April 13, 2012
Reverse Termination Fee study
regular readers know that Afra and I have a thing for reverse termination fees. The Practical Law Company just released a "what's market" study on reverse termination fees - Reverse Break-up Fees and Specific Performance: A Survey of Remedies in Leveraged Public Deals. There's a lot in there. One point of interest is the extent to which reverse termination fees are now making regular appearances in strategic deals - more than 51% of deals in their sample.
It's opening day in Boston - funny enough with a 1-5 start - people around here are already jumping on the panic button. Too early? Have a great weekend - spend as much of it at a ball park as possible.
April 11, 2012
M&A and JOBS Act
Most analysis of the JOBS Act has focused on its implications for capital markets activity. Now, Davis Polk has a short client alert focusing on the implications of the JOBS Act for private company M&A. Worth a quick read.
Beware of the devil from Delaware
Following up on a recent flattering feature on Leo Strine in The Globe and Mail, Conrad Black is sending warnings to his fellow Canadians not to fall for that " influential small-town American judge" in Delaware. I think he's still angry over the Delaware case against him in the sale of Hollinger:
Strine is, I am reliably told, conversationally and socially rather aggressive, and improbably, given his physical stature and Mr. Peepers likeness, is an ostentatious sports fan. He rules his court like a full-time martinet and constantly inflicts what he evidently considers to be his unfailingly rapier-like wit on all those to whom his judgments are too important to permit the groans that commend themselves. He will get to any plausible speaking event (including one in Toronto not long ago), if necessary by flapping his arms. He fancies himself a crusader for the little person, a holy terror against “hinky” boardroom and executive suite practices, a shoot-from-the-hip authority on almost anything, and a crack philologist, constantly adding funky new words to the language; what isn’t “hinky” is apt to be “freakin” and so forth. A bright, energetic little man, seeking attention and trying to become a celebrity despite his rather dry and technical occupation, is not unprecedented and need not be exceptionable.
In Strine’s case, there is cause for concern. While, (unlike Posner as far as I am concerned), he reads the papers filed in his court, he has an untrustworthy and even bigoted (not in any racial or sectarian sense), intuition and a whim of iron. Because few judges have the ambition to attract public attention as Strine does, and most are happy not to be bothered with the media, whom Strine pursues with the shameless tenacity of a vendor of fake religious relics hustling pilgrims in Bethlehem, he is becoming an eager go-to default source for the media on any aspect of commercial law, (and doubtless, would expand his repertoire of pontifical opinion to a range as vast as the great outdoors, if asked).
He goes on about how Strine is "feckless and flippant" and has little regard for shareholders when he inserts himself into board decisions. Given the recent result in El Paso, Black is either wrong in his broad characterization or Stine has changed since Hollinger.
April 9, 2012
Hamermesh on the Delphi Financial settlement
Last month, Vice Chancellor Glasscock had an interesting opinion in the Delphi Financial Group case. You'll remember that in that case, Rosenkranz, a controlling shareholder, structured the transaction to generate a "control premium" for himself. To do that he had to amend the certificate of incorporation to eliminate the equal treatment provision in the charter that would have prohibited him from taking a premium. Glasscock didn't look favorably on that move. Now the litigation has been settled in what, at first glance, looks like a total victory for the plaintiffs. Larry Hamermesh asks the right question about the settlement and whether the shareholders really won:
The question the press release doesn’t quite answer, however, is what the source of the $49 million settlement payment is. If it’s Rosenkranz only, the “truing up” will have been accomplished. To the extent, however, that the acquirer or some D&O insurance carrier is providing some portion of the $49 million, Rosenkranz would be retaining some of the premium that the Court criticized.
Tailspotting and CEO vacations
Yermack continues his crusade against the corporate jet in his new paper, "Tailspotting: How Disclosure, Stock Prices and Volatility Change When CEOs Fly to Their Vacation Homes". Who would have guessed ... CEOs park the jet and stay in the office when the weather at their vacation homes is bad.
Abstract: This paper shows close connections between CEOs’ vacation schedules and corporate news disclosures. Identify vacations by merging corporate jet flight histories with real estate records of CEOs’ property owned near leisure destinations. Companies disclose favorable news just before CEOs leave for vacation and delay subsequent announcements until CEOs return, releasing news at an unusually high rate on the CEO’s first day back. When CEOs are away, companies announce less news than usual and stock prices exhibit sharply lower volatility. Volatility increases immediately when CEOs return to work. CEOs spend fewer days out of the office when their ownership is high and when the weather at their vacation homes is cold or rainy.