsored a shareholder proposal regarding advisory votes on executive compensation at Pfizer’s 2009 Annual Meeting of Shareholders.


October 30, 2009 in Executive Compensation | Permalink | Comments (0) | TrackBack (0)

Dealmaker of the Week

Congratulations to my partner, Monica Shilling for being named Dealmaker of the Week by AmLaw Daily.

As the story notes, in a complex M&A transaction involving "a multitude of players," including lawyers from Proskauer, Latham, S&C, Sutherland, Venable, and Wilkie Farr, Monica was the "one attorney . . . charged with sorting out the complicated deal."  The story goes on to quote our client, who says "This deal wouldn't have happened without her--She quarterbacked the whole thing."

The whole story can be found here.


October 30, 2009 in Deals | Permalink | Comments (0) | TrackBack (0)

Thursday, October 29, 2009

Keep It Simple

So you graduated with a fancy law degree and picked up some Latin phrases that you can use to impress dates and pass the Bar (congratulations, by the way).  But guess what, the SEC wants none of it in your filings and it's best left out of your merger agreements, too.  Your clients will thank you.  Young lawyers should download and bind a copy of the SEC's plain language guide and keep it on their shelves.  

If you're of a mind, then maybe you should drop by the Center for Plain Language's symposium today (HT: Felix Salmon). 


October 29, 2009 | Permalink | Comments (0) | TrackBack (0)

Wachtell's 2009 Proxy Season Review and Look Ahead

...is available on the NY Law Journal's site, here.  


October 29, 2009 in Proxy | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 28, 2009

Assessing the Chrysler Bankruptcy

Mark Roe and David Skeel have a new paper, Assessing the Chrysler Bankruptcy. In the paper they argue that the Chrysler 363 sale pushes us back to the practices of the 19th century - those were some pretty dark days from a corporate governance perspective with bought courts appointing receivers left and right.

AbstractChrysler entered and exited bankruptcy in 42 days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised considerable concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the 19th and early 20th century equity receiverships, and that its potential, if followed, for disrupting financial markets surrounding troubled companies in difficult economic times is more than small.


October 28, 2009 | Permalink | Comments (1) | TrackBack (0)

The Warning

This is worth watching if you missed it when it ran earlier this week.

October 28, 2009 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Forstmann on Future of Wall St.

Teddy Forstmann and Charlie Gasparino on the financial crisis, executive compensation, corporate risk taking and the future of Wall St.

October 28, 2009 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Night School?

Umm...I don't care if it's on the front page of today's NY Times, this is one academic trend that I am not interested in following:

BOSTON — Winston Chin hustles on Tuesdays from his eight-hour shift as a lab technician to his writing class at Bunker Hill Community College, a requirement for the associate’s degree he is seeking in hopes of a better job.

He is a typical part-time student, with one exception. His class runs from 11:45 p.m. to 2:30 a.m., the consequence of an unprecedented enrollment spike that has Bunker Hill scrambling to accommodate hundreds of newcomers. In the dead of night, he and his classmates dissect Walt Whitman poems and learn the finer points of essay writing, fueled by unlimited coffee, cookies and an instructor who does push-ups beforehand to stay lively.

Although now that I think about it, there might be some value in having law students take the business negotiations class sometime after midnight...


October 28, 2009 in Academic Jobs | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 27, 2009

AOL Spin-off Update

Time Warner recently filed an amendment to its Form-10 which includes and Information Statement describing the overall transaction.  To accomplish the spin-off, Time Warner will, following the reorganization, distribute all of its equity interest AOL to Time Warner shareholders on a pro rata basis. After the spin-off, Time Warner will not own any equity interest in AOL and AOL, will be independent from Time Warner even though the population of shareholders will be the same. The spin-off transaction does not require a vote of Time Warner's shareholders.

The centerpiece of the spin-off transaction is the Separation and Distribution Agreement with AOL (exhibit 2.1).  The effect of the Separation and Distribution Agreement (along with the ancillary agreements) will be to finally undo this "Deal from Hell".  The Separation Agreement itself reads like an amicable divorce.  Who gets what and who is responsible for what, when.  Schedule II to the Agreement includes a list of assets that assigns them to either AOL or Time Warner.  For example, Time Warner gets 11 AOL-related patents and AOL's Gulfstream jets.  

Time Warner also gets to keep something like 500+ web addresses, all of which include some version of the AOL and Time Warner name, for example:  america-online-time-warner.net, aolandtimewarner.com, and aolcnn.com.  My favorite?  I suppose it has to be aolfucktimewarner.com or maybe boycottaoltimewarner.com or even not-aol-time-warner.com.  Time Warner also gets a list of Harry Potter-related websites.

The filing includes all of the ancillary agreements and provides a pretty good example of how, if you happen to be interested, one goes about structuring a spin-off.  In addition to the Separation Agreement there is a Transition Services Agreement (tax audit, and general contracting/construction management), an IP Cross Licensing Agreement (you license all my IP, I license all your IP), a tax opinion (no taxable event pursuant to Sec.332 and 337), an Employee Matters Agreement (they're yours, deal with them), and a Search Services Agreement (you'll still do that for me, right?), among many others.  The list of agreements is really pretty lengthy.  Working one's way through these documents, particularly the employment contracts, feels a bit voyeuristic.  

This deal looks set to close on or about November 12 of this year.


October 27, 2009 | Permalink | Comments (1) | TrackBack (0)

PE in Vietnam

Yesterday, the FT carried a piece announcing that TPG would be investing $35 mln in a private Vietnamese company, Masan Group.  I'm noting this for a couple of reasons. First, I have a long-standing personal/professional interest in things that happen in Vietnam.  Second, this investment comes against the backdrop of reports earlier in the month that PE investors had turned off the spigot to new Vietnam country funds.   To be honest, that's not altogether surprising.  It's still a relatively small (85 million people!) place and investments there are hands-on projects that require more spade work than you can probably imagine.  At the same time the past few years have seen an explosion in the growth of PE interest in the country resulting in much more money chasing deals.  That said, the Masan Group is a real company that's enjoyed quite a bit of success with a strong management team. 

Third, you can be sure that this deal will be well documented.  I wouldn't be surprised if a recognizable US- or UK-based law firm did the work.  I can guarantee you though that TPG is holding its breath a bit and hoping it will all work out as it signs up.  TPG would be smart to negotiate a tight deal with an airtight offshore dispute resolution clause.  If not, remember that Masan Group is a Vietnamese company and disputes amongst the stockholders will be resolved by the Vietnamese economic courts.  Let's be charitable and just say that these courts are not quite the Chancery Court of Delaware.  


October 27, 2009 in Asia | Permalink | Comments (0) | TrackBack (0)

Monday, October 26, 2009

Say on Pay - Great White North Edition

According to the Canadian Globe and Mail, say-on-pay is voluntarily sweeping Canada's financial services industry:

Canada's nine largest financial services companies have reached an agreement to give shareholders a vote next year on the same resolution approving the firms' compensation policies for top executives.

The rare show of co-operation among the largest banks and insurers comes as they are preparing to give shareholders their first vote on executive compensation, a practice known as “say on pay.”

Meanwhile, back down in the US, Rep. Frank's say-on-pay bill continues to plod along tied to regulatory reform of the financial sector.


October 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunday, October 25, 2009

Dodgers Cat-Fight in the Works

I like sales of sports teams.  It's one of the few times I can read the sports pages and still pretend to be working.  That said, the pending divorce of Dodgers owner Frank McCourt from his wife, Jamie, is shaping up to be a drag-out battle over who will own the team.  The LA Times is reporting that she is already lining up investors after having been fired from her position as the team's CEO.   

The Dodgers Organization is set up as an LLC.  Presumably they have some version of an "I cut-you choose" buyout clause in their operating agreement.  There's a nice chapter in the Oxford Handbook of Political Economy on fair division, with plenty of cake cutting references.  I cut-you choose buyout provisions turn out to be the simplest and fairest way to get parties, even parties who dislike each other to the point of divorce, to reveal their private valuations of hard to value assets like baseball teams.   That's probably why they are so prevalent. 

October 25, 2009 in Deals | Permalink | Comments (0) | TrackBack (0)

BAC-ML: More E-Mail

OK, so now that BAC has started turning over internal e-mails to the House Committee on Oversight, it's not looking so good ... especially for the lawyers.  Law.com/Corporate Counsel has had access to the e-mail and it's quite a tangled web. 

The e-mails show that early on the morning of Dec. 19 [Eric] Roth [, a litigation partner at Wachtell] advised the bank's chief executive, Ken Lewis, and its interim general counsel, Brian Moynihan, on how difficult and financially risky it would be to try to invoke a so-called MAC -- or material adverse change -- clause, which would allow the bank to get out of the merger with Merrill.

But another e-mail from associate general counsel Teresa Brenner to Moynihan, sent several hours later and on the same day as Roth's e-mail, says, "Eric made a very strong case as to why there was a MAC" during a conference call with some officials from the Federal Reserve.

Later, Roth writes another e-mail to the legal/business team:

The e-mail says any attempt to invoke the MAC would certainly cause Merrill to file suit. Roth then lists a half dozen reasons why Merrill's arguments could prevail in court. It lists no argument in Bank of America's favor. But perhaps the most compelling fact on the list was this one: The merger deal is governed by Delaware law and "no Delaware court has ever found that a MAC occurred permitting an acquiror to terminate a merger agreement."

Yeah, this isn't turning out well for the lawyers.  It's looking like on the one side you had Treasury and the Fed saying do this deal or the economy goes down the tube and then on the other side BAC trying to come up with arguments to get the Treasury/Fed to subsidize what at the time was looking like a bad deal.  All the time, the shareholders were told nothing.


October 25, 2009 in Cases, Material Adverse Change Clauses | Permalink | Comments (0) | TrackBack (0)

Saturday, October 24, 2009

Grading Google

Talk about a serial acquiror, over at Silicon Alley Insider they've assembled a list of 52 of Google's recent acquisitions.  Silicon Alley Insider has done us all a service by grading Google's efforts.  The grades are decidedly mixed  - an "F" for Dodgeball (what was that?) and an "A+" for Applied Semantics among others.  It's hard to know whether the grades really matter given that Google says it intends to use the acquisitions as a way of doing back door hiring of talented teams rather than to acquire useful new technology.  Hmm.  Why not just hire them and save on the legal bills? 



October 24, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, October 23, 2009

Australian Takeovers Panel

The Australian Takeovers Panel is presently seeking comment on a rewrite of their procedural rules.  The Takeover Panel there is modeled on the UK Takeover Panel.  Comments are due by October 26! 

In May, the Takeovers Panel began to revisit their rules (GN 7) with respect to deal protection measures, no-shops/no-talks, go-shops, asset lock-ups, break fees (limited to around 1% of equity value of the target) and other deal related provisions.  While all this seems familiar to those of us who think about through the lens of Delaware law, some of their approach takes a decidedly British view on takeovers.  For example, their statement on "frustrating actions" puts the shareholders and not the board clearly in the driver's seat (right side, obviously) when it comes to deciding whether or not to accept an offer:

Although it is generally the responsibility of a company’s directors to make company decisions, decisions about control and ownership of the company are properly made by its shareholders. Where a corporate action could frustrate a proposal concerning control or ownership of a company, the Panel will generally require that shareholders be able to determine the control and ownership of the company. The Panel expects that target company directors will act appropriately in such situations and that references to the Panel on these matters will not be common.

Action taken by a target company is likely to frustrate a takeover bid if taking that action has a material effect on the objective of the bid. Such action will usually allow the bidder either to rely upon a condition in its offer, causing the offer to lapse, or allow a bidder not to proceed with a genuine potential offer. 


October 23, 2009 | Permalink | Comments (0) | TrackBack (0)

Thursday, October 22, 2009

Oracle Fiddling While Sun Burns?

MySQL, an afterthought in Oracle's decision to buy Sun last April has turned into a major obstacle with the EU Competition Commission standing in the way over the fate of the technology.  According to PC World representatives from Oracle met with the commission yesterday and, well, it didn't go well. 

In a meeting with Oracle President Safra Catz in Brussels on Wednesday, Competition Commissioner Neelie Kroes "expressed her disappointment that Oracle had failed to produce, despite repeated requests, either hard evidence that there were no competition problems or, alternatively, proposals for a remedy to the competition problems identified by the Commission," a Commission spokesman said.


Meanwhile Sun's sales have been declining as rivals IBM and Hewlett-Packard take advantage of the uncertainty around Sun's business with aggressive migration plans. Oracle CEO Larry Ellison said last month that Sun is losing $100 million a month while it waits for the deal to close.

He has also asserted that Oracle's database competes with Microsoft's SQL Server and IBM's DB2 products, and not with MySQL.

Sun announced a big round of layoffs yesterday, citing the additional time it is taking to close the deal with Oracle. The company said it will lay off 3,000 workers around the world over the next 12 months. Oracle is widely expected to make deeper job cuts if the deal closes.

Although the delay is expensive, short of reaching a deal with the Commission, there's no real end in sight for Oracle.  The Merger Agreement (Sec. 8.01(b)) won't permit Oracle to walk for antitrust reasons until at least April of 2010.  That's six months, or $600 million in losses away. 

In Section 6.10 (below), the parties included what appears to be relatively modest antitrust language. 

(b) Without limiting the generality of the undertakings pursuant to this Section 6.10, the parties hereto shall (i) provide or cause to be provided as promptly as practicable to Governmental Authorities with regulatory jurisdiction over enforcement of any Antitrust Laws (each such Governmental Authority, a “Governmental Antitrust Authority”) information and documents requested by any Governmental Antitrust Authority or necessary, proper or advisable to permit consummation of the transactions contemplated by this Agreement, including preparing and filing any notification and report form and related material required under the HSR Act and any additional consents and filings under any Antitrust Laws as promptly as practicable following the date of this Agreement (but in no event more than fifteen (15) Business Days from the date hereof except by mutual consent confirmed in writing) and thereafter to respond as promptly as practicable to any request for additional information or documentary material that may be made under the HSR Act and any additional consents and filings under any Antitrust Laws; (ii) use their reasonable best efforts to take such actions as are necessary or advisable to obtain prompt approval of consummation of the transactions contemplated by this Agreement by any Governmental Authority; and (iii) use their reasonable best efforts to contest on the merits, through litigation in United States District Court and through administrative procedures in relation to other Government Authorities, any objections or opposition raised by any Governmental Authority;provided, however, that nothing in this Section 6.10 shall require Parent to appeal any Order from a Governmental Authority.

What are "reasonable best efforts" anyway?  The reaction we're hearing from the EU Competition commission suggests that Oracle could be doing something "reasonable" to assuage their concerns, but it's not. "Reasonable best efforts" is one of those ambiguous phrases, like materiality, that people think have meaning, but when one tries to give them meaning, they get harder to actually pin down. One would think that the mounting losses at Sun would be motivation enough for Oracle to give its dealings with the  EU its best effort, but apparently it's not.   I find it hard to believe that Oracle is unable (or unwilling) to respond to EU requests for a report on the marketplace and competition with respect to MySQL.  So, while Oracle digs in its heels over MySQL, Sun is left to suffer.


October 22, 2009 in Antitrust, Transactions | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 21, 2009

Bulow and Klemperer on Auctions

Jeremy Bulow and Paul Klemperer have a new paper out in the current issue of the American Economic Review, Why Do Sellers (Usually) Prefer Auctions?.  Here's the abstract:

We compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether to enter the bidding. The sequential process is always more efficient. But preemptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry -- precisely because of its inefficiency -- it usually generates higher expected revenue. We also discuss the effects of lock-ups, matching rights, break-up fees (as in takeover battles), entry subsidies, etc. (JEL D44, G34, L13)


October 21, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, October 19, 2009

Reuters Interview with Vice Chancellor Laster

Reuters sat down with the newest Vice Chancellor.  His thoughts on the financial crisis:

"With the crash in the banking system still ringing loud in everyone's ears," said Laster. "If there was ever a moment where a politically sensitive Delaware judiciary might have reached out to change Delaware law, that was it. Oversight law is not going to change for a moment-specific reason."


"I don't think it's fair to say about the financial crisis that directors weren't trying to do a good job. Directors were trying to do a good job," he said.

"Now it is always nice after the fact to try to find someone else to hold the bag, but I think it critically important we not to judge these things in hindsight. The core question for us is always: At the time the decision was made, what were the directors thinking?"


October 19, 2009 in Delaware | Permalink | Comments (0) | TrackBack (0)

Saturday, October 17, 2009

Business Week-Bloomberg

Just realizing that this website is apparently worth more than Business Week.  I'm not sure how I feel about that.


October 17, 2009 | Permalink | Comments (0) | TrackBack (0)