class 22 - omnicare; state laws

8/18/2019 Class 22 - Omnicare; State Laws

1/26

Hostile Takeovers

• Tender Ofers – Deensive Measures

• Unocal governs

• Third Party Bids – Lock-up agreeent


2/26

Onicare v! "#$


3/26

Onicare v! "#$

• "#$ – Outcalt %#hairan& and $ha' %#(O&

• Have voting control over the copany


4/26

"#$ De)t

• Total* +,. illion in de)t – +/.0 illion in senior )ank de)t

– +1./ illion in converti)le )onds

• "#$ deaults


5/26


6/26

"#$ 6 independentcoittee

• "#$ perorance )egan to iprove

• "#$ appoints coittee oindependent directors to negotiate atransaction


7/26

7enesis Bid

• 7enesis 'as contacted and ofered – Pay senior de)t in ull - +/.0 illion

– Pay or other de)t through cash andcoon stock

– +/8 illion to "#$ shareholders


8/26

(3clusivity agreeent

• 7enesis 'ants e3clusivity agreeent – 7enesis lost a prior )idding 'ar 'ith

Onicare


9/26

Onicare 6 "e' Ofer

• Onicare proposes ofer - +, pershare – #onditioned on due diligence

– "#$ considered )id9 used to negotiateincreased )id ro 7enesis


10/26

7enesis Merger 5greeents

• 7enesis 6 increased )id in responseto Onicare )id – Payof all the "otes - +1./ illion

%akes it ore likely the deal 'ill gothrough&

– 2ncrease in payent to shareholders

–

Lo'ered terination ee to +0 illion


11/26

7enesis Lock-up 5greeent

• 5greeent – "o $hop

• #an only respond i* – Unsolicited 'ritten proposal – Board )elieves in :good aith; the ofer 'as

:likely to result; in a :superior; deal

– Terination


12/26


13/26

Board

• 5pproves the deal* – :)alancing the potential loss o the

7enesis deal against the uncertainty o

Onicare?s letter@ results in theconclusion that the only reasona)lealternative or the Board; is the approvethe deal

– Aere advised that the erger andvoting agreeents :'ould prevent "#$ro engaging in any alternative or

superior transaction in the uture!;


14/26

Onicare?s "e' Bid

• Onicare sues and ofers +,!. pershare %no conditions&

• Bid is clearly )etter 6 "#$ )oard'ithdre' its recoendation or7enesis erger@ recoendedOnicare transaction

• Pro)le 6 votes are alreadycoitted


15/26

$tandard o evie'

• evlon does not apply – "o auction

– "o )reak-up

– "o change in control


16/26

Unocal scrutiny reCuired

• Unocal 6 reCuires enhanced scrutinyo the deal protection easures even'hen evlon does not apply – Threat 6 losing ofer

– easona)le response• Unitrin

–

#oercive – Preclusive


17/26

#ourt nds the lock-upinvalid

• Lock-up agreeent – Merger 5greeent 6 erger agreeent

ust )e su)itted to a vote

– =oting 5greeents 6 Outcalt and $ha' 6coit to vote in avor

• Board did not have po'er to grant an

:a)solute; lock-up• Must have a :duciary out;


18/26

Dissent

• ,-/ split decision %Dela'are $upree#ourt is usually unanious&

• #riticiss – Bright-line rule 'hile Dela'are la' is

case )y case

– Aithout agreeent 6 no )id


19/26

5nti-takeover statutes

•


20/26

#T$ #orp! v! Dynaics


21/26

$econd generation statutes

• 2ndiana 6 i )idder acCuires controllingstake 6 no voting rights unless a aEorityo other shareholders approves


22/26

#onFictG

• Aillias 5ct – eCuires disclosure and airness in

tender ofers

– Does it strike a particular :)alance)et'een the investor@ anageent@ andthe takeover )idder;G

•

Dorant #oerce #lause – Prohi)its discriinating against another

state?s coerce


23/26

2ndiana $tatute is =alid

• 2nternal 5fairs Doctrine – $tate la' governs :internal afairs; o a

corporation incorporated 'ithin that state

– The 5ct is like ost corporate la' in thatit governs the rights )et'eenshareholders and corporation• Many e3aples o corporate la' that could

delay a takeover• Liited to 2ndiana corporations 6 so no

attept to regulate out-o-state corporations


24/26

5nti-takeover statutes

• Dela'are 6 D7#L /., 6 , year'aiting period ro tie 'henshareholder acCuires 1> or ore o

a copany@ to a erger agreeent


25/26

(3ceptions to Dela'are 5nti-

takeover statute

• (3ceptions

– $hareholder o'ns I>

– Prior to tie 'hen shareholder )uys stake@

the Board approves erger or transaction'here shareholder )uys stake

– 5ter the shareholder )uys a stake@ the Boardapproves transaction and /J, o shares %other

than those held )y )idder& vote in avor• #orporation can opt-out o the statute@

)ut opt-out only takes efect in 1/ onths


26/26

5nti-takeover statutes and

stakeholders

• Pennsylvania 6 directors can takeinto account interests o eployees@custoers@ custoers@ creditors@

counities9 shareholder interestsare not doinant

• Massachusetts 6 eployees get

severance pay i red as result otakeover

class 22 - omnicare; state laws

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