In a recently published decision of November 7, 2017, the German Federal Court of Justice (Bundesgerichtshof) has added another twist to the much debated acquisition of German Celesio AG by US pharma wholesaler McKesson.  McKesson had launched a takeover offer to the free float of Celesio in late 2013, and had entered into a purchase agreement with its then main shareholder Franz Haniel & Cie. to acquire its shareholding of slightly above 50% alongside the takeover bid.  The transaction attracted the interest of Paul Singer.  Elliott acquired a position of approximately 24% in shares and, in addition, convertible bonds of Celesio, and opposed the initial offer due to an alleged undervaluation.  As a result, the initial offer, which was subject to a minimum acceptance threshold of 75%, failed in early January 2014. The 75% acceptance threshold is key under German law, for a bidder to be in a position to exercise control over a German listed corporation and access the cash flows, prior to having effected a squeeze-out of all remaining minorities. Continue Reading Treating Shareholders Equally – Another Chapter in the McKesson/Celesio Saga

Last week, the Delaware Supreme Court issued another highly anticipated appraisal decision, Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. Dell builds on the Court’s DFC decision earlier this year in which the Court held that the merger price will generally be entitled to significant, if not dispositive, weight in an appraisal action involving the sale of a public company pursuant to an open, competitive, and arm’s-length bidding process, regardless of whether the buyer is a financial or strategic bidder. Dell extends and applies this principle to mergers involving a relatively limited pre-signing bidding process, at least where that process is competitive and does not exclude logical potential bidders. Significantly, Dell also expands DFC to cases involving management buyouts (MBOs), at least where management is not a controlling stockholder and is committed to working with rival bidders who are given full access to necessary information about the company. As Dell makes clear, while process is extremely important in determining whether to defer to (or give substantial weight to) deal price in an appraisal case, it will take more than merely theoretical doubts about an arm’s-length and competitive process to justify departing from the deal price.

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On 19 September 2017, the UK Takeover Panel published Panel Consultation Paper 2017/2 (the PCP), which proposed amendments to the rules of the UK Takeover Code relating to statements of intention and related matters. On 11 December 2017, the Panel published Response Statement 2017/2 (the RS) having received responses to the PCP from 13 respondents, including the Quoted Companies Alliance, the International Corporate Governance Network, the Investment Association and the Joint Working Party of the Company Law Committees of the City of London Law Society and the Law Society of England and Wales. The RS summarizes the responses received by the Panel and sets out the changes to the Code that will take effect on 8 January 2018 (including in relation to ongoing bids).

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The SEC recently approved a proposal by NYSE to amend NYSE Listed Company Manual Rule 202.06 to prohibit NYSE-listed companies from issuing material news after the NYSE close of trading until the earlier of the publication of the company’s official closing price on the NYSE or five minutes after the NYSE’s official closing time (which is 4:00PM ET) for the placement of orders.

Continue Reading NYSE Requires Companies to Delay Release of Material Information After Market Close

On December 2, 2017, the U.S. Senate passed the Tax Cuts & Jobs Act. Two weeks earlier, on November 16, the U.S. House of Representatives passed its version of the bill. The Senate and House bills, while broadly similar, also have many important differences.

The Senate and the House will need to agree on one consistent bill before it can become law. The Senate and the House will engage in significant negotiations over the coming days/weeks, which would require additional modifications to the bill before it is enacted.

Recent press reports have suggested that the House may seek to adopt a revised bill substantially similar to the bill passed by the Senate, but the situation remains fluid and unpredictable, and additional changes are anticipated for the Senate bill as well. This memorandum sets forth a few key observations about the proposed bills that may be relevant to M&A transactions.

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On November 15, 2017, the Securities and Exchange Commission Division of Enforcement released its annual report detailing its priorities for the coming year and evaluating enforcement actions that occurred during Fiscal Year 2017.   The Report captures the SEC during a period of transition and provides insight into changes in the SEC’s approach to enforcement actions and a glimpse into its priorities for the coming year.  The following summarizes key shifts from FY 2016, outlines the Enforcement Division’s current priorities, and, in view of its stated focus on the conduct of investment professionals and protection of retail investors, provides guidance to the investment management industry as it gears up for the coming year.

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Just as companies are starting to gear up for the 2018 proxy season, on November 1, 2017, the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) released new guidance on shareholder proposals that seems to indicate the Staff will be taking a more company-friendly approach in its review of no-action letter requests.

Specifically, Staff Legal Bulletin No. 14I (“SLB 14I”) clarifies the scope and application of two grounds for excluding a shareholder proposal from a company’s proxy statement – the “ordinary business” exception (Rule 14a-8(i)(7)) and the “economic relevance” exception (Rule 14a-8(i)(5)) – and provides guidance on proposals submitted on behalf of shareholders (“proposals by proxy”) and the use of graphs and images in proposals. The following is a summary of the guidance.

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On November 2, 2017, the much anticipated Tax Cuts & Jobs Act was introduced in the U.S. Congress. The bill has been amended twice, on November 3 and November 6.

This memorandum sets forth a few key observations about the proposed bill, as amended, that may be relevant to M&A transactions. It must be emphasized, however, that the bill is likely to go through many additional changes before it becomes law, if ever.

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The recently proposed Tax Cuts and Jobs Act (the “Act”) includes executive compensation tax reforms that, if enacted, would have significant implications for the way in which companies structure their compensation programs.

The Act was introduced in the U.S. House of Representatives on November 2, 2017, and may undergo significant revisions as part of the legislative process in the House, and the U.S. Senate is expected to propose tax reform legislation shortly that may not be identical to the House’s bill, even though an identical bill could facilitate enactment without the need for a joint committee to reconcile differences.

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Last month, we published a blog post explaining the basis for our view that Regulation G does not require a GAAP reconciliation when M&A disclosure documents present the management projections used by financial advisors to opine on the financial fairness of merger consideration.  We argued that these projections are not the type of information that Regulation G was adopted to police and that, in view of the bases in Delaware case law and Regulation M-A for including disclosure of these projections, they should be considered exempt from the reconciliation requirements of Regulation G and Item 10(e) of Regulation S-K.  Accordingly, we urged the SEC staff to provide guidance confirming our view.   Continue Reading New SEC Interpretation Helps Limit Reg G as an Enabler of Merger Litigation