Tuesday, May 4, 2010
Apparently, there are limits to the use of poison pills in Canada. As you likely know, Carl Icahn has a tender offer pending for all of the outstanding stock of Lions Gate. In response to Icahn appearing, Lions Gate amended its shareholder rights plan. Icahn then brought an action with the British Columbia Securities Commission seeking to have the plan nullified. Last week, the British Columbia Securities Commission ordered a halt to any trading of securities to be issued to be issued pursuant to Lions Gate's pill. Notwithstanding the order, Lions Gate management is still scheduled to submit the plan to LGF shareholders for approval on May 12, 2010. To that end, management is still recommending shareholders vote in favor.
A couple of things worth noting with respect to shareholder rights plans in Canada. In general, the provincial securities commissions have the right to review such plans. In reviewing such plans, the commissions will apply their own version of intermediate scrutiny. In re Royal Host provides the Canadian framework for thinking about whether or not a board must pull a pill. In re Royal Host entails and examination of relevant factors, including: 1) when the plan was adopted; 2) whether shareholders had approved the plan; 3) whether there is broad support for the continued operation of the plan. This standard has been widely adopted by Canadian regulators - the provincial securities commissions. In a subsequent case, Falconbridge, the Ontario Securities Commission applied the Royal Host approach in nullifying a shareholder rights plan. The BC Securities Commission has also previously applied the Royal Host approach.
Although the Commission did not make its reasons for nullifying the Lions Gate pill known, one can guess that the BCSC applied the Royal Host factors to the facts (pill adopted in response to Icahn appearing; shareholders have not yet approved the plan; and there appears to be shareholder support for the Icahn offer) and decided that on balance, the shareholders would be better off without the pill in place.
Monday, May 3, 2010
"Say on pay" measures were on the proxy for DuPont and Johnson & Johnson. In both cases shareholders rejected the measures (DuPont here and J&J here). Don't know if that's typical of all say on pay measures. Though I'll admit to being surprised at the results. Meanwhile, the financial reform package making its way through Congress contains a mandatory say on pay provision. Reticence to move too quickly out in front of the Feds might account for the failure of the question at both DuPont and J&J.
Last month the second circuit affirmed the district court's opinion in Thesling v Bioenvision - holding that issuers have no duty to disclose merger negotiations. Whether and when one has a duty to disclose merger negotiations is a regular question that comes up with students. Bioenvision provides a succinct summary of the law on this question.
The plaintiffs claimed that when Bioenvision failed to disclose that it was engaging in merger negotiation with Genzyme that this failure to disclose caused several other statements to be materially misleading. The court's opinion is very short and reads in relevant part:
Thus, it is by now axiomatic that "a corporation is not required to disclose a fact merely because a reasonable investor would very much like to know that fact." In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d Cir. 1993). As the district court correctly observed, however, no express duty requires the disclosure of merger negotiations, as opposed to a definitive merger agreement. Moreover, "[s]ilence, absent a duty to disclose, is not misleading . . . ." Basic Inc. v. Levinson, 485
224, 239 n.17 (1988). For substantially similar reasons to those stated by the district court, we hold that plaintiff has not identified any part of the seven challenged statements that were rendered materially misleading by the alleged omissions relating to Bioenvision's merger negotiations. This pleading deficiency is sufficient to warrant the affirmance of the entire portion of the district court's decision that is challenged in this appeal, including the dismissal of plaintiff's claims against defendants-appellees for control-person liability. See ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007). U.S.
Sunday, May 2, 2010
Who doesn't remember the 1985 Delaware Supreme Court case, Smith v Van Gorkom, from their basic corporations course? That case, which found that directors of TransUnion were grossly negligent in their handling of the sale of the company to Jay Prtizker's Marmon Group. Although highly controversial because directors were held personally liable, it turned out that Van Gorkom was the first of a series of cases in which the courts began to develop a jurisprudence to grapple with the 1980s takeover boom.
Well, late last week, the Pritzker family called it quits and sold their controlling stake in TransUnion LLC to Madison Dearborn, a private equity shop. In the years since the acquisition, TransUnion underwent a thorough rebirth - from lazy railroad car shop to one of three powerhouse credit bureau. Now, with the Pritzker's moving on, there may be no one left there to remember the important role that TransUnion and its board played in developing the law - even if they were grossly negligent! (And there is lots of controversy still about that.)