October 2, 2009
Hostile Takeover Market ... in India?
An article in The Economic Times of India raises that prospect. But, the takeover market in India is governed by the Securities and Exchange Board of India and is organized along the lines of the UK's Takeover Panel. So while there may be the prospect of unwelcome offers on the horizon, targets won't have the benefit of the defensive measures that have stymied the hostile acquisition in the US for years.
October 1, 2009
Transfer of Intellectual Property in a Merger
Nixon Peabody has a summary of a decision just handed down by the Sixth Circuit in Cincom Sys, Inc. v. Novelis Corp. The decision (below) is worth reading, especially if you are a young lawyer buried under a pile of assignment clauses deep in the back of the diligence room - though these days the diligence room is just as likely to be virtual. In any event, the court in Cincom expands the rule in the Sixth Circuit against the assignability of patents to software copyright licenses. So, where a software license is silent on the question of transfer to a third party, the presumption is that no assignment or transfer is permitted without the express permission of the licensor.
The court also interpreted Ohio General Corporation Law Sec. 1701.81 (A)(3) to include a "transfer" for the purposes of determining whether or not a merger is considered a "transfer" under the Ohio code. Notwithstanding the fact that amended code drops the word "transfer" from this provision, the court held that a merger constitutes a transfer by operation of law or otherwise. Here's the amended language that the court looked at:
(3) The surviving or new entity possesses all assets and property of every description, and every interest in the assets and property, wherever located, and the rights, privileges, immunities, powers, franchises, and authority, of a public as well as of a private nature, of each constituent entity, and, subject to the limitations specified in section 2307.97 of the Revised Code, all obligations belonging to or due to each constituent entity, all of which are vested in the surviving or new entity without further act or deed. Title to any real estate or any interest in the real estate vested in any constituent entity shall not revert or in any way be impaired by reason of such merger or consolidation.
If you're sitting in Ohio (or elsewhere in the Sixth Circuit) looking at assignment clauses, it's time to wake up.
Responding to an Unsolicited Takeover Offer
Frederick Alexander (Morris, Nichols) has a good primer from this summer on director duties in responding to an unsolicited takeover offer. Here.
GM: Saturn Sale Collapses
The proposed sale of GM's Saturn division to Penske has collapsed and it looks like the Saturn brand will head for the dust-bin. That's too bad. They had a great one price concept, but "corporate" never really set them free to follow through. In the end it became just another wasted GM brand.
If anyone might have had a chance to make it work it would have been someone like Roger Penske, who has a long history in the auto business but is still enough of an outsider. The Detroit Free Press reports that the main reason for Penske walking was an inability to find anyone (Renault, in particular) to build the next generation Saturn once the transition services agreement with GM would expire.
Penske said it had negotiated a deal to get products manufactured by another company but that agreement had fallen apart.
“That agreement was rejected by that manufacturer's board of directors,” Penske said in a statement. “Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction.”
I guess the manufacturer didn't see much of a future there. So another GM brand will go away. GM is still negotiating with a consortium of Swedish and Chinese investors over the future of the Saab brand. The sale of Opel to Magna looks set to sign next week. That leaves only the "brand that shall not be named" hanging on for the time being.
September 30, 2009
Sina and Focus Media Drop Deal and then Issue Stock
The FT is reporting today that two NASDAQ-listed Chinese companies, Sina Corp and Focus Media, are walking away from their proposed $1.7 billion sale of substantially all Focus Media's assets to Sina because the Chinese Ministry of Commerce refused to consider approving their application. In the Form 6-K filed by Sina and the Form 6-K filed by Focus Media yesterday, the respective chairman blame the termination of the agreement on the delay and uncertainty regarding closing.
While they were in the filing mood both companies also announced "private equity" transactions. Sina announced a $180 million sale of 5.6 millions shares of stock to a BVI entity controlled by Sina's CEO and other members of Sina's management chairman. The FT notes that the sale was at an 8.8% discount to lat close. For its part Focus Media announced a $142 million sale of 75 million shares to its executive chairman, an approximate 11% discount of its $10.78 closing price.
I wonder what that's about? I mean, if following a busted deal, one of the parties issues stock to an insider at a discount to the market price for some reason, then I guess that happens. Not often ... but hey ... why not? But, now both parties to a busted deal issue stock to insiders at a discount on the same day immediately following the termination of the deal. That's a bit much. So, I wonder what's up.
No Big Deal: GM & Chrysler
September 29, 2009
Hummer: The Last Word
September has come and gone and I've decided that I'm tired of waiting for the Hummer "deal". For reasons I've already stated, I don't think it will ever get done - even if both sides still say they're close to signing. And if it ever does happen, I'm convinced it will be an awful deal for the buyer.
Anyway, now comes the final nail in the coffin as far as I'm concerned. A study in the Chicago journal of Consumer Research found that Hummer buyers make moral statements through their purchase of Hummer vehicles. Those statements are patriotic and defending America and its frontier lifestyle from anti-American critics and foreigners. Okay ... so what happens when you sell that brand to the Chinese? Gotta start looking for different customers.
1) The deal actually happens and then notwithstanding statements to the contrary about the deal saving US jobs Tengzhong Heavy relocates all the Hummer assembly operations to China; or2) The deal actually happens and Tengzhong Heavy places a large order with AM General for H1 and H2 vehicles on behalf of an important Chinese customer. Leave out the luxury package. We'll just take them all in green, thanks.
September 28, 2009
CF - Terra - Agrium Saga Continues
The Deal Professor has been following what he aptly calls "The Forever War" more closely than I, but I thought the recent developments worth commenting on, if briefly.
Now, Terra doesn't have a shareholder rights agreement on file with the SEC, so an accumulation of 7% doesn't trigger a dilution as it might were the board of Terra to have adopted one. This, of course, raises the question why the board didn't adopt one? It can be done easily enough and certainly the board must have been aware that someone (guess who) was actively building a bloc. A pill would have permitted the board to to continue to stave off an unwanted CF Industries bid while conserving cash that it might use in its attempted acquisition of Agrium.
Instead, it announced a $750 million cash dividend to shareholders. The dividend will make the company less attractive to CF, but at the cost of sapping the strength that Terra might otherwise need to acquire Agrium. Oh, and given that CF is now a 7% shareholder, the potential hostile buyer gets a nice dividend of about $7.50 per share for its troubles.
Plural and Majority Voting
Today's WSJ has a good article on the beauties of plural voting for directors. The machinations of corporate voting can be hard for normal people to understand. In fact, when I introduce corporate voting to my introductory corporations classes, I usually have to rely on visual aids involving horses and finish lines. Frustration with plural voting gave rise to "withhold" campaigns, majority voting policies (example: Sherwin-Williams), majority voting bylaws (Morris, Nichols memo on majority voting bylaws) and then finally the amended sec. 141(b).
The knock on all of these developments was that even though a majority of shareholders might vote to withhold, that a director could nevertheless still retain her seat. The WSJ reported Riskmetrics' data on voting at 50 companies. Ninety-three directors failed to get a majority votes. Directors at two companies that had either majority voting policies or bylaws submitted their resignations as required, but then were promptly reappointed to the board. Apparently, no directors actually lost their seats following an election in which they received less than 50% of the vote. So much for shareholder democracy.
I think Webb Crockett, a director at Southwest Airlines who garnered just 46.3% of the vote, sums it up nicely, "I have the grey matter to serve...How many people who voted against me have any knowledge of my expertise about Southwest and the airline industry?" Yummy, cake.
September 27, 2009
One Year Later: Financial Regulation
Three things worth reading/listening to: 1) Ezra Klein interviews Barney Frank on the future of financial regulation. 2) Last week Roberta Karmel of Brooklyn Law School sat down with Joe Stiglitz and Jesse Eisinger to talk about the future of financial regulation. The panel was moderated by Theresa Galbaldon of GW Law School. The audio for the panel - New World of Financial Regulation - can be found at the SEC's Virtual Museum. 3) On the other hand, Gerard Baker provides a counter-view arguing that we should resist the temptation to "do something" here.