Thursday, June 26, 2014
What with all the attention to hostile pharma deals these days, it's no surprise that names of potential targets are getting batted around in the press. This was interesting, though. A name of a firm that is not a target - Eli Lilly. Why? Because Eli Lilly is an Indiana corporation and Indiana corporations are subject to that state's control share statute. This flavor of state antitakeover prevents an acquiring shareholder from exercising the voting rights over any "control shares" without the express approval by the other shareholders of the target corporation. This particular type of antitakeover decision was approved by the US Supreme Court in CTS Corp as not pre-empted by the Williams Act and within the competence of state legislatures. Though largely superceded by Section 203, later generation antitakeover statutes, the control share statutes are still out there and they are potent defenses.