Last month, in Vento v. Curry,[1] the Delaware Chancery Court preliminarily enjoined the Consolidated Communication Holding (“Consolidated”) shareholder vote[2] on the company’s all-stock acquisition of FairPoint Communications (“FairPoint”) due to Consolidated’s failure to adequately disclose the compensation its financial advisor would receive for participating in the acquisition financing. The court’s ruling ultimately had very little impact on the transaction – Consolidated subsequently disclosed that its financial advisor would receive $7 million in financing fees and the Consolidated shareholders overwhelmingly approved the transaction without any delay.[3]  Vento nonetheless provides important guidance for principals and financial advisors in evaluating whether disclosure of a financial advisor’s transaction-related compensation is required when seeking shareholder approval of an M&A transaction.    Continue Reading Assessing Financial Advisor Compensation Disclosure Following Vento v. Curry

The German M&A market has remained active in Q1/2017: General Motors agreed the sale of Opel to Peugeot, Henkel made another US acquisition with Darex, and Clayton Dubilier & Rice sold the industry packaging specialist Mauser on to BWAY. The merger between Linde and Praxair is imminent. The London Stock Exchange and Deutsche Börse merger, however, looks set to fail due to Brexit, among other factors. Continue Reading

The Delaware Supreme Court has affirmed the Delaware Court of Chancery’s ruling that Energy Transfer Equity L.P. (“ETE”) did not breach its agreement to merge with The Williams Companies, Inc. when ETE terminated the agreement on the grounds that its counsel was unwilling to deliver a tax opinion that was a condition to closing.

While the court’s decision has been eagerly anticipated, the larger impact of the ETE/Williams matter occurred back in May 2016 when the dispute became public: the dispute highlighted that tax-opinion closing conditions which are intended to protect the parties against tax risks could instead add to deal risks.

This alert memorandum briefly describes the facts in the case and the court’s decision, and then turns to a survey of what deal counterparties have been doing differently to mitigate “ETE/Williams risk”.  We end with a menu of features deal counterparties should consider using in future deals.  These features include:

—  No tax opinion required
—  Tax opinions prepared before signing
—  Closing condition limited to change in tax law
—  Obligation to accept opinion from other party’s counsel or an alternate counsel
—  Obligation to restructure if necessary to obtain tax opinion
—  Termination fee for termination because of inability to obtain opinion

Please click here to read the full alert memorandum.

Quick settlements with activist hedge funds to recompose boards and adjust strategic plans have resulted in hundreds of new directors and changes to stand-alone plans in the S&P 500 over the last two years.   The arguably outsized influence of these activists, which often own less than 5% of their targets’ public floats, led one of the leading hosts of index funds, State Street, to issue publicly a position paper earlier this year in opposition to this “quick settlement” trend.[1]  Underlying State Street’s concern is the view that incumbent directors frequently settle to avoid the painful scrutiny and distraction of proxy contests while failing to take into account the sentiments of their companies’ broader shareholder bases.  The views of State Street and the other major index funds matter not only because these “passive”-strategy funds regularly control up to 40% of the public floats of listed companies, but also because that figure is likely to continue to rise steeply, along with similar increases in the interest of these funds in (as well as the number of personnel at these funds scrutinizing) governance, board composition and processes, and strategic shifts at publicly traded companies.  As a result, targets of activist campaigns are increasingly struggling with balancing the benefits of a quick and comprehensive settlement with activist hedge funds against the desirability of assuring that there is broad shareholder support, especially among long-term institutional holders, for making concessions to the activists. Continue Reading Balancing Concessions to Activists Against Responsiveness to the Broader Shareholder Base: Lessons from a Recent Settlement with an Activist

March 30, 2017

Two Cleary Gottlieb senior M&A partners will be playing major roles at this year’s 29th Annual Tulane Corporate Law Institute, generally considered the leading M&A and Corporate Law conference in the country. Victor Lewkow, who was a Chair of the Tulane conference for four years, will be joining Delaware Chancellor Andre Bouchard to moderate a panel on the increasing importance of appraisal rights in M&A transactions, and how recent court decisions and statutory amendments are impacting deal-making in 2017. Ethan Klingsberg will be drawing on his experience, on behalf of corporate clients navigating corporate governance refreshment, stockholder activism, and strategic alternatives, to moderate the conference’s keynote discussion featuring Ed Garden, the Chief Investment Officer and Founding Partner of Trian Partners (one of the world’s most successful activist funds), and Gerald Hassell, the Chair and CEO of The Bank of New York Mellon Corporation (which has undergone significant internal transformation in recent years while Mr. Garden has served on its board and Trian has been a shareholder).

Additional details about this event may be found here.

We were glad to see over 195 of you in San Francisco a month ago for the lively discussions on “M&A, Antitrust and The Board Room in 2017: Challenges and Conundrums for the West Coast” among senior personnel from in-house corporate development and legal teams, law firms, financial advisory and investment banking firms, proxy solicitors, and shareholder engagement consultants, as well as the Chief Justice of the Delaware Supreme Court, the Chief Economist of Google, the investment director at CalPERS, former senior officials from Federal Trade Commission and the U.S. Department of Justice, the author of the best seller Chaos Monkeys, and professors from a number of graduate programs, including the University of California, Berkeley School of Law and the Berkeley Center for Law, Business and the Economy, the event’s co-sponsor with Cleary Gottlieb.

Key takeaways from the day’s discussions, the agenda and participants can be found here.

Please do not hesitate to contact any of your friends at Cleary Gottlieb to follow up on any of the matters raised at the conference.

Several sources have reported that Acting SEC Chair Michael Piwowar recently issued a directive mandating that only the Acting Director of the Division of Enforcement can authorize the issuance of formal orders of investigation, the means by which the SEC authorizes its investigative staff to issue subpoenas.[1]  The change—which reportedly strips approximately 20 Enforcement Division senior officers of the power to authorize formal orders—was not announced publicly and is not reflected in the SEC’s Enforcement Manual.

Continue Reading Acting SEC Chair Michael Piwowar Takes Steps to Centralize the Process of Issuing Formal Orders – Are Commentators Drawing the Right Lessons?

Earlier this month, following three hours of deliberation, a California federal jury found that Bio-Rad Laboratories, Inc. had violated the federal whistleblower provisions by unlawfully firing Sanford Wadler, its former general counsel, and awarded Wadler nearly $11 million in damages.  Wadler had sued his former company under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and California state law, asserting that he was wrongfully terminated in retaliation for investigating and reporting to senior management potential violations of the Foreign Corrupt Practices Act (“FCPA”) in China.  The pre-trial proceedings and three-week trial involved several whistleblower-friendly rulings that promise to generate additional litigation.  Those legal determinations, as well as the jury’s prompt finding of liability and imposition of a substantial award in the face of an aggressive corporate defense, bring to the forefront significant issues relevant to public companies, directors and other corporate stakeholders – not the least of which is the precedent of a general counsel in the role of whistleblower.  Continue Reading Jury Awards Ousted General Counsel Nearly $11 Million in Whistleblower Retaliation Action – Key Takeaways

President Trump has repeatedly used his Twitter account to single out companies for criticism of their business practices, raising the question for a broad range of public companies of how to prepare for and potentially respond to such criticism. Of course, rhetorical attempts by politicians to influence the conduct of private enterprise – commonly referred to as “jawboning” – are an old political tactic. The nature and frequency of jawboning in the current environment makes this a serious issue for boards and management at a wide variety of public companies, in a way that it has not been in the recent past.

Crisis plans maintained by public companies for other circumstances may provide useful guidance for how to respond to a politician’s social media attack (an “SMA”). However, every type of crisis raises unique concerns and considerations. Many companies should carefully consider the appropriate response to an SMA in advance.

This note is intended to aid public companies for a discussion at the board level concerning SMAs. It covers three main areas that public companies should specially consider: (i) governance, (ii) executive compensation- and employment-related issues and (iii) communications, and provides senior legal advisors with an outline of relevant considerations. While the principal considerations relevant to responding to an SMA will not typically be legal concerns, corporate governance considerations constitute threshold legal issues and employment-related and communications considerations implicate important legal issues.

Please click here to read the full memo.

The review of financial regulation under the new administration has its first victim.  On February 3, the Senate passed a resolution under the Congressional Review Act that disapproves the SEC’s rule on resource extraction payments. The House of Representatives had already passed the resolution, so the SEC’s rule is no longer in effect.

The target of the joint resolution is a rule requiring each SEC reporting company engaged in commercial development of oil, natural gas or minerals to file annual disclosures on payments it makes to governments.  The rule has already had a tortured history, which left it vulnerable to action under the Congressional Review Act (CRA). Continue Reading Congress Rolls Back SEC Resource Extraction Payments Rule