August 1, 2009
Vice Chancellor Lamb and his replacement
A found farewell to Vice Chancellor Lamb and then some scuttlebutt
on a potential replacement in the Delaware
Those who confirmed they applied for the post are: Delaware Superior Court Judge Mary Miller Johnston; J. Travis Laster, a partner with Abrams & Laster in Wilmington; Joel Friedlander, a partner with Bouchard Margules & Friedlander in Wilmington; and Bruce Silverstein, a partner with Young Conaway Stargatt & Taylor in Wilmington. Richard Forsten, who is a partner with Saul Ewing in Wilmington, declined to comment on speculation that he applied. Robert Saunders, a partner at Skadden, Arps, Slate, Meagher & Flom in Wilmington, whose name had been suggested earlier this month, said he did not apply.
The paper says to expect things to move on a nomination by mid-August.
July 31, 2009
Executive Compensation Blog
Need to keep up with say-on-pay and the proposed rules on expanded comp disclosure? I'd start over at David Chun's Equilar CEO Blog. He spends all his time on these issues so you don't have to. The monthly newsletter is handy, too.
Say-on-Pay Starting to Move
Rep. Barney Frank’s “say-on-pay” bill, also known as the Investor Protection Act of 2009 (Title IX, Subtitle D of the Financial Regulatory Reform package), is making some headway. It’s expected to get a vote on the floor of the House this morning. The bill will amend Section 14 of the 34 Act. The bill requires that all members of the comp committee will be independent and strengthens compensation committee powers.
In addition, it requires a
separate, annual non-binding vote to approve the compensation of
executives. In connection with a merger or acquisition, boards
will be required to seek a separate, non-binding vote to approve
golden-parachutes or other change of control payments.
On the other hand, Prof. Charles Elson argues that shareholders should be careful what they wish for. Say on pay may not be a panacea. Evidence from the UK experience where say-on-pay has been in place since 2002 suggests that say-on-pay doesn't stop the increase in size of pay packages. They have continued to increase there in spite of say-on-pay.
In any event, one should expect NY Attorney General Andrew Cuomo's new report on executive compensation to add more fuel to the fire. The report, No Rhyme or Reason: The "Heads I Win Tails You Lose" Bank Bonus Culture, is all fire and brimstone. From the executive summary:
"When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well."
July 30, 2009
Chinese Auto News...
According to the China Car News, the NDRC has given Geely, a company that actually makes cars, the go ahead to bid for Ford's Volvo. No word on Tengzhong Heavy Industrial Machinery's application to buy Hummer.
Boatloads of Money…or Not
It is days like today that have corporate directors thanking
the gods for the creation of the business judgment rule. Last year, Yahoo passed on a $48bn offer from
Microsoft. Its market cap is now
somewhere around $20bn and falling. Carol
Bratz famously said that she’d do the deal with Microsoft that Jerry Yang
passed if “boatloads
of money” were involved. Well, she
deal, sort of, but where’s the money? The Microhoo
link-up is no doubt good for Microsoft, but an extra
$275 million a year for the first 5 years for Yahoo hardly seems like “boatloads”
given what was on offer. What happens
long-term after Yahoo has handed over search and then ad revenue to Microsoft? Yahoo says that the cash has been replaced with "boatloads of value." Unfortunatelty, the source of the new value is "too hard to explain" on a conference call. Although a lawsuit for breach of fiduciary duties
would not doubt fail given the protection afforded by the business judgment
rule, I wonder when the first one will be filed.
Help Wanted - Business Law Prof
ARIZONA STATE UNIVERSITY
Tempe, Arizona Sandra Day O'Connor College of Law
Associate and Full Faculty Positions
The Sandra Day O'Connor College of Law, under Dean Paul Schiff Berman, is poised for transformative growth in the quality and scope of its student body, its faculty, and its programs. As part of this ambitious agenda, the College of Law invites applications for associate and full faculty positions at all levels, including highly distinguished lateral and entry candidates.
We invite applications from outstanding individuals in any subject area, although there is some preference for individuals who specialize in business law (including business associations, securities, and finance), commercial law (including bankruptcy and consumer law), land-use and sustainability, law and technology, patent law, and transnational issues. Finally, individuals with established records of scholarly productivity, experience and interest in administration of centers, and a strong commitment to institutional innovation and growth are encouraged to apply.
Candidates must have a J.D. degree, or a Ph.D. degree in an area related to the law school curriculum. Candidates must also have teaching, research, and other professional experience appropriate to rank.
Applications will be reviewed beginning September 15,2009; if not filled, reviews will occur on the first of the month thereafter until search is closed. Please submit resume to:
CONTACT: Ms.Jenny Bishop Coordinator for Appointments Committee Sandra Day O'Connor College of Law Arizona State University 1100 S. McAllister Avenue Tempe, AZ 85287-7906
Additional information about the Sandra Day O'Connor College of Law and Arizona State University is available at:
ASU is an equal opportunity/affirmative action employer.Good luck!
July 29, 2009
What must a Board do to satisfy its Revlon duties?
Milbank, Tweed reviews the decision of the Delaware Court of Chancery in Police & Fire Ret. Sys. of the City of Detroit v. Bernal, et al. and concludes
[The Delaware Supreme Court’s recent decision in Lyondell Chemical Company v. Ryan] confirmed that directors may aggressively pursue a transaction that they determine in good faith to be beneficial to shareholders, despite the absence of an auction process, so long as their actions are reasonable and aimed at obtaining the best available price for shareholders. However, . . . the language used by the Court in Bernal certainly suggests that when a company has attracted more than one bidder, the best way for a board to satisfy its Revlon duties and maximize shareholder value is to follow a robust sale or auction process that avoids taking actions that could be perceived as favoring one bidder over another. As Court of Chancery decisions in recent years have demonstrated, when only one bidder exists, Delaware Courts are reluctant to upset the deal and risk losing an attractive opportunity for target company shareholders. In contrast, when more than one bidder is involved, Delaware Courts are more comfortable scrutinizing a deal and taking steps to permit an auction to continue.
Get the full story here.
July 29, 2009 in Asset Transactions, Deals, Going-Privates, Leveraged Buy-Outs, Management Buy-Outs, Merger Agreements, Mergers, Private Equity, Takeovers, Transactions | Permalink | Comments (2) | TrackBack
Vice Chancellor Lamb's Last Day
July 28, 2009
Another Lesson for Young M&A Lawyers
I’ve told students in my Acquisitions Workshop repeatedly
that insider trading is no way to start a long and fruitful career. Of
course, none of them think that they’ll be so stupid as to do anything like
that. But I remind them, it doesn’t
always happen like in the movie Wall
Street. Dennis Berman’s column in
the WSJ (Insider
Affair) gives us yet another example of how easy it is to make the kind of
poor decisions that can end up in jail time.
Last May, the SEC charged James Gansman, a former partner at E&Y, and his mistress, Donna Murdoch with insider trading. Here’s the civil complaint. The DOJ also filed criminal charges in the matter. Gansman bragged to Murdoch about deals he was working on, likely to impress her and win her affections, who knows. In one case he tipped to Murdoch “news of a coming takeover to be used in one of Murdoch’s children's stock-market simulation games at school.” It appears that Gansman was rather indiscrete with information that his clients wanted treated “super strictconfidential” [sic].
Of course, Gansman never actually traded or made any money himself. He may have even believed that Murdoch was loyal to him and would keep his confidences. Unfortunately for him, that wasn’t the case. Murdoch traded on much of the information that she got from Gansman and made more than $500,000 in profits. She even shared tips with her father who also apparently traded on the information. The fact that Gansman didn’t profit financially as you’ll remember from law school is not enough to shield one from liability in tipper/tippee cases. Gansman is now going to jail, convicted on six counts of securities fraud.
Lesson for young M&A lawyers: If you’re working on a deal, don’t talk in elevators, don’t brag to friends or significant others. Oh, and even if they did pay for your legal education, your parents don’t really need to know what deal your working on.
Ticketmaster-Live Nation Fireworks
Yesterday, Rep. Bill Pascrell (D-Springsteen) sent a letter to Assistant Attorney General Christine A. Varney urging her to investigate the pending merger between Ticketmaster Entertainment, Inc. and Live Nation, Inc. for anti-trust law violations. The letter was co-signed by 50 other members of Congress. Rep. Pascrell is also primary sponsor of the Better Oversight of Secondary Sales and Accountability in Concert Ticketing Act (BOSS ACT!!). Sen. Herb Kohl (D-WI), Chairman, Subcommittee on Antitrust, Competition Policy and Consumer Rights sent a similar letter. Sen. Kohl held hearings on this merger last February. The webcast is here. In case you haven't figured it out by now, Bruce Springsteen has been vocally opposed to this transaction from its announcement. We'll see if The Boss has any pull.
July 27, 2009
Activision Litigation – Game Over
Last week Chancellor Chandler dismissed Wayne County
Employees’ Retirement System v Corti (the Activision litigation). The plaintiffs in the case made a number of
claims – you can probably guess what they were.
What caught my eye in the opinion was how the court dealt with the Revlon claims against the board. FYI: The business combination agreement in
question is here. The opinion can be found over at AmLawDaily.com along with commentary.
The court dismissed claims that the directors of Activision failed in the obligations under Revlon by not conducting an independent market check before agreeing to a sale of control. By the way, the transaction is slightly out of the ordinary in that it’s a two step deal. In the first step, Activision issued new shares to Vivendi giving them 52% control of the stock, then Vivendi engaged in a tender offer for the outstanding shares of Activision that it did not control.
In dismissing the claims against Activision’s board, the court reiterates what is by now settled Delaware law – directors are not liable for failing to carry out a perfect process during in a sale of control. There is “no blueprint” for meeting one’s duties under Revlon. Indeed, citingthe Delaware Supreme Court's decision in Lyondell v. Ryan, the court noted that “the relevant question is whether the Director Defendants ‘utterly failed to attempt to obtain the best sale price’” and not whether the process was perfect.
“Utterly failed to attempt” now that’s not an active auction or even much of a market check. In fact, that’s a pretty low bar when it comes to assessing whether directors have met their obligations under Revlon. Whatever happened to the board as auctioneer. If that’s not low enough, the court offers up Lyondell’s “knowingly and completely failed to undertake their responsibilities” language.
It’s hard to imagine what kind of inaction by directors can be the product of ‘utterly failing to attempt’ and ‘knowingly and completely failing’. I mean, it's really got to be bad. I imagine that if the facts of Revlon re-appeared in 2009 post-Lyondell that the case might even come out a different way given these standards. In Revlon, court struck down a lock-up granted to a favored bidder. That’s hardly an utter failure to attempt to obtain the best sale price.
M&A Market Trends Subcommittee
At the Chicago meeting of the M&A Market Trends Subcommittee of the ABA Business Law Section(scheduled for 10:00 a.m. to 11:30 a.m., local time, on Saturday, August 1st):
Jennifer Muller of Houlihan Lokey will discuss deal stats for the first six months of 2009.
Wilson Chu and other members of the working group for the 2009 Private Target M&A Deal Points Study will provide a preview of selected results from that study.
Jim Griffin and other members of the working group for the 2009 Strategic Buyer/Public Target Deal Points Study will provide a preview on the public company side of things.