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18 Cards in this Set

  • Front
  • Back
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
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
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
CORPORATIONS - MERGERS

Pro Rata Rule—§14(d)(6)
the bidder must buy in the same proportion from each shareholder
CORPORATIONS - MERGERS

Best Price Rule—§14(d)(7)
each tendering holder must be given the best price given to any other holder who tenders
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
CORPORATIONS - MERGERS

Exceptions to Regulation
threat of subsequent back end merger not prohibited
CORPORATIONS - MERGERS

Poison Pill - Call plans
Give stockholders the right to buy cheap stock
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
CORPORATIONS - MERGERS


Poison Pill - Call plans
(Flip in)
applicable in sale of asset mergers
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
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
CORPORATIONS - MERGERS

Judicial Limitations on Defensive Actions

Basic Requirements
2 steps (real threat + proportional response)
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)
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
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
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)
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