M & A

Death of the Top-Up Option in Two-Step Transactions

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James Matarese and Danielle Lauzon are M&A partners at Goodwin Procter LLP whose practices focus on technology and life sciences companies. Their recent representations include Onyx Pharmaceuticals in its merger with Amgen in a transaction valued at $10.4 billion.  

On October 1, 2013, Amgen Inc. (“Amgen”) announced the completion of its acquisition of Onyx Pharmaceuticals, Inc. (“Onyx”).  The transaction was structured as a two-step acquisition – a tender offer by Arena Acquisition Company (the “Purchaser”), a Delaware corporation and wholly-owned subsidiary of Amgen, for all outstanding shares of Onyx, followed by a “back-end” merger of the Purchaser with and into … Read more

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Editor's Tweet: Goodwin Proctor on Death of the Top-Up Option in Two-Step Transactions http://wp.me/p2Xx5U-1ue

The Government Shutdown Could Affect Your Transaction

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The US antitrust authorities will cease certain of their operations during the pending government shutdown and your transaction may be affected.

The US antitrust agencies receive an average of 25 Hart-Scott-Rodino (HSR) filings per week. During the current government shutdown, the Federal Trade Commission (“FTC”) and Antitrust Division of the Department of Justice (“Antitrust Division”) have indicated they will continue to accept HSR filings, and the FTC’s Premerger Notification Office will be open but with a very limited staff. We see three consequences that transacting parties should take into consideration:

First, given the limited staff likely to be on hand … Read more

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Editor's Tweet: Clifford Chance's Tim Cornell on The Government Shutdown Could Affect Your Transaction

Greenberg Traurig Summarizes the 2013 Amendments to the Delaware General Corporation Law

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Recently, the Delaware legislature adopted and Delaware’s Governor signed into law several substantive amendments to the General Corporation Law of the State of Delaware (the DGCL), 8 Del. C. §§ 101 et seq.

New Provisions

Ratification of Defective Corporate Acts, Transactions and Stock (§§ 204 and 205) → These new Sections provide a procedure to ratify defective corporate acts, transactions and stock and vest the Court of Chancery of the State of Delaware (the Court of Chancery) with jurisdiction over disputes regarding such ratification, the validity of any corporate act, transaction or stock and the modification or waiver of … Read more

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Editor's Tweet: Greenberg Traurig Summarizes the 2013 Amendments to the Delaware General Corporation Law http://wp.me/p2Xx5U-1pY

Sullivan & Cromwell discusses Shuanghui International’s CFIUS Clearance for its Purchase of Smithfield Foods

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Shuanghui International Holdings Limited (“Shuanghui”) and Smithfield Foods, Inc. (“Smithfield”) announced on Friday that the companies have received notice from the Committee on Foreign Investment in the United States (“CFIUS”) that its national security review of the proposed acquisition by Shuanghui of Smithfield is complete. Although the CFIUS process has concluded, the acquisition, which would be the largest acquisition of a U.S. company by a Chinese investor to date, remains subject to other conditions to closing, including the approval of Smithfield shareholders.

Shuanghui, a Hong Kong-based company that owns a variety of businesses in the food and logistics sectors, including

… Read more

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Editor's Tweet: Sullivan & Cromwell discusses Shuanghui International's CFIUS Clearance for its Purchase of Smithfield Foods http://wp.me/p2Xx5U-1oo

What to Do When an Activist Comes Knocking

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The following comes to us from Charles M. Nathan, Partner and Head of Corporate Governance Practice at RLM Finsbury.

Activist investors are currently the darlings of the equity markets and the financial media.  Many of the leading activist investors (Bill Ackman, Dan Loeb, Nelson Peltz and Carl Icahn, to name a few) appear regularly on business news channels, have their investment forays avidly covered by the media and are literally household names.  In part due to (mostly fawning) press coverage and a perceived track record of success, activist investing has emerged as a well-recognized and growing alternative asset class, … Read more

The Going-Private Freeze-Out: A Unique Danger for Investors in Publicly Traded Delaware LPs and LLCs

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The following post comes to us from Brent J. Horton, assistant professor at Fordham University Gabelli School of Business.

In my recent article, The Going-Private Freeze-Out: A Unique Danger for Investors in Delaware Non-Corporate Business Associations,[1] I examine the agreements of 86 publicly traded, non-corporate business associations (i.e., limited partnerships (“LPs”) and limited liability companies (LLCs)) for provisions that modify the fiduciary duties of management in the context of going-private freeze-outs.

One danger of investing in a public company—whether in the corporate or non-corporate context—is the going-private freeze-out.  In such a transaction, public ownership is eliminated—“cashed-out”—and … Read more

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Editor's Tweet: The Going-Private Freeze-Out: A Unique Danger for Investors in Publicly Traded Delaware LPs and LLCs

Credit Risk Retention: Agencies Propose Revised Rule

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The following is a joint press release from six federal agencies on the revised credit risk retention rule, available here.

Six federal agencies on Wednesday issued a notice revising a proposed rule requiring sponsors of securitization transactions to retain risk in those transactions. The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk retention requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

This proposal is being issued jointly by the Board of Governors of the Federal Reserve System, the Department of Housing and Urban Development, the Federal Deposit … Read more

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The Geography of Revlon-Land in Cash and Mixed Consideration Transactions: A Response to Professor Bainbridge

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The following comes to us from Mohsen Manesh, an Assistant Professor at the University of Oregon School of Law.

In the recently published The Geography of Revlon-Land,[1] Professor Stephen Bainbridge attempts to crisply delineate the boundaries and contours of the evolving doctrine first articulated by the Delaware Supreme Court in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.[2]— or Revlon-land, more colloquially. The Revlon doctrine famously dictates that in certain transactions involving the “sale or change in control” of a corporation, the corporation’s board of directors has a duty to “get[] the … Read more

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Editor's Tweet: Prof. Manesh of Oregon Law Respond to Bainbridge on Revlon-Land

The Marketplace of Ideas: Rethinking the Disclosure of Beneficial Ownership under Section 13(d)

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The CLS Blue Sky Blog presents the third installment of our series,  “The Marketplace of Ideas.”  Earlier installments are available here and here.  The intent is to present different perspectives on the same subject by two or more authors.

Today, the subject is how the SEC should respond to Dodd Frank’s invitation to rethink the disclosure of beneficial ownership under Section 13(d).  We have asked a number of experts for their views.

Our first release, Proposals to “Reform” the Section 13D Rules:  Getting it Precisely Backwards, comes to us from Professors Ronald J. Gilson of Columbia and Stanford … Read more

Proposals to “Reform” the Section 13D Rules: Getting it Precisely Backwards

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The current proposals to accelerate the timing of beneficial ownership disclosure under Section 13(d) of the 1934 Securities Exchange Act and to broaden the definition of beneficial ownership to include derivative positions that provide economic exposure to stock price movement but not a right to vote or acquire stock, gets the problem precisely backwards.  The mismatch of problem and solution is apparent when we focus on two dates:  1968, when the Williams Act adding Section 13 was adopted, and 2010, when Section 766 of the Dodd-Frank legislation gave the SEC the authority, but not the obligation, to consider whether derivative … Read more

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Editor's Tweet: Profs. Gilson and Gordon on Proposals to “Reform” the Section 13D Rules: Getting it Precisely Backwards

Disclosure Is Still the Best Policeman!

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In a delightful essay, Ron Gilson and Jeff Gordon remind us that the times have changed and the Williams Act belongs in their view to the era of the Beatles. (Personally, I have trouble believing that Sgt. Pepper was really that long ago.  Next, they will try to tell me that John Lennon is dead).  Even if they are right, I must respond with a counter-truism.  Plus ca change, plus la meme chose.  And I will raise their bid, by invoking two other familiar maxims:  First, power corrupts, and absolute power is at least within view for institutional … Read more

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Editor's Tweet: John Coffee on why Disclosure Is Still the Best Policeman in the 13(d) Debate

Sullivan & Cromwell discusses SIGA Technologies, Inc. v. Pharmathene, Inc.

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In an opinion issued on May 24, 2013,[1] the Delaware Supreme Court reaffirmed that an express contractual obligation to negotiate an agreement in good faith is enforceable and held that expectation damages[2] are available for breach of that obligation if the court is reasonably certain that the contracting parties would have reached an agreement but for the defendant’s bad faith, assuming the damages can be ascertained with reasonable certainty. The case serves as a useful reminder that care should be taken in drafting term sheets or other preliminary documents and that obligations to negotiate in good faith should be taken

… Read more

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Editor's Tweet: Delaware Reaffirms Express Obligation to Negotiate Agreement in Good Faith Is Enforceable and Holds Expectation Damages Are Available

Journeys in Revlon-Land with a Conflicted Financial Advisor

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When the board of directors of a Delaware corporation begins a process that results in a change of control of the company (typically, a cash-out merger), the board’s Revlon duties are triggered: the directors then have a fiduciary obligation to take reasonable steps to get for the shareholders the best price reasonably available. In my recent article, Journeys in Revlon-Land With a Conflicted Financial Advisor: Del Monte and El Paso, I discuss two cases in which the Delaware Court of Chancery considered claims that a board of directors had breached its Revlon duties because its financial advisor had a … Read more

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Editor's Tweet: Professor Robert T. Miller of the University of Iowa College of Law discusses Revlon duties with a Conflicted Financial Advisor

Honored in the Breach: Diverging Law and Practice in Tender Offers for Debt Securities

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The views expressed in this article are those of the authors and do not necessarily represent the views of Jones Day or its clients.

In a recent article in the NYU Journal of Law & Business, we discuss some of the legal and regulatory concerns that have arisen in structuring tender offers for debt securities.  The paper’s title refers to a divergence that has developed between accepted market practices and the legal framework that is supposed to govern them.  This divergence is grounded in the SEC’s reliance on no-action letters as a regulatory mechanism to address developing market practices, … Read more

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Editor's Tweet: Haag and Keller discuss Diverging Law and Practice in Tender Offers for Debt Securities

Gibson Dunn on Controlling Shareholders and the Business Judgment Rule in Going Private Merger Transactions

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On May 29, 2013, Chancellor Leo E. Strine, Jr. of the Delaware Court of Chancery issued an important decision that lays the foundation for controlling stockholders to pursue going-private merger transactions with the comfort that, if certain conditions are met, such transactions will be reviewed under the deferential business judgment rule standard, rather than the exacting entire fairness standard.   

In In re MFW Shareholders Litigation, C.A. No. 6566-CS (Del. Ch. May 29, 2013), Chancellor Strine considered a question of law that had long vexed the deal community: whether a controlling stockholder that expressly conditions a going-private merger transaction on … Read more

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Wachtell on Controlling Shareholders and the Business Judgment Rule in Going Private Merger Transactions

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The Delaware Court of Chancery this week held that the use of both an independent special committee and a majority-of-the-minority vote condition in a go-private merger between a controlled company and its controlling stockholder will result in application of the deferential business judgment rule standard of review rather than the onerous entire fairness standard.  In re MFW S’holders Litig., C.A. No. 6566-CS (Del. Ch. May 29, 2013).

The case arose out of a stockholder challenge to a merger in which MacAndrews & Forbes acquired the 57% of M&F Worldwide it did not already own.  The transaction was subject to … Read more

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Editor's Tweet: Wachtell Discusses Court of Chancery's Application of the Business Judgment Rule to Controlling Stockholder Mergers http://wp.me/p2Xx5U-11H

The Marketplace of Ideas: Professor Coffee and Brandon Gold on the Wachtell Bylaw

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The CLS Blue Sky Blog presents its first installment of our new series, entitled “The Marketplace of Ideas.”  The intent is to present different perspectives on the same subject by two or more authors.

Today, Professor John C. Coffee, Jr. of Columbia Law School responds to Mr. Brandon Gold, a fellow in the Harvard Law School Program on Corporate Governance, who will be an associate with Schulte Roth & Zabel LLP this fall.  Mr. Gold’s post, available here, argues, for a number of reasons, that a proposed bylaw suggested by Wachtell, Lipton is overbroad and potentially invalid.

The proposed … Read more

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Editor's Tweet: Introducing "The Marketplace of Ideas" Professor Coffee and Brandon Gold offer different views on the Wachtell Bylaw

The Wachtell Bylaw: A Balanced Perspective

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In a free-swinging and provocative attack, Brandon Gold, a graduating Harvard Law School student, argues (1) that third party bonuses, paid by hedge funds or others soliciting proxies, to their director nominees are acceptable and even desirable, and (2) that a proposed bylaw, drafted by Wachtell, Lipton, that would disqualify nominees who were parties to any such agreement or understanding or who have received such compensation from third parties is invalid.  Only the second of these questions involves much nuance, but both are worth exploring.

Mr. Gold’s first assertion that such “pay for performance” compensation arrangements for directors are desirable … Read more

Why the Wachtell Bylaw on Director Compensation by Shareholders is Overbroad and May Fail Blasius Scrutiny

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The following post comes to us from Brandon S. Gold, a fellow in the Harvard Law School Program on Corporate Governance.  Beginning in the Fall, Brandon will be an associate with Schulte Roth & Zabel LLP.

In a recent memorandum to clients shared on this blog, Wachtell, Lipton, Rosen & Katz urged companies to adopt a bylaw that would effectively prevent hedge funds and other shareholders from offering their director nominees compensation arrangements such as “pay-for-performance” plans.[1] In an effort to weaken shareholder activists, Wachtell has ignored arguments it has been making for decades and has treated the … Read more

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Editor's Tweet: Brandon Gold discusses why the Wachtell Bylaw on director compensation by shareholders is overbroad and may fail blasius scrutiny

Sullivan & Cromwell Discusses last week’s new development in Delaware on “Don’t Ask, Don’t Waive” Standstills

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In a preliminary injunction opinion issued on May 21, 2013, the Delaware Court of Chancery (VC Glasscock) found that the board of directors of NetSpend Holdings Inc., comprised of four directors representing private equity-affiliated stockholders that owned over 45% of NetSpend’s shares, three independent directors and the CEO, likely failed to satisfy their so-called “Revlon” duties to attempt to secure the best value reasonably attainable when agreeing to sell the company to Total Systems Services, Inc. (“TSYS”) in an all-cash $1.4 billion transaction. Specifically, the Court concluded that while the single-bidder sale process was not unreasonable per se … Read more

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Editor's Tweet: Sullivan & Cromwell Discusses last week's new development in Delaware on "Don't Ask, Don't Waive" Standstills