Friday, May 2, 2014
In Canada's Financial Post, Yvan Allaire makes the argument that Canada's approach to merger rules, which are close to exactly the US academic orthodoxy that board of directors should have only a very limited ability to stand in the way of shareholders accepting a tender offer, go too far and should be reconsidered:
Take the recent case of Inmet Mining Corp. and First Quantum Minerals. Inmet’s board was dead set against a takeover by First Quantum. The latter made a bid; no other bidder showed up. Despite the board’s opposition, Quantum simply put its offer to the shareholders. As enough of them handed in their shares the deal has been consummated. Under Canadian regulations, the board members of Inmet had no other recourse; they believed that it was not in the long-term interest of Inmet to be acquired by Quantum at the offered price but were powerless to act. That does not make any sense.
How can anyone defend this dysfunctional regime? How can one pretend that this system is best for stable, long-term shareholders?
In a world of financial derivatives, speed trading, arbitrageurs, momentum players and hedge funds of all sorts, as soon as a takeover offer is made public the shareholder base of the target company is swiftly and radically transformed. To consider these newcomers as the sole “deciders” of a company’s fate, needing the benevolent protection of securities commissions against malevolent, conflicted management, seems like an imaginative scenario of times past.
It's an advertisement to be careful what you wish for I suppose.