M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Saturday, September 18, 2010

Poison Pill Forum at The Conglomerate

Over at The Conglomerate, they recently concluded a good forum on the current state of the shareholder rights plan following the eBay v Craigslist litigation.  They had contributions from Gordon Smith, Eric Talley, and Christine Hurt with Erik Gerding moderating.  Steven Davidoff even made a cameo.  It's worth dropping by for a read.  



September 18, 2010 in Takeover Defenses | Permalink | Comments (0) | TrackBack (0)

Thursday, September 16, 2010

Airgas' Bylaw Amendment

In yesterday's Airgas shareholders' meeting, Air Products put forward a bylaw amendment (you can find the text of the amendment here, proposal 5 on page 65) that would change the date of the annual meeting to January, 2011 effectively short-circuiting the staggered board/poison pill defense.  As I said yesterday, it's intriguing.  Now, that bylaw amendment won a bare majority of shareholders present and voting.  Airgas' response was to claim that since the proposed amendment did not receive a supermajority of votes from the outstanding shares that the bylaw did not pass.  That's odd.  I pulled the 1995 Airgas certificate of incorporation and went straight the to language on amendments and this is what it says:

6.  By-Law Amendments.  The Board of Directors shall have power to make,
alter, amend and repeal the By-Laws (except so far as the By-Laws adopted by
the stockholders shall otherwise provide.)  Any By-Laws made by the Directors
under the powers conferred hereby may be altered, amended or repealed by the
Directors or by the stockholders.  Notwithstanding the foregoing and anything
contained in this certificate of incorporation to the contrary, Article III of
the By-Laws shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least 67% of the voting power of all the shares of the
Corporation entitled to vote generally in the election of Directors, voting
together as a single class.

Looks about right.  I suspect if Air Products is unable to 67% of the outstanding shares that the bylaw amendment goes down, notwithstanding the fact that it may have gotten a majority of the quorum in yesterday's meeting.   That will leave Air Products with one-third of the board and hanging around until the next annual meeting.  That's a mighty uncomfortable position to be in unless it can convince a Delaware court to order the Airgas board to pull the pill.  We'll see.


Correction:  Strike that, reverse it.  The Deal Professor is obviously correct on this point.  As has been also pointed out to me by a helpful reader, the "Article III" referenced in the bylaw amendment provision of the certificate (above) points back to bylaw provisions relating to "Directors".  The annual meeting is covered under "Article II" of the bylaws (from the bylaws) and they are subject to the following amendment provision:

 Article IX, Section 1. Amendments of By-Laws.

     Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting; provided that in the notice of such special meeting notice of such purpose shall be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these By-Laws, the Board of Directors may by majority vote of those present at any meeting at which a quorum is present amend these By-Laws, or enact such other By-Laws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation.
If we're not talking about the provisions that relate to directors, then any bylaw amendments, including presumably amendments to annual meeting provision (Article II) are governed under this provision.  This calls for a simple majority of a quorum, which if I'm not mistaken is what Air Products got yesterday.  So, I suppose the intriguing short-circuit of the poison pill/staggered board defense is on.  


September 16, 2010 in Takeover Defenses | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 15, 2010

Don't forget to vote ...

... your Airgas stock, I mean.  The shareholder meeting is today and they have two major issues on the table:  1) a contested director election; and 2) a bylaw amendment to push up the next shareholder meeting.   I think the second proposal is intriguing.  The deterrent power of the combination of the poison pill and the classified board comes from the lengthy delay that the structure forces upon any potential acquirer.  Going through two election cycles before you can take control is a lot to risk - a year can be a long time when you have a lot of money at risk.  That's where the bylaw amendment comes in.  By having shareholders vote to amend the bylaws to provide for a shareholder meeting in January 2011 Air Products is trying to create its own short-cut and reduce the time/risk involved in holding three seats with a pill in place.  Interesting.  So remember to get out and vote.


Update:  Looks like the Air Products directors have won.  Here the press release from Airgas.  The outcome of the bylaw amendment is a little uncertain (from the press release):

Airgas continues to believe that Air Products' by-law proposal to require a Meeting of Stockholders be held on January 18, 2011 - only four months after the 2010 Annual Stockholder Meeting - and that all future annual meetings of stockholders be held in January is invalid under both Delaware law and Airgas' Certificate of Incorporation. We also believe that the proposal has not been approved because it received the affirmative vote of less than 67% of the shares entitled to vote generally in the election of directors. As previously announced, Airgas intends to seek an expedited judicial determination on the validity of this by-law.

September 15, 2010 in Takeover Defenses | Permalink | Comments (0) | TrackBack (0)

Whatever ... it's only money

With Mark Hurd now out of the way, it seems that HP has unleashed its acquisition crew and given it almost a blank check.  There was 3Par for which HP paid 325 times EBITDA ... catch me, I just fainted ... Now, there's ArcSight.  At $1.5bn, the valuation for this target is almost as rich according to Bloomberg:

The offer also values ArcSight at 57 times the company’s Ebitda, compared with a median 11.5 times Ebitda in 10 comparable deals tracked by Bloomberg.

Seeking Alpha also has some thoughts on the valuation:

HP put the enterprise value of the transaction, which is slated to close by the end of the year, at $1.5bn. That means the tech giant is paying 7.5 times ArcSight’s trailing sales of $200m. (For the current fiscal year, ArcSight is expected to put up about $225m in sales, meaning HP is paying about 6.7x projected sales.) On a trailing basis, both McAfee (MFE) and VeriSign’s (VRSN) identity and authentication business garnered 3.5x sales in their respective sales to Intel (INTC) and Symantec (SYMC). (Morgan Stanley advised both McAfee and ArcSight, while JP Morgan Securities advised VeriSign.)

But this isn't really a new direction for HP.  Actually, they've been in the market buying for some time now ... remember Palm?  They paid $1.2 billion for that company just last April.  Before that it was 3Com.  Now, I've got nothing against HP.  Really, I don't.  In fact, it's great news for shareholders of the sellers.  Clearly it's a make or buy decision and HP has decided to buy.  I'm just a little mystified at why HP appears to insist on overpaying for almost everything.   


September 15, 2010 in Transactions | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 14, 2010

Throwing it all away

Before his arrest, Bob Moffat had it all - stand out student in college, led to an "extraordinary career with IBM, a happy family.  He had it all.  And then he threw it all away when he became involved with the Galleon crew. From today's Bloomberg report on the latest Galleon sentencing:

“Why the defendant betrayed the only employer he has had for his entire career has not been addressed,” Batts said. “His astounding breach of his fiduciary duty to his employer is why he is here.”

I think I know why.  He didn't make any money.  No, that's true.  But it's a familiar story. According to the pre-sentencing report (Moffat - PSR):

   "My actions were not driven by greed or the desire to profit by disclosing this information.  In fact, I did not make any money as a result of what I did.  In the end, I believe my actions stemmed from misplaced trust, letting 'my guard down' and a misguided desire to appear important and knowledgeable to share Ms. Chiesi that I was 'in the know' about important matters."  Bob's mistakes were real and he is deeply sorry for them, but it must also be understood that his motives were not venal and not profit-driven.  Perhaps his ego got in the way by making him want to impress someone with whom he had become intimate.  Perhaps he just wanted to seem knowledgeable and worldly.  This case is tragic precisely because Bob Moffat's actions are so inexplicable and because he threw away what he had spent so much of his life working for -- in exchange for non-pecuniary benefits that were, at most, fleeting and insubstantial. 

It's just another reminder that if you're handing out tips on inside information, you don't actually have to "profit" (as in receive cash) for those tips to be liable.  Moffat got six months in jail and lost it all today.


September 14, 2010 in Insider Trading | Permalink | Comments (1) | TrackBack (0)

Monday, September 13, 2010

Corporate Law Update - 2010

Prickett Jones' annual review of 2010 developments in the Delaware corporate law can be found here.  It's definitely worth downloading and reading.


September 13, 2010 in Corporate, Delaware | Permalink | Comments (0) | TrackBack (0)