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18 Cards in this Set
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CORPORATIONS - MERGERS
Statutory Merger (General) |
Survivor and dissolved corporation sign plan of merger
Disappearing corporation is “fused into” the survivor Shares in the surviving corporation are issued to the disappearing corporation’s shareholders must file a certificate of merger with state office transfer of legal rights and obligations |
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CORPORATIONS - MERGERS
Williams Act Limitations Disclosure |
§14(d)(1) imposes disclosure requirement on any tender offeror who, if successful, would own more than 5% of any class of stock of the target.
Disclosure includes info on the financial condition of the bidder & methods used to purchase shares Info must be filed with SEC and disseminated to shareholders Any communications from either management or the tenderor advising the stockholders to accept or reject the offer are subject to disclosure |
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CORPORATIONS - MERGERS
Withdraw Rights—§14(d)(7): |
a shareholder who tenders t a bidder has the right to withdraw his stock at any time while the offer remains open
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CORPORATIONS - MERGERS
Pro Rata Rule—§14(d)(6) |
the bidder must buy in the same proportion from each shareholder
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CORPORATIONS - MERGERS
Best Price Rule—§14(d)(7) |
each tendering holder must be given the best price given to any other holder who tenders
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CORPORATIONS - MERGERS
20 Minimum Offer—§14(e)(1)(a) |
offer must be kept open for at least 20days. IF the price or number of shares requested/offered changes another 10day extension
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CORPORATIONS - MERGERS
Exceptions to Regulation |
threat of subsequent back end merger not prohibited
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CORPORATIONS - MERGERS
Poison Pill - Call plans |
Give stockholders the right to buy cheap stock
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CORPORATIONS - MERGERS
Poison Pill - Call plans (Flip over) |
cheap, tradable purchase rights in target which can also be applied to purchase cheap stock in bidder post-merger
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CORPORATIONS - MERGERS
Poison Pill - Call plans (Flip in) |
applicable in sale of asset mergers
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CORPORATIONS - MERGERS
Put Plans |
allow post-tender minority shareholders to sell back remaining shares of the target at a fair price—fight off back end mergers
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CORPORATIONS - MERGERS
Poison Pill - Def |
--issued by board w/o shareholder approval
--share purchase right are exercisable only if someone buys more than specified amount of stock (usually 10-20%) --“triggering pill” = high cost for buyer b/c other s/h can buy common stock equivalents at discount (usually ½ price) --would be acquirer has to negotiate w/board to “redeem” the pill trigger proxy fight --can be put in place after the tender offer is announced b/c they typically don’t require shareholder approval |
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CORPORATIONS - MERGERS
Judicial Limitations on Defensive Actions Basic Requirements |
2 steps (real threat + proportional response)
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CORPORATIONS - MERGERS
Judicial Limitations on Defensive Actions Reasonable Basis for Fear |
Reasonable fear that the take over will result in harm to the corporation (not just loss of job which would require showing of “entire fairness” to shareholders)
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CORPORATIONS - MERGERS
Judicial Limitations on Defensive Actions Possible Bases for fear |
Change of business practices
Bidder will liquidate the company May operate the business in an illegal or unethical manner Valuable, non-assignable contracts may be lost Coercive tactics |
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CORPORATIONS - MERGERS
Judicial Limitations on Defensive Actions Proportionality |
The anti-takeover defense must represent a response that is reasonable in relation to the threat posed
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CORPORATIONS - MERGERS
Judicial Limitations on Defensive Actions Benefit to stockholders |
Even if the defensive measure primarily benefits management, they must demonstrate that there is at least some benefit to shareholders—Revlon v. MacAndrews (he board cannot exact a takeover defense that better protects the company’s creditors against the risk of default but that clearly deprives the stockholders of the highest price for their shares)
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CORPORATIONS - MERGERS
Judicial Limitations on Defensive Actions Investigation |
A target board must conduct a reasonable investigation of the defensive measure before adopting it.
Ok for bd to discriminate against unfavored bidder as defensive measure—Unocal but SEC 14(d)(10) outlaws discrimination in tender offers |