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Corps 2.0 > Takeovers > Flashcards

Takeovers Flashcards

1
Q

There’s always a suspicion that the BOD may be partial to a controlling SH because the _____

A

controller could replace them under the default rules 141(k) and 228

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2
Q

Control blocks in US can be bought and sold in US without ___

A

having to deal with minority SHs unless known looter

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3
Q

Due to an absence of mandatory bid rules, a controller may sell control ___

A

to a buy who makes minority SHs worse off

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4
Q

Poison pills arose in response to a situation in the 1970s where directors had ___ but not ___

A

power to block unwanted mergers, the capacity to reject hostile tender offers

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5
Q

Examples of deal protection devices

A
  • no-shop clauses
  • lock up agreements
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6
Q

Deal protection devices are legal meaning that BODs don’t have to ___

A

drop merger agreements with one party just because another comes along and wants to buy

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7
Q

Unocal held that ____ are threats

A

low (grossly inadequate) bids

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8
Q

____ alone don’t force a sale

A

High bids

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9
Q

The BOD’s power to not drop one bid for another comes from ___

A

141

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10
Q

DGCL 157 authorizes the BOD to ___

A

issue poison pills/rights plans

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11
Q

151(g) says that if ____

A

there aren’t enough shares available to use the poison pill the BOD can issue more

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12
Q

What provision of the DGCL authorizes poison pills?

A

157

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13
Q

what is an interested SH

A

person who owns more than 15%

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14
Q

DGCL 203 says that interested SH cannot ____

A

engage in business transaction (merger, sale) with corp for three year period unless (exceptions)

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15
Q

What are the DGCL 203 exceptions?

A
  • BOD approved business combo before interested SH became interested SH
  • ISH acquires 85% stock in single transaction
  • after becoming controller business combo approved by 2/3 disinterested SHs
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16
Q

The goal of poison pills is to __

A

make BOD a negotiating agent in tender offers

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17
Q

Poison pills generally work by ___

A

diluting acquired block of shares

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18
Q

If anyone triggers the pill by acquiring more than the threshold, then the corp ___

A

issues additional shares to all other SHs (usually enough to dilute acquiror’s stake by half)

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19
Q

In DE, poison pills are permissible as long as ___

A

they meet Unocal

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20
Q

For a flip-in pill, when rights flip SHs __

A

can purchase additional shares at a discount and hostile acquirer excluded

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21
Q

For a flip-over pill, the rights become exercisable upon ___

A

triggering event, usually completion of hostile takeover

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22
Q

For a flip-over pill, SHs can purchase ___

A

shares of acquiring company at discount

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23
Q

What is greenmailing

A

investor buys enough shares to threaten takeover and then gets paid off by target

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24
Q

The rationale behind the poison pill is to

A
  • prevent greenmailing
  • protect against abusive tender offer tactics
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25
Q

BOD does not need SH approval to adopt pills but __

A

charter must authorize enough shares to do it

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26
Q

Unocal held that due to the threat of conflict, there must be ___

A

enhanced BJR when BOD takes defensive measures in response to hostile bid

27
Q

What are three types of threats under Airgas

A
  • structural coercion
  • opportunity loss
  • substantive coercion
28
Q

what is structural coercion

A

more favorable treatments of tendering SHs causes other SHs to tender

29
Q

what is substantive coercion

A

SH may accept inadequate offer due to misevaluation

30
Q

what is opportunity loss

A

SHs may lose opportunity to choose better offer proposed by management or better bidder

31
Q

Unitrin held that if something is coercive/draconian/preclusive then ___

A

can never be proportionate and no need to continue to step 2

32
Q

Two prongs of Unocal

A
  • reasonably perceived threat
  • proportionate response
33
Q

Unocal blessed discriminatory defensive measures but ___

A

SEC subsequently prohibited so led to 109 Rights Plans

34
Q

Moran made the SEC discriminatory rule ___

A

obsolete

35
Q

Under Unocal if directors fail then ___

A

injunction to remove devices

36
Q

Revlon held that if the BOD is to sell then it must ___ NOT ___

A

get highest price, use defenses to play favorites among bidders or protect non-SH groups

37
Q

Under Revlon, the duty of the BOD shifts from ___ to ___

A

preservation of corporate entity, max SH value

38
Q

Revlon court found that the company breached loyalty to SHs when it ___

A

favored one bidder over another out of concern for note-holders

39
Q

Time Warner held that unless in Revlon world BOD no duty to max SH at expense of ___ unless ___

A

deliberate corporate plan, no basis to sustain corporate strategy

40
Q

The defensive measures remained applied in Time Warner because __

A

no evidence break-up of the company was inevitable

41
Q

QVC held that if a corporation undertakes a transaction that will ___ then the director’s must seek value for SH

A

cause change in corporate control OR break-up of corporate entity

42
Q

QVC also held that you can’t rely on deal protection devices to ___

A

avoid Revlon duties if they are coercive and fail Unocal

43
Q

Unocal and Revlon don’t apply to ___

A

post-closure $ damages (then need loyalty claim)

44
Q

The remedy in a Revlon scenario is that ))

A

merger process with favored bidder stopped

45
Q

What is crown jewel defense

A

sell most valuable asset to prevent takeover

46
Q

What is white knight defense

A

friendly third party comes to rescue target company from hostile acquirer (Revlon)

47
Q

What is the Pac-man defense

A

target turns tables by attempting to acquire the acquiror

48
Q

What is the golden parachute defense

A

generous financial benefits to key executives if terminated or experience change in control

49
Q

Golden parachutes make it more costly for __

A

acquirer to replace or terminate the BOD

50
Q

Unocal held that a BOD can repurchase stock to defeat perceived threat so long as ___

A

not motivated primarily out of desire to perpetuate themselves in office

51
Q

QVC holds that defensive measures (like no-shop) that ___ cannot ___

A

make it difficult or unfeasible for a corporation to accept another offer, prevent BOD from carrying out fiduciary duties

52
Q

The court in QVC says that SHs should get __ because __

A

control premium, become minority SHs when previously no controller

53
Q

DGCL 157 allows a corporation to ___

A

issue rights entitling right holder to purchase stock

54
Q

The court disagrees with the plaintiffs in Moran that it prevents proxy contests because __

A

most proxy contests won on less than 20% ownership

55
Q

Airgas held that the BOD’s decision to not remove a poison pill when facing hostile tender ___

A

is reviewed under Unocal

56
Q

The court in Airgas found that while their offer was not ___ it did involve ___

A

structural coercion nor involved an opportunity loss, substantive coercion

57
Q

Airgas found the response was in the range of reasonableness because ___

A

realistic to nominate another slate of directors at meeting in 8 months if don’t like tender response

58
Q

Corwin facts

A
  • KKR buyout of Financial Holdings which was managed by affiliate of KKR
  • fully informed SH vote
  • KKR no veto power, 1% of stock and no right to appoint directors
59
Q

Corwin held that KKR was NOT __

A

a controlling SH

60
Q

Corwin held that the transaction was subject to ___

A

BJR (vote)

61
Q

Corwin held that even if Revlon applied the ___

A

BJR post-closure determines whether that value was achieved

62
Q

Corwin held that Revlon does not impede the BJR because ___

A

Revlon designed for pre-closing injunction not post-closure $

63
Q

141(k) allows ___

A

Majority of SHs to fire member of BOD at any time without cause

64
Q

DGCL 228 allows ___

A

SHs to waive SH meeting

Corps 2.0 (6 decks)

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