M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, September 30, 2013

Telling it like it is

In a recent (ok, last Spring, sorry), Vice Chancellor Laster tells it like it is, with respect to some shareholder plaintiffs out there.  In the following colloquy during a settlement hearing in In re Gen-Probe, VC Laster questions counsel about their clients:



I wonder why counsel would ever take a client who owns just two shares of stock.  I'm not totally naive about what's going on, but you'd think there would be someone out there with a few more shares they could approach.


September 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, September 27, 2013

Delaware Supreme Musings

So...what? You think you know who is going to get nominated to fill Chief Justice Steele's soon to be empty seat? Ha. You know nothing.  Want some informed speculation, beyond, "Well, it's Strine, right?" then go here to the Delaware Grapevine.  You'll get tidbits like this:

For now, there is no telling who will be next to assume the Supreme Court's center seat.

Within the state's legal circles, it would not be seen as a surprise if all four justices apply. Other names being mentioned are: Leo Strine Jr., the chancellor from the Court of Chancery; Jim Vaughn Jr., the president judge of the Superior Court; and Jan Jurden, a Superior Court judge.

Or even better, insight like this that might really inform who gets the nod:

All eyes are primarily on Leo Strine Jr., the chancellor on Chancery, and Jan Jurden, a judge on the Superior Court, as the major contenders for chief justice, although the field easily could include any or all of the justices, the presiding judges of other courts and various senior partners, particularly the ones with corporate law practices.

Strine is as aggressively brilliant as Jurden is logistically grounded, his Slytherin to her Gryffindor.

Before they were judges, they did a turn in the political trenches, Strine as the counsel to Tom Carper, when the Democratic senator was the governor, and Jurden as an officer for the New Castle County Democratic Party.

They practiced at firms known as incubators for judges, Strine at Skadden, the out-of-state behemoth, and Jurden at Young Conaway Stargett & Taylor, the homegrown powerhouse.

Strine has been through a cutthroat confirmation war already. Carper wanted to make him a vice chancellor in 1998, but Strine as his counsel was not known for suffering fools, and this attitude was perhaps not the best approach for dealing with the legislature, kind of known as a ship of fools. There were hard feelings.

Strine did get confirmed, but not before Carper agreed to name one senator's son a judge and another senator's nephew a Family Court commissioner.

Jurden had no such trouble when Ruth Ann Minner, the Democratic governor, put her on the bench in 2001. All she had hanging out there were the editorial cartoons drawn by Jack Jurden, her father. Her confirmation went easily.

It's cheaper than getting on the Acela and probably much better informed than what you'll hear in the Club Car.


September 27, 2013 in Delaware | Permalink | Comments (0) | TrackBack (0)

Thursday, September 26, 2013

LBOs and corporate governance

So, this issues gets debated back and forth quite bit.  On the one side are those that argue that LBOs are good corporate governance.  The presence of debt and the high degree of equity ownership by managers pushes managers to improve efficiency and profitability of the firm in order to quickly pay down that debt.  In that way, the LBO structures reduces the agency problems that plague the public corporation.  On the hand there are arguments that the LBO is nothing more than financial mumbo-jumbo that does little more than create opportunities for managers to enrich themselves.  

Cohn, et al have a contribution to the  debate.  Their new paper is The Evolution of Capital Structures and Operating Performance after LBO: Evidence from US Corporate Tax Returns.  Here's the abstract:

This study uses corporate tax return data to examine the evolution of firms' financial structure and performance after leveraged buyouts for a comprehensive sample of 317 LBOs taking place between 1995 and 2007. We find little evidence of operating improvements subsequent to an LBO, although consistent with prior studies, we do observe operating improvements in the set of LBO firms that have public financial statements. We also find that firms do not reduce leverage after LBOs, even if they generate excess cash flow. Our results suggest that effecting a sustained change in capital structure is a conscious objective of the LBO structure.


September 26, 2013 in Going-Privates, Leveraged Buy-Outs | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 24, 2013

Metrocards and insider trading

Matt Levine at Bloomberg sends up the latest idiot insider trading charged  by the SEC.  Not only are these guys trading in single stock options (save me, please), but the SEC tied the noose on them by tracking their Metrocard usage! Levine asks the right questions: 

*** Like, wait, does the MTA track Metrocard use and associate it with a credit card? Or did they only catch these guys by saying "hey can we look at your Metrocard for a minute?"? Or what?

What struck me about the alleged trading in this case was that one of the traders allegedly used the proceeds from their ill-begotten gains to finance his independent film production company.  Aren't there easier ways to finance indy films?  What happened to credit cards? Here's the complaint.


September 24, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, September 23, 2013

Blackberry mirage or a swing for the fences

So, no surprise to anyone that Blackberry has been circling the drain.  Perhaps this latest announcement of letter of intent between Blackberry and one it's largest investors is the final sign that the end is near.  Fairfax is proposing to acquire Blackberry for $9/share in cash.  But, according to Bloomberg, it's not much actual cash.  In fact, almost no new equity from Fairfax: 

Fairfax doesn’t plan to invest more cash as part of the takeover bid, relying on others for the remaining financing. The investor will roll over its 9.9 percent stake in BlackBerry, worth $457 million as of today’s close, [Fairfax CEO] Watsa said. Other investors will be able to finance the rest of the purchase through equity and debt, he said.

Well, given the weak prospects of Blackberry, maybe shareholders want someone who will be willing to swing for the fences.


September 23, 2013 | Permalink | Comments (0) | TrackBack (0)


Kyle Wagner Compton's deep dive into the Delaware Chancery Court turns up another example of Vice Chancellor Laster trying to move mountains - in this case trying to get lawyers to refer to shareholder litigation as stockholder litigation.  Vice Chancellor Laster denied a proposed order to consolidate a series of cases into a single case titled " In re Astex ShareholderLitigation" with the following: 

"Shareholders litigation?  Under what state's corporate law do you believe you are litigating?"

Laster has been trying to change conventions for while now.  Students sometime ask what's the difference between shareholder and stockholder.  The correct answer is, well, nothing, but...but...corporate law drafting isn't creative writing.  To the extent one is looking at the statute, it's probably always better practice to rely on the language of the statute.  Laster's effort is a small one to move away from the convention of calling representative litigation in Delaware shareholder litigation.  Since the corporate code refers only to stockholders, proper usage should indicate captioning shareholder litigation, stockholder litigation.


September 23, 2013 in Corporate, Delaware | Permalink | Comments (1) | TrackBack (0)

Thursday, September 12, 2013

Faculty hiring announcement: BC Law

Boston College Law School expects to make one or more faculty appointments in subject areas that include: corporations, business law and related subjects. Other substantive areas, particularly in the first year core curriculum, may also be of interest.

JOB QUALIFICATIONS: We seek candidates who understand a range of pedagogies, including skills and experiential training. In addition, applicants must possess a J.D. or equivalent degree and outstanding academic credentials. Relevant experience in practice at an advanced level, challenging government service, or a judicial clerkship is strongly preferred.

APPLICATION PROCEDURE: Boston College and is an Affirmative Action and Equal Opportunity Employer. We strongly encourage women, minorities and others who would enrich the diversity of our academic community to apply. Boston College, a Jesuit, Catholic university, is located in Newton, Massachusetts, just outside of Boston.

Interested applicants should contact:

Renee Jones, Chair
Appointments Committee
Boston College Law School
885 Centre Street
Newton, MA 02459

or lawappts@bc.edu


September 12, 2013 in Academic Jobs | Permalink | Comments (0) | TrackBack (0)

Dole go-shop expires

Dole announced last night that its go-shop expired without any bidders.  File that under "not surprised."  

You'll remember that Chairman and CEO of Dole David Murdock is taking the company private using a structure that includes all of the procedural safeguards described in MFW.  So, challenges to the transaction are going to be subject to the higher business judgment review standard.


September 12, 2013 in Going-Privates | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 11, 2013

No fraud exception for Countrywide litigation

The Delaware Supreme Court just issued its opinion in response to a certified question posed to it by the Ninth Circuit in the Countrywide shareholder litigation.  The question posed to the court: 

Whether, under the “fraud exception” to Delaware’s continuous ownership rule, shareholder plaintiffs may maintain a derivative suit after a merger that divests them of their ownership interest in the corporation on whose behalf they sue by alleging that the merger at issue was necessitated by, and is inseparable from, the alleged fraud that is the subject of their derivative claims.

Short answer: No, affirming Lewis v Anderson.  While shareholders' direct claims survive the merger, deritivate claims are extinguished.  In answering the certified question, the Supreme Court takes the time to remind us all that dictum is, well, just dictum, not new law.



September 11, 2013 in Litigation | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 10, 2013

Basics of Acquisition Agreements MOOC

LawMeets, in conjunction with the ALI, is putting on its Basics of Acquisitions Agreements MOOC for the second time.  Registration is open now -- here. Here's an overview of the course:

This course is an overview of how acquisition agreements work. It will provide aspiring and practicing deal lawyers with an understanding of the deal process and their role in it.

The course will have four modules. Each module includes video lectures and a LawMeet® - an interactive exercise that involves posting a video response to a real world problem presented by a client or partner, followed by peer and expert review. Click here to see how a LawMeet® works. The first module will be available no later than September 9, 2013.

Students of mine who took this course last year thought it was great.  If you are taking an M&A class now, or if you plan on taking an M&A class in the Spring, this MOOC would be a valuable addition.


September 10, 2013 in Merger Agreements | Permalink | Comments (0) | TrackBack (0)

Monday, September 9, 2013

Dell battle over

Although the vote is not until September 12, Icahn threw in the towel today.  From his letter to stockholders:

One of the great strengths of our country is that we abide by the rule of law.  However, state laws dealing with corporate governance often favor incumbent corporate boards and management and are weak in many areas.  While we must abide by these laws, we believe that they can and must be changed.  Among many other things, boards should not be able to treat elections as totalitarian dictatorships do; where if they lose, they simply ignore the results.
The Dell board, like so many boards in this country, reminds me of Clark Gable’s last words in “Gone with the Wind,” they simply “don’t give a damn.” If you are incensed by the actions of the Dell Board as much as I am, I hope you will choose to follow me on Twitter where from time to time I give my investment insights.  I also intend to point out what I consider to be unconscionable actions by boards and discuss what remedies shareholders may take to change the situation...

 Well...okay then. What happened to the appraisal threat?  I guess that's not going to happen, either?


September 9, 2013 in Delaware, Leveraged Buy-Outs | Permalink | Comments (2) | TrackBack (0)

Saturday, September 7, 2013

Gov. Markell comments on Steele retirement

Statement from the Governor's office on Chief Justice Steele's retirement ann0uncement:

“A judiciary is only as good as the men and women who serve in it, and quite simply, Chief Justice Steele is as good as they get. In addition to serving as Chief Justice, he has been a Superior Court judge, a Vice Chancellor on our Court of Chancery, and a member of the Supreme Court,” said Gov. Jack Markell (D-Delaware). “He has been a tireless and forceful advocate for our state’s judiciary and indeed, for the entire State of Delaware. It is no secret that Delaware’s judiciary is the finest in the nation. I want to thank Chief Justice Steele for his tireless efforts in building and maintaining a court system that is truly a national model.”


September 7, 2013 in Delaware | Permalink | Comments (0) | TrackBack (0)

Friday, September 6, 2013

Chief Justice Steele announces retirement

Kyle Wagner Compton of the Chancery Daily has the news that Chief Justice Myron Steele of the Delaware Supreme Court has announced his retirement in a letter to Gov. Markell.   Steele will retire effective Nov. 30, 2013.


September 6, 2013 in Delaware | Permalink | Comments (0) | TrackBack (0)

Thursday, September 5, 2013

Cadbury Law has teeth

You'll remember that that in the UK they adopted the Cadbury Law in part as a backlash to the acquisition of  that august candy maker by US based Kraft in 2010.   Bloomberg has an excellent piece with an assessment of the law now that we've had some experience with it.   While there were a number of changes in the takeover regime that came with the Cadbury Law, the one that seems to have had the biggest (and most protective) bite is the addition of a hair-trigger to the "put up or shut up" rules:

The so-called Cadbury Law stipulates that any hint of a transaction involving a U.K.-listed target -- unusual stock movement, a news article based on anonymous sources, or even a tabloid market column that cites stock-trader chatter -- can force a company to issue a press release confirming or denying the existence of negotiations and identifying any potential bidder.

At that point, an acquirer has 28 days to “put up or shut up” -- either making a firm, fully financed bid or walking away for six months, unless the target requests an extension. ...

Underscoring how practices have changed, earlier this month Vodafone twice issued press releases confirming media reports on its talks to sell its stake in Verizon Wireless -- even though bids for assets aren’t the focus of the new rules.

The regulations are meant to discourage so-called virtual bids that send stocks on a speculative tear, putting target companies in a defensive position and harming shareholders and employees if the bid never materializes, the Takeover Panel has said.

The effect of the hair-trigger is to force potential acquirers to disclose their interest well before a period where they might actually be comfortable to make a bid.  The consequence is that it puts the power to provide extensions of the 28 day tolling period into the hands of the target.  A hostile target board can use this power to put off a buyer.  

What's interesting about the Cadbury Law and its effects a year or so on is that we (academic types) used to be able to point to the UK as the natural experiment for what a shareholder friendly regime might look like - a regime where target boards had little power to stand between an offeror and shareholders.  Compare that regime to the US where states are extremely deferential to management in tender offer situations.  But now, that balance is shifting.  Boards in UK companies with the hair trigger rules now in effect have the ability through the use of leaks and forcing disclosure to wrest control of the process and insert themselves between offerors and shareholders. 


September 5, 2013 in Europe, Takeover Defenses, Tender Offer | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 4, 2013

Waksal out and about

First day of classes...this semester, I've brought the traveling roadshow down Commonwealth Ave to BU.  They will soon get to know what I think about the following topic...  Sam Waksal - (memba him?!) is now out and about and making the rounds on Bloomberg TV.  He calls his insider trading conviction a "personal event." Okay, then.   Thankfully, his insider trading conviction appears to have changed his approach to business... 




September 4, 2013 in Insider Trading | Permalink | Comments (0) | TrackBack (0)

Monday, September 2, 2013

Dutch poison pill

Carlos Slim's America Movil has threatened to withdraw from its offer to purchase the 70% of the Dutch mobile carrier, Royal KPN NV, that it doesn't already own.  America Movil's change of heart came after Royal KPN deployed it's poison pill to defend against the unwanted offer.

Now, the poison pill deployed by Royal KPN is different from an American poison pill.  Remember, the power of the US-styled poison pill comes from the threat that it might be deployed and the difficulty presented in acquiring control once the pill is deployed.   The defensive power of the Dutch pill comes from an actual transfer of control from public stockholders to a controlled foundation.  The WSJ has a good description of how it works:

In the 1980s and 1990s, many Dutch firms set up defenses to protect themselves against hostile takeovers or activist investors. Although most barriers have been removed, many listed companies still have the possibility to block unsolicited takeover attempts through foundations they created.

Companies grant these foundations (in Dutch: Stichting) a call-option to buy preference shares which, if activated, allows them to take control of the company for a certain period of time.

The defense is barely used, however. Experts say it is a measure of last resort that deters investors in ordinary shares and only buys time to look for alternative strategic options.

In KPN’s case, the Foundation Preference Shares B KPN were set up in 1994 following the privatization of Koninklijke PTT Nederland NV, the former mother company of KPN. Its board comprises lawyers and former top executives at other Dutch companies, some of whom also sit on the boards of other foundations.

By deploying the pill, control is temporarily transferred from public stockholders to the foundation forcing a potential acquirer to negotiate with the foundation if the acquirer wants to gain control.  The effect is the same as with the US-styled pill - putting the board (in this case the foundation board) in between the tender offeror and the shareholders.   However, because the preference shares issued to the foundation are time limited, unlike the standard US poison pill, the Dutch pill is only a temporary defense.  It's not a 'just say never' defense, just a 'not right now' defense.



September 2, 2013 in Europe, Takeover Defenses, Tender Offer | Permalink | Comments (0) | TrackBack (0)