Boards of public corporations have more independent directors than ever before. Sixty percent of boards of S&P 500 companies are not only majority independent, but have a single insider on the board: the CEO. While Jamie Dimon is still CEO as well as chair of J.P. Morgan’s board, despite attempts to unseat him, this is becoming increasingly rare. Over the last 15 years, the percentage of S&P 500 firms with separated positions has risen from 16% to 45%.
Director independence has been pushed by institutional investors, exchanges, and also government regulators. The push for independence has continued despite, at best, … Read more
Last week, the Delaware Court of Chancery ruled that an acquiring merger party obtains legal control of all of a target’s attorney-client communications, absent an express provision in a merger agreement to the contrary. Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, C.A. No. 7906-CS (Del. Ch. Nov. 15, 2013). In so ordering, the Delaware court declined to follow a decision of the New York Court of Appeals, Tekni-Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123 (1996), which held that a selling party retains control of those privileged pre-merger communications that … Read more
The recent increase in the frequency and success with which “willful blindness” theories have been asserted in litigation may have long term implications for the corporate director’s liability profile.
Willful blindness is an aggressive liability theory that seeks to expand the definition of “knowledge” to include situations in which institutions or individuals “turn a blind eye” when there is a high probability that a particular, troubling, fact or circumstance exists. Assessing willful blindness involves a highly subjective analysis, and can be especially troublesome for defendants in cases where bad facts, and real harm, may be present. As such, it is … Read more
Harvard Law School Professor Lucian Bebchuk believes that shareholders should be able to control the material decisions of the companies they invest in. Over the years, he has written numerous articles expressing this view, including a 2005 article urging that shareholders should have the power to initiate a shareholder referendum on material corporate business decisions. In addition to his writings and speeches, Prof. Bebchuk has established and directs the Shareholder Rights Project at Harvard Law School for the purpose of managing efforts to dismantle classified boards and do away with other charter or bylaw provisions that restrain or moderate shareholder … Read more
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
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
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.
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
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 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, 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
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
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, 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.— 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
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
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
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
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
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
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
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