Class 27 takeovers_bb

Class 27 takeovers_bb - CORPORATIONS Business Organizations...

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CORPORATIONS Business Organizations
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Today Takeovers Paramount v. Time Paramount v. QVC
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Unocal Holding Independent directors who adopt defensive tactics in a takeover must show: There are reasonable grounds for believing that the takeover posed a danger to corporate policy and effectiveness they have acted in good faith ; and after reasonable investigation ; that their actions constituted a reasonable response to the threat posed
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Problem with two-tier takeover offers CSX bid for Conrail (1996): CSX offers $92.50 cash for 40% of Conrail shares and CSX stock worth $92.50 per share for the remaining 60%. BUT: On deal announcement CSX share price drops so that back-end is now worth $86.78. AND: As CSX raises its cash front-end to compete with hostile bid from Norfolk Southern, market takes the value out of the CSX stock. Morris Kramer, Skadden Arps: “Every time you raise the front end, your stock goes down on the back end. That’s the problem: you can keep raising the front end, but your back end keeps going down, and it just becomes more coercive.”
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Tactical defenses Greenmail (+ standstill agreement) Agreeing to purchase a bidder’s shares at an attractive price. Leveraged Recapitalization Issuing new debt to buy back shares or issue a cash dividend. Pac Man Defense Making a bid for the bidder “Bulking Up”
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Golden Parachutes: Large payments to management team and sometimes to employees (silver parachutes) in the event of a takeover. Anti-Greenmail provision Prohibits the board from buying back a stake from a large-blockholder at a premium price. Supermajority Voting Provisions
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Class 27 takeovers_bb - CORPORATIONS Business Organizations...

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