M & A Law Prof Blog

Money Never Sleeps

You know you've been counting the days.  Well, you won't have to wait much longer.  Here's the trailer for Wall Street: Money Never Sleeps.   Gordon Gecko is free and looking to redeem himself, or at least get a new cell phone ...

-bjmq

Next Up ... the Warriors?

Having just recently closed on its acquisition of Sun, Oracle's Larry Ellison is apparently turning his sights on more interesting prey - the Golden State Warriors.  In response to a question at an Oracle employee event about likelihood that he might try to buy the Warriors, Ellison responded, "I'm trying. I'm trying. Unfortunately you can't have a hostile takeover of a basketball team." 

That's unfortunate, because with the single exception of the 2007-08 season, the Warriors and their poor fans haven't been over .500 (or made the playoffs) since 1993-94.

-bjmq

Envious CEOs

Men are so constituted that every one undertakes what he sees another successful in, whether he has aptitude for it or not. - Goethe

Isn't that the truth?!  In their new paper, Do Envious CEOs Cause Merger Waves? in the Review of Financial Studies, Goel and Thakor start with a simple premise: CEOs have preferences that can be characterized by envy.   Assuming CEOs envy each other and that CEOs of larger firms get paid more, then a merger in the industry that increases firm size for one CEO will cause other envious CEOs to be tempted to undertake similar "value-dissipating but size-enhancing acquisitions."  Theirs is another take on the empire-building story.

Abstract: We develop a theory which shows that merger waves can arise even when the shocks that precipitated the initial mergers in the wave are idiosyncratic. The analysis predicts that the earlier acquisitions produce higher bidder returns, involve smaller targets, and result in higher compensation gains for the acquirer's top management team than the later acquisitions in the wave. We find strong empirical support for these predictions. The model also generates additional predictions, some of which remain to be tested.

-bjmq

Notification thresholds under the HSR Act lowered

In an unprecedented first, effective February 22, 2010, the notification thresholds under the Hart-Scott-Rodino Antitrust Improvements Act will be lowered. The jurisdictional thresholds are adjusted annually under the indexing required by the 2000 amendments to the Act, which require the Federal Trade Commission to revise the thresholds annually based on the change in gross national product.

Here's Proskauer's memo on the new thresholds

MAW

Delaware's New Arbitration Rules

The Chancery Court in Delaware has proposed arbitration rules that go into effect on February 1, 2010 (here).  The proposed rules would permit its members to arbitrate "all business disputes" as long as the dispute is valued at more than $1,000,000 for money claims, involves at least one Delaware entity and the parties agree to the arbitration process.  The proposed process is speedy - potentially huge cost saver - and so there might be a strong incentive for potential litigants to go the arbitration route.  Especially so since the arbitrators will be the same court personnel who would hear the case if it ended going the normal route.  The proposed arbitration rules also guarantee parties confidentiality.  Individual litigants may find the confidentiality aspect appealing as well.  After all, who wants the world the know that their directors stink? 

Here's hoping that Delaware's arbitration process doesn't become too successful.  Why?  Well, much of Delaware's value derives from the positive externalities that come from its corporate law jurisprudence.  If parties increasingly take disputes "private" via the Delaware courts, increased reliance on the confidentiality of the arbitration process might have the effect of degrading the continued development of the Delaware common law.  That's actually something worth paying attention, but difficult to track.  

-bjmq

Ticketmaster-Live Nation Transaction Approved

The DOJ Antitrust Division just announced it has approved the proposed Tickmaster-Live Nation deal.  This transaction was subject to a good deal of controversy -- including vocal opposition from The Boss.  And if Springsteen has an opinion on a transaction, it's got to be a big deal.  From the DOJ press release: 

After a rigorous investigation, we concluded that the transaction, as originally proposed, was anticompetitive. ...  

The relief here is both structural and behavioral. The settlement requires Ticketmaster to divest more ticketing than it will gain through its acquisition of Live Nation. Simultaneously, the licensing solves a second competitive issue by giving AEG, an integrated competitor, the ability and incentive to compete with the combination of Ticketmaster and Live Nation for concert promotion, venue management, and ticketing.

Under the settlement, Ticketmaster will be required to license its ticketing software to AEG, its single largest customer. AEG will now have the opportunity and incentive to compete in primary ticketing, both in its own venues and third-party venues. Under the settlement, AEG will transition from using Ticketmaster for its ticketing needs, which last year involved about ten million tickets, to its own ticketing platform. Thus, the proposed settlement opens the door for AEG to become a vertically integrated competitor with competitive incentives similar to those of the merged company.

In addition, Ticketmaster will divest Paciolan, an established ticketing business that sells tens of millions of tickets annually. Within sixty days, Ticketmaster will divest Paciolan to Comcast-Spectacor, which has already signed a letter of intent, or some other buyer suitable to the Department.

A copy of the DOJ's Competitive Impact Statement filed with the court is here and AEG and Tickmaster's technology agreement - required as part of the settlement is here.

-bjmq

Arsenal Update

What does Stan Kroenke have up his sleeve?  He's 17 shares away from crossing the 30% threshold and then being required to make an offer for all of the outstanding shares of the Arsenal Football Club.  Here's the update.   Might it involve a sale of the St. Louis Rams?  Kroenke has a right of first refusal as well a go-along provision with respect to the Rams.  Kroenke could end up going along with the Rosenblooms when they sell and then use the proceeds to launch on offer for Arsenal.  

-bjmq

Krispy Kreme's Poison Pill

The Krispy Kreme board is doing a little revisiting of its pre-transaction planning.  Last week it adopted a revised shareholder rights plan to replace the expiring plan that it had in place.  The revised plan is similar to the first, with the notable exception that the revised plan expires in three years rather than ten.  The term limitation on shareholder rights plans seems to be a growing trend amongst firms adopting such plans.  On the other hand, KKD shareholders are not being asked to approve the new rights plan.  From the board's announcement:

The new Rights Plan was adopted to deter abusive takeover tactics, but it was not adopted in response to any specific effort to acquire control of the Company.  The Company's current market capitalization makes the Company and its shareholders especially vulnerable to a creeping acquisition of control whereby a person can acquire a substantial percentage of the Company's outstanding stock prior to making any public disclosure regarding its control intent and without paying a control premium. 

The mechanics of the new Rights Plan are similar to the existing Rights Plan. In general terms, and as in the existing Rights Plan, the rights that will be issued under the new Rights Plan are not exercisable until such time as a person or group becomes the beneficial owner of 15 percent or more of the Company's common stock immediately following the expiration of the existing Rights Plan. The rights may cause substantial dilution to a person or group that acquires 15% or more of the Company's common stock unless the rights are first redeemed by the Board of Directors. Unlike the existing Rights Plan (which had a ten-year term), the new Rights Plan only has a three-year term.

You can find a copy of the revised rights plan here.

-bjmq

The Volcker Rule and the End of Private Equity?

Late last week, Obama announced the "Volcker Rule" -- a new era Glass-Steagall.  Prohibiting banks that take deposits from investing in private equity or hedge-funds will likely have a big impact on the position of financial acquirers in the takeover market.  Could it be the end of private equity - and the market for corporate control - as we know it?  That sounds pretty apocalyptic.  It couldn't be that bad, could it?     

Clive Crook over at the FT has thoughts on the "Volcker Rule" as does Felix Salmon.  The "Volcker Rule" proposal is here and video below.

-bjmq