M & A Law Prof Blog

Is Delaware Losing?

John Armour, Bernie Black, and Brian Cheffins have a new paper, Is Delaware Losing its Cases? that argues Delaware may well be losing its competitive edge with respect to corporate litigation.  They focus their research on what Wachtell's Ted Mirvis has called the "Anywhere But Chancery" trend.   They put together a dataset of 729 corporate law opinions over 15 years and conclude that Delaware is losing its market share with respect to the types of cases that have typically called Delaware home.  Here's an interesting chart from their paper that makes this point:

 
The big move over the past decade appears to be to the Federal courts.   That's consistent with other scholarship that suggests that states don't really compete for incorporations and that the only viable competition is with Federal regulators.  However, it looks like since the 2002 states have also begun to hear and apply Delaware cases. If I were sitting in Wilmington, this graph would be disturbing.  

Contrast the findings here with findings in Cain and Davidoff's paper, Delaware's Competitive Reach that looked at merger agreement and found that the overwhelming majority of agreements (60%) select Delaware as their choice of forum. 

State competition for incorporations and governing law it seems is still a live issue.

-bjmq

Red Sox Sold!

Not quite an April Fool's joke.  According to Bloomberg the NY Times, which owns a portion of New England Sports Ventures - the Red Sox parent, sold 50 its 750 units to Henry McCance of Greylock Partners.  The Times announced on an earnings call last summer that it planned to sell its 18% stake in the Sox by January 2009.  They're a little behind schedule and still looking for buyers I guess.  I wonder how much 1 unit costs?  Wonder if anyone will pitch in with me to by one? 

-bjmq

Poison Pill Use Declines

A Reuters piece cites FactSet SharkRepellent data to note that the number of shareholder rights plans in effect is at the lowest since 1990.

The number of U.S. incorporated companies with a poison pill in effect hovered at 1,000 on Tuesday, hitting the lowest level since 1990, according to FactSet SharkRepellent. In comparison, the number of poison pills in force at the end of 2001 totaled 2,218.  ...

The drop in poison pills has mirrored a drop in other takeover defenses, such as having a board of directors with staggered election terms. At the end of 2009, only 164 companies in the S&P 500 had a staggered board, down from 294 at the end of 2001, according to FactSet SharkRepellent.

Interesting, but as Prof. Jack Coffee notes in the article, just because a board doesn't have a pill in place, doesn't mean it can't adopt one in about five minutes.   The drop in staggered boards, I think, is more significant.  Without the combination of the pill and the staggered board, the rights plan can delay, but not prevent, a hostile bid that is undertaken in conjunction with a proxy contest.  

On that front SharkRepellent notes on its website that the number of proxy fights has soared recently.

The number of proxy fights against U.S. companies has soared from 42 in 2004 to last year's record total of 133. 

-bjmq