1. Genzyme Refocus
The Wall Street Journal yesterday told us that Genzyme is selling one of its non-core units, its genetic-testing business, as part of its effort to "fend off" the takeover efforts of Sanofi-Aventis SA.
Genzyme is apparently trying to rid itself of two other units also, a diagnostics concern (that sells tests and testing supplies) and a pharma intermediaries operation. The proceeds from these sales are supposed to go into a pot whence the company will buy back $2 billion of its stock.
2. Mike Castle
Rep. Mike Castle (R-Del.) lost a hotly contested primary campaign in yesterday's voting in Delaware. The usual characterization of this race has been that Castle represents the Republican "establishment" while Christine O'Donnell is the Palin-endorsed, tea-partying "insurgent." As my use of scare quotes indicates, I take such characterizations with more than a grain of salt -- and I don't take salt in my tea. Here's a story from Monday from the AP, about the home stretch of that campaign.
What I do know about Mike Castle, though, is that he was half of the team of Capuano and Castle. Together, he and Michael Capuano (D-Mass.) introduced the Hedge Fund Adviser Registration Act of 2009. It didn't become law as such, but it was one important step in the long legislative history that led to Dodd-Frank, the bill that did become law (with Castle's support)in July 2010.
3. Casey's General Stores
The logic behind consolidation in the retail "convenience outlets" market remains strong. The situation with regard to Casey's General Stores remains confusing.
As regular readers of Proxy Partisans may remember, Alimentation Couche-Tard, the Canadian convenience store concern that owns the Circle K brand, bid $36 a share for Casey's in April, and raised that to $36.75 in May. That price valued Casey's at $1.9 million.
Casey's has resisted, and to good effect. On September 1 the bid went up again, to $38.50 per share.
Even since then, there's a new suitor. Casey's has revealed that it is in talks with a white knight, 7-Eleven Inc. They are talking about a $40 a share offer, though so far that is merely vapor.
Showing posts with label Delaware. Show all posts
Showing posts with label Delaware. Show all posts
Wednesday, September 15, 2010
Monday, August 16, 2010
Barnes & Noble settlement talks
Settlement talks between the parties in the fight over the famous bookstore chain seemed promising early last week. Talks went late into the night on Wednesday. But by week's end, things had fallen apart.
In a brief statement B&N said that it and Yucaipa "were unable to conclude an agreement on mutually acceptable terms."
Yucaipa is an investment company alter ego for Ron Burkle. According to scuttlement, a tentative deal had emerged in which B&N would expand the size of its board of directors by three seats and let Burkle name directors to the new seats. In return, Burkle would support the candidates director nominees for this meeting and the next. He would also stop litigating to try to have B&N's poison pill plan invalidated, thereby allowing B&N to continue in effect to limit the size of his investment in their company.
On Thursday, that tentative agreement unravelled. The parties communicated that to the chancery court in Delaware, and that court issued its ruling on the pending motion to dismiss. Barnes & Noble won the litigation -- or at least this round of it -- in a ruling by Judge Leo Strine.
The "rights plan" a/k/a the poison pill, by the way, provides that if an outside acquires 20 percent or more of the company's stock, other investors get to buy common shares at a 50 percent discount. So Burkle can only pass the 20 percent threshold if he is willing to accept enormous dilution in stock value thereafter.
"The defendants have shown that their adoption and use of the rights plan was a good, fair, reasonable response to a threat to Barnes & Noble and its stockholders," Strine said, dismissing Burkle's lawsuit.
The name of the decision is: Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court.
In a brief statement B&N said that it and Yucaipa "were unable to conclude an agreement on mutually acceptable terms."
Yucaipa is an investment company alter ego for Ron Burkle. According to scuttlement, a tentative deal had emerged in which B&N would expand the size of its board of directors by three seats and let Burkle name directors to the new seats. In return, Burkle would support the candidates director nominees for this meeting and the next. He would also stop litigating to try to have B&N's poison pill plan invalidated, thereby allowing B&N to continue in effect to limit the size of his investment in their company.
On Thursday, that tentative agreement unravelled. The parties communicated that to the chancery court in Delaware, and that court issued its ruling on the pending motion to dismiss. Barnes & Noble won the litigation -- or at least this round of it -- in a ruling by Judge Leo Strine.
The "rights plan" a/k/a the poison pill, by the way, provides that if an outside acquires 20 percent or more of the company's stock, other investors get to buy common shares at a 50 percent discount. So Burkle can only pass the 20 percent threshold if he is willing to accept enormous dilution in stock value thereafter.
"The defendants have shown that their adoption and use of the rights plan was a good, fair, reasonable response to a threat to Barnes & Noble and its stockholders," Strine said, dismissing Burkle's lawsuit.
The name of the decision is: Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court.
Tuesday, March 30, 2010
The Mervyn's Deal from 2004 reverberates
Back in 2004, Target's sold the Mervyn's department-store chain to a group of PE investors led by Cerberus. (Faille's first law of finance: Cerberus has one of its many canine heads in everything!)
Mervyn's declared bankruptcy in 2008. (Didn't everybody?) But in Mervyn's case, ticked-off unpaid creditors decided it was all Target's fault. Target had structured the sale so as to strip to valuable real-estate holdings from the transaction, so that Mervyn's thereafter was required to make lease payments on land it had previously owned. Inflated lease payments, say the ticked-off creditors.
The estate trustee has apparently brought an adversary action against Target through the bankruptcy court. I say "apparently" because I haven't done a serious search via PACER for the actual papers yet, so I'm relying on news accounts. Said accounts tell me that Judge Kevin Gross of the U.S. Bankruptcy Court in Wilmington, Del., said the complex series of transactions should be viewed as a single deal, one that had "devastating" consequences on Mervyn's creditors, and he denied the motion to dismiss.
Last year, William Ackman tried to use a proxy fight to persuade Target to turn the land under its stores into a real-estate investment trust. His slate of nominees for the board was defeated, though. I wonder if Ackman has a cheering interest in this lawsuit one way or the other?
Mervyn's declared bankruptcy in 2008. (Didn't everybody?) But in Mervyn's case, ticked-off unpaid creditors decided it was all Target's fault. Target had structured the sale so as to strip to valuable real-estate holdings from the transaction, so that Mervyn's thereafter was required to make lease payments on land it had previously owned. Inflated lease payments, say the ticked-off creditors.
The estate trustee has apparently brought an adversary action against Target through the bankruptcy court. I say "apparently" because I haven't done a serious search via PACER for the actual papers yet, so I'm relying on news accounts. Said accounts tell me that Judge Kevin Gross of the U.S. Bankruptcy Court in Wilmington, Del., said the complex series of transactions should be viewed as a single deal, one that had "devastating" consequences on Mervyn's creditors, and he denied the motion to dismiss.
Last year, William Ackman tried to use a proxy fight to persuade Target to turn the land under its stores into a real-estate investment trust. His slate of nominees for the board was defeated, though. I wonder if Ackman has a cheering interest in this lawsuit one way or the other?
Tuesday, March 9, 2010
Selectica's poison pill upheld
The Delaware Court of Chancery recently dismissed a challenge to Selectica's shareholder rights plan, i.e. its "poison pill."
The facts of this case take us back to November 11, 2008, when Versata Enterprises, Inc. and related parties filed a Schedule 13D disclosing a 5.1% ownership position in Selectica common stock. Selectica had a poison pill plan in place at that time, but it had (as is/was the custom) a 15% triggering threshold, so Versata had no reason to believe that this was an epochal moment.
Six days later, though, apparently because of concern that futher share accumulation would have an impact on its own net operating loss carry forwards (NOLs), Selectica amended its pison pill to reduce the triggering threshold to 4.99%. Holders who had more than that before the adoption of the new plan were exempted, providing they didn't thereafter acquire another half percent.
On November 19, Versata updated its 13D filing to disclose a 6.1% ownership interest. It is unclear whether Versata was aware of the reduction in the triggering threshold two days earlier. From there we got to this, the board pulled the trigger (swallowed the pill, whatever the pertinent metaphor might be) on January 2, 2009.
Key takeaways fgrom the Chancery Court decision upholding Selectica:
1. Loss of NOLs is a legally cognizable threat under Unocal Corp. v. Mesa Petroleum Co.
2. There is nothing de jure about a 15% threshold, it has been simply a custom.
3. A decision to lower the trigger in the face of a legally cognizable threat is not per se invalid under Delaware law.
The facts of this case take us back to November 11, 2008, when Versata Enterprises, Inc. and related parties filed a Schedule 13D disclosing a 5.1% ownership position in Selectica common stock. Selectica had a poison pill plan in place at that time, but it had (as is/was the custom) a 15% triggering threshold, so Versata had no reason to believe that this was an epochal moment.
Six days later, though, apparently because of concern that futher share accumulation would have an impact on its own net operating loss carry forwards (NOLs), Selectica amended its pison pill to reduce the triggering threshold to 4.99%. Holders who had more than that before the adoption of the new plan were exempted, providing they didn't thereafter acquire another half percent.
On November 19, Versata updated its 13D filing to disclose a 6.1% ownership interest. It is unclear whether Versata was aware of the reduction in the triggering threshold two days earlier. From there we got to this, the board pulled the trigger (swallowed the pill, whatever the pertinent metaphor might be) on January 2, 2009.
Key takeaways fgrom the Chancery Court decision upholding Selectica:
1. Loss of NOLs is a legally cognizable threat under Unocal Corp. v. Mesa Petroleum Co.
2. There is nothing de jure about a 15% threshold, it has been simply a custom.
3. A decision to lower the trigger in the face of a legally cognizable threat is not per se invalid under Delaware law.
Monday, February 15, 2010
Kurtz v. Holbrook
The Delaware Court of Chancery recently issued a decision in the potentially important corporate-governance case of KURTZ v. HOLBROOK, on February 9.
You can read the decision here, or just accept the spoon-feeding below.
The case involved a contest for control of a microcap company named EMAK Worldwide. The Inspector of Elections had disallowed some 1 million voted shares held in their "street name" becaise they had not been accompanied by a DTC "universal proxy." Thus, the incumbents kept their control over EMAK. In the process, the incumbents also secured passage of a bylaw that reduced the size of the board, in effect pulling the chair out from under two of the incumbents who had been insufficiently responsive to the will of the one large preferred stockholder.
The dissidents sued, and the Court ruled in their favor on a range of issues.
1. Street name holders are shareholders of record for purposes of voting rights, even without a DTC "universal proxy"
2. The court invalidated the by-law amendment reducing the size of the board,
3. Any bylaw that sought to achieve the same effect by disqualifying a sitting director and this terminating his services will be invalid under Delaware law;
4. There was also a dispute in this case over the issue of "vote buying," a charge that the incumbents levelled against the dissidents. This is one form of a broader issue I've mentioned here before: how should courts respond as voting interests become severed from economic interests?
See the nice passage on pages 62-63 of the pdf. "'Vote buying' is an incendiary phrase...."
You can read the decision here, or just accept the spoon-feeding below.
The case involved a contest for control of a microcap company named EMAK Worldwide. The Inspector of Elections had disallowed some 1 million voted shares held in their "street name" becaise they had not been accompanied by a DTC "universal proxy." Thus, the incumbents kept their control over EMAK. In the process, the incumbents also secured passage of a bylaw that reduced the size of the board, in effect pulling the chair out from under two of the incumbents who had been insufficiently responsive to the will of the one large preferred stockholder.
The dissidents sued, and the Court ruled in their favor on a range of issues.
1. Street name holders are shareholders of record for purposes of voting rights, even without a DTC "universal proxy"
2. The court invalidated the by-law amendment reducing the size of the board,
3. Any bylaw that sought to achieve the same effect by disqualifying a sitting director and this terminating his services will be invalid under Delaware law;
4. There was also a dispute in this case over the issue of "vote buying," a charge that the incumbents levelled against the dissidents. This is one form of a broader issue I've mentioned here before: how should courts respond as voting interests become severed from economic interests?
See the nice passage on pages 62-63 of the pdf. "'Vote buying' is an incendiary phrase...."
Tuesday, December 29, 2009
NACCO Sues Applica
On December 22, the Chancery Court in Delaware denied a motion to dismiss in the matter of NACCO Industries v. Applica Inc., a lawsuit arising out of a takeover battle in 2006.
What underlies this lawsuit is a classic "white knight" situation. The executives at Applica, an appliance firm which markets under the Black & Decker brand, weren't at all happy at the prospect of being taken over by NACCO. But another suitor, Harbinger Capital Partners, appeared more likely to let these executives keep their job. So (these unproven allegations run), some of the executives at NACCO passed nonpublic information to a consultant working for Harbinger. Harbinger then alegedly used that information to craft disclosure documents of its own that helped sink the deal.
Eventually (this part is not allegation, but public fact), Harbinger won the bidding war and combined Applica with another appliance company it controls, Salton Inc.
The whole opinion is available here, but to my mind, the most intriguing of the counts in the lawsuit is the allegation of tortious interference with contract, pp. 57-60.
There are five common-law elements for such a claim: (1) a contract, (2) a third party's knowledge of this contract, (3) an intentional act by that third party, (4) that act must be without justification and (5) it must cause damage.
The court said that there could be "no meaningful dispute" about either of the first two elements, and that in earlier sections of the opinion (dealing with breach of contract) he had setled the fifth, on the face of the complaint, in the plaintiff's favor. So what was unique to the tort claim was the dispute over elements (3) and (4).
The Court of Chancery found that the complaint satisfied these points, as well, by alleging that "Harbinger ... obtained an unfair advantage over NACCO by accumulating a large stock position based on false disclosures. Because of Harbinger's actioons, NACCO did not receive the full benefit of the contractual protections that NACCO bargained for...."
As merger-and-acquisitions activity revives from its recent dormancy, many are the market participants who will want to study this decision.
What underlies this lawsuit is a classic "white knight" situation. The executives at Applica, an appliance firm which markets under the Black & Decker brand, weren't at all happy at the prospect of being taken over by NACCO. But another suitor, Harbinger Capital Partners, appeared more likely to let these executives keep their job. So (these unproven allegations run), some of the executives at NACCO passed nonpublic information to a consultant working for Harbinger. Harbinger then alegedly used that information to craft disclosure documents of its own that helped sink the deal.
Eventually (this part is not allegation, but public fact), Harbinger won the bidding war and combined Applica with another appliance company it controls, Salton Inc.
The whole opinion is available here, but to my mind, the most intriguing of the counts in the lawsuit is the allegation of tortious interference with contract, pp. 57-60.
There are five common-law elements for such a claim: (1) a contract, (2) a third party's knowledge of this contract, (3) an intentional act by that third party, (4) that act must be without justification and (5) it must cause damage.
The court said that there could be "no meaningful dispute" about either of the first two elements, and that in earlier sections of the opinion (dealing with breach of contract) he had setled the fifth, on the face of the complaint, in the plaintiff's favor. So what was unique to the tort claim was the dispute over elements (3) and (4).
The Court of Chancery found that the complaint satisfied these points, as well, by alleging that "Harbinger ... obtained an unfair advantage over NACCO by accumulating a large stock position based on false disclosures. Because of Harbinger's actioons, NACCO did not receive the full benefit of the contractual protections that NACCO bargained for...."
As merger-and-acquisitions activity revives from its recent dormancy, many are the market participants who will want to study this decision.
Tuesday, September 22, 2009
Three brief items
1. What is the "ethernet"?
A couple of entries ago, I described MRV Communications as a "networking/ethernet company." What does that mean? Networking is the broader term. All computer operating systems nowadays are "networking," i.e. they all support internet protocol at a minimum. "Ethernet" is a more specific term, referring to a particular local-area network (LAN) architecture.
2. General Growth Properties
GGP, the mall operator and a Delaware chartered corporation, remains in bankruptcy court, where it has been since its filing in April, in the Manhattan bankruptcy court.
The case is shaking up ideas about special purpose entities and what is or isn't bankruptcy remote. Walter Kurtz writes that "structurers are quickly moving away from Delaware" as a result of developments in this litigation, and that the Caymans will be their new charterer of choice.
3. Dell offers $3.9 billion for Perot Systems.
Analysts who cover Dell have long said that it was too tightly focused on hardware and should diversify into the software side of the industry. This it now appears intent on doing, by purchasing a company founded by a former independent presidential candidate.
Perot, I'm told, is a juicy target because it has contracts with hospital groups, and any reform of the healthcare system that does come out of this or ensuing Congresses will almost surely include a push to digitize healthcare, which of course means work for Perot. I'll try not to wax conspiratorial here, or even to mutter about crony capitalism.
A couple of entries ago, I described MRV Communications as a "networking/ethernet company." What does that mean? Networking is the broader term. All computer operating systems nowadays are "networking," i.e. they all support internet protocol at a minimum. "Ethernet" is a more specific term, referring to a particular local-area network (LAN) architecture.
2. General Growth Properties
GGP, the mall operator and a Delaware chartered corporation, remains in bankruptcy court, where it has been since its filing in April, in the Manhattan bankruptcy court.
The case is shaking up ideas about special purpose entities and what is or isn't bankruptcy remote. Walter Kurtz writes that "structurers are quickly moving away from Delaware" as a result of developments in this litigation, and that the Caymans will be their new charterer of choice.
3. Dell offers $3.9 billion for Perot Systems.
Analysts who cover Dell have long said that it was too tightly focused on hardware and should diversify into the software side of the industry. This it now appears intent on doing, by purchasing a company founded by a former independent presidential candidate.
Perot, I'm told, is a juicy target because it has contracts with hospital groups, and any reform of the healthcare system that does come out of this or ensuing Congresses will almost surely include a push to digitize healthcare, which of course means work for Perot. I'll try not to wax conspiratorial here, or even to mutter about crony capitalism.
Wednesday, September 9, 2009
CNS Response
The CNS/Brandt saga continues. CNS Response is a California based company that develops software designed to analyze a patient's brainwaves.
You may remember that back in July there was some excitement when the company's former CEO, Leonard Brandt, purported to call a spaecial shareholders meeting in a hallway outside of a closed office door in Dover, Delaware.
Now there's a new installment of the soap opera. Brandt -- who, BTW, is a current director of the company as well as its former CEO -- called another meeting for the Friday before Labor Day weekend and the company says that this one didn't count either.
Gee, this sounds like an operation that has its act together. I'd surely want to invest my money with them!
Meanwhile, while you and I make our portfolio decisions, the family feud is in litigation before Delaware Chancery Court as explained in this 8K.
You may remember that back in July there was some excitement when the company's former CEO, Leonard Brandt, purported to call a spaecial shareholders meeting in a hallway outside of a closed office door in Dover, Delaware.
Now there's a new installment of the soap opera. Brandt -- who, BTW, is a current director of the company as well as its former CEO -- called another meeting for the Friday before Labor Day weekend and the company says that this one didn't count either.
Gee, this sounds like an operation that has its act together. I'd surely want to invest my money with them!
Meanwhile, while you and I make our portfolio decisions, the family feud is in litigation before Delaware Chancery Court as explained in this 8K.
Tuesday, July 28, 2009
Important Delaware decision
Wayne County Employees v. Corti. The Court of Chancery has confirmed that judicial review in the corporate sales context is limited to the boards' "decision making process," not to the substance of what the board decided.
Wayne County Employees' Retirement System, the pension fund for the named Michigan county (which includes the city of Detroit) was invested in Activism in 2007, when that company, a video game producer, developer of Guitar Hero and Call of Duty, agreed to combine with Vivendi Games, of World of Warcraft fame. Both W of W and Guitar Hero have inspired memorable South Park episodes, but I suppose that is neither here nor there, legally. Sigh.
To simplify just a bit: Activism agreed to sell itself to Vivendi, and the pension fund managers in Michigan didn't think they as shareholders were were getting a very good deal. In the usual phrasing, they objected that the shareholders weren't getting a "control premium," and tha the failure to insist on one in negotiations was a breach of their duty of loyalty. Nor (since shareholders had to vote on the combination) did they believe all the crucial information about the deal had been disclosed prior to that vote.
The first-named defendant is Robert Corti, one of the members of the board of directors.
The Court dismissed all of the counts of the complaint. It dismissed the substantive (control-premium related) counts because there is no rule of law requiring a premium for a change of control, and making that a test for satisfaction of the duty of loyalty.
The court's objection to the process-based claim of the same complaint apparently was that the allegedly undisclosed facts were not material.
"Materiality is the essence of a successful disclosure claim, and
plaintiff has failed to demonstrate how any of the alleged omissions
would significantly alter the total mix of information that is already
available in the nearly 300-page definitive proxy released by the
Company."
So Delaware once again polishes its reputation as the great management-friendly state. I think there are counter-pressures in existence that will over time weaken Delaware's dominance, but IMHO this decision shows its institutionalized determination to hang onto it.
Wayne County Employees' Retirement System, the pension fund for the named Michigan county (which includes the city of Detroit) was invested in Activism in 2007, when that company, a video game producer, developer of Guitar Hero and Call of Duty, agreed to combine with Vivendi Games, of World of Warcraft fame. Both W of W and Guitar Hero have inspired memorable South Park episodes, but I suppose that is neither here nor there, legally. Sigh.
To simplify just a bit: Activism agreed to sell itself to Vivendi, and the pension fund managers in Michigan didn't think they as shareholders were were getting a very good deal. In the usual phrasing, they objected that the shareholders weren't getting a "control premium," and tha the failure to insist on one in negotiations was a breach of their duty of loyalty. Nor (since shareholders had to vote on the combination) did they believe all the crucial information about the deal had been disclosed prior to that vote.
The first-named defendant is Robert Corti, one of the members of the board of directors.
The Court dismissed all of the counts of the complaint. It dismissed the substantive (control-premium related) counts because there is no rule of law requiring a premium for a change of control, and making that a test for satisfaction of the duty of loyalty.
The court's objection to the process-based claim of the same complaint apparently was that the allegedly undisclosed facts were not material.
"Materiality is the essence of a successful disclosure claim, and
plaintiff has failed to demonstrate how any of the alleged omissions
would significantly alter the total mix of information that is already
available in the nearly 300-page definitive proxy released by the
Company."
So Delaware once again polishes its reputation as the great management-friendly state. I think there are counter-pressures in existence that will over time weaken Delaware's dominance, but IMHO this decision shows its institutionalized determination to hang onto it.
Monday, July 13, 2009
A "special meeting" outside the office door.
CNS Response Inc., a company based in Costa Mesa, California, describes itself as the developer of "A patented data-analysis capability that, with the help of a simple, non-invasive EEG, will analyze a patient's brain waves and compare the results to an extensive patient outcomes database."
It is engaged in a dispute with Len Brandt, its own former chief executive officer. And some wild stuff seems to have happened in that regard over the Independence Day weekend.
Brandt mailed out a "Notice of Special Meeting of Shareholders of CNS Response Inc.," purporting to call a meeting on July 3, at the office of the company's registered agent in Dover, Delaware. July 3 was a federal and a Delaware state holiday.
According to the company's filing with the SEC, Brandt didn't go to the meeting he had called, but he gave his proxy to his attorney, and the attorney went to the Dover office. Finding the registered agent's office closed for the holiday, the attorney "attempted to call the purported meeting to order in the hallway outside of the office and adjourn the meeting when it became clear that the necessary quorum to conduct business was not present."
Hmmm. If he was doing this in an empty office building corridor, how do the company officials who filed this know about it? Because they had sent somebody to that corridor, too. So it appears there was some sort of gathering (if not a "meeting") in the corridor on the holiday.
"CNS' counsel was present to object to the attempt to call the purported meeting, the attempt to adjourn the purported meeting, and other matters."
Was it just these two in the hallway? Apparently the incumbent CEO, George Carpenter, was somewhere around, although perhaps not at the epicenter of the excitement. The filing says he was "ready outside of the purported meeting...."
The purported meeting was outside a closed office door in a corridor. Where was Carpenter if he was "outside" of that? In the corridor a floor below? In the building's lobby?
I don't know what is going on, but I am amused. Thanks, corporate America!
It is engaged in a dispute with Len Brandt, its own former chief executive officer. And some wild stuff seems to have happened in that regard over the Independence Day weekend.
Brandt mailed out a "Notice of Special Meeting of Shareholders of CNS Response Inc.," purporting to call a meeting on July 3, at the office of the company's registered agent in Dover, Delaware. July 3 was a federal and a Delaware state holiday.
According to the company's filing with the SEC, Brandt didn't go to the meeting he had called, but he gave his proxy to his attorney, and the attorney went to the Dover office. Finding the registered agent's office closed for the holiday, the attorney "attempted to call the purported meeting to order in the hallway outside of the office and adjourn the meeting when it became clear that the necessary quorum to conduct business was not present."
Hmmm. If he was doing this in an empty office building corridor, how do the company officials who filed this know about it? Because they had sent somebody to that corridor, too. So it appears there was some sort of gathering (if not a "meeting") in the corridor on the holiday.
"CNS' counsel was present to object to the attempt to call the purported meeting, the attempt to adjourn the purported meeting, and other matters."
Was it just these two in the hallway? Apparently the incumbent CEO, George Carpenter, was somewhere around, although perhaps not at the epicenter of the excitement. The filing says he was "ready outside of the purported meeting...."
The purported meeting was outside a closed office door in a corridor. Where was Carpenter if he was "outside" of that? In the corridor a floor below? In the building's lobby?
I don't know what is going on, but I am amused. Thanks, corporate America!
Monday, June 29, 2009
Trico Marine, Outcome
The shareholders of Trico Marine elected the two contested incumbent nominees at the 2009 Annual Meeting, Joseph S. Compofelice and Ben A. Guill.
The Trico Marine Group, which is headquartered in The Woodlands, Texas, provides subsea, trenching, and marine support vessels and services.
This is a defeat for the two Kistefos nominees, Christen Sveaas and Age Korsvold. A proposal to expand the size of the board was also defeated.
But all was not lost for admirers of insurgency. A proposal to declassify the board of directors prevailed.
The company's announcement is here.
One of the unusual features of this particular proxy fight was the involvement of the Jones Act, otherwise known as the Merchant Marine Act of 1920. This is a bill that provides for workers compensation payments to seamen, and that offers various sorts of protectionism to US maritime related industry. For example, the Jones Act prevents US shipholders from refurbishing their ships in foreign ports.
Trico made a point that the Jones distinguishes between US companies and non-US companies, beneficiaries of its protection provisions and non-beneficiaries, based on the control of a company even by indirect means. It said that a May 29th letter the company had received from the US Maritime Administration said that Trico's protected status might be at risk should certain Kistefos-sponsored outcomes ocur at the meeting. I'll try not to get into the technicalities of it, which are intricate.
The bottom line, after all, is that the issue turned out to be a red herring, though, as on June 5 the same agency sent a follow-up letter. "In light of our review of Delaware case law and the affidavit of Messrs Korsvold and Sveaas, we find that concern regarding use of Independent Proxies has been assuaged."
Still, maybe that isn't quite the bottom line. For who knows but that the momentunm of a proxy contest, always an uphill matter, was broken during that period between the 29th and the 5th, when this seemed to be an issue?
The Trico Marine Group, which is headquartered in The Woodlands, Texas, provides subsea, trenching, and marine support vessels and services.
This is a defeat for the two Kistefos nominees, Christen Sveaas and Age Korsvold. A proposal to expand the size of the board was also defeated.
But all was not lost for admirers of insurgency. A proposal to declassify the board of directors prevailed.
The company's announcement is here.
One of the unusual features of this particular proxy fight was the involvement of the Jones Act, otherwise known as the Merchant Marine Act of 1920. This is a bill that provides for workers compensation payments to seamen, and that offers various sorts of protectionism to US maritime related industry. For example, the Jones Act prevents US shipholders from refurbishing their ships in foreign ports.
Trico made a point that the Jones distinguishes between US companies and non-US companies, beneficiaries of its protection provisions and non-beneficiaries, based on the control of a company even by indirect means. It said that a May 29th letter the company had received from the US Maritime Administration said that Trico's protected status might be at risk should certain Kistefos-sponsored outcomes ocur at the meeting. I'll try not to get into the technicalities of it, which are intricate.
The bottom line, after all, is that the issue turned out to be a red herring, though, as on June 5 the same agency sent a follow-up letter. "In light of our review of Delaware case law and the affidavit of Messrs Korsvold and Sveaas, we find that concern regarding use of Independent Proxies has been assuaged."
Still, maybe that isn't quite the bottom line. For who knows but that the momentunm of a proxy contest, always an uphill matter, was broken during that period between the 29th and the 5th, when this seemed to be an issue?
Wednesday, April 8, 2009
Delaware Supreme Court news
In an important decision last month, the Delaware Supreme Court rejected post-merger
stockholder claims that directors failed to act in good faith in selling the company.
Delaware, unfortunately, is living down to its reputation as an entrenched management's favorite state, and this decision -- Lyondell Chemical v. Ryan -- will compound that.
The decision, written by Justice Berger, rejects attempts to impose personal liabiolity on directors EVEN on the assumption that they did nothing to prepare for an imnpending offer and upon receiving the offer entered into a merger agreement with a no-shop provision and a 3.2% break-up fee.
Lyondell had moved for summary judgment in the Court of Chancery. That court had refused to grant summary judgment, setting the stage for a trial. But the state's highest court has now short-circuitesd any trial, holding that "the directors are entitled to the entry of summary judgment."
This is precisely the sort of decision that ticks me off, and that has me convinced there has to be a serious shareholder-rights movement, which would among other goals put pressure upon managements to incorporate in places other than Delaware. For the record, you can find the decision yourself here.
stockholder claims that directors failed to act in good faith in selling the company.
Delaware, unfortunately, is living down to its reputation as an entrenched management's favorite state, and this decision -- Lyondell Chemical v. Ryan -- will compound that.
The decision, written by Justice Berger, rejects attempts to impose personal liabiolity on directors EVEN on the assumption that they did nothing to prepare for an imnpending offer and upon receiving the offer entered into a merger agreement with a no-shop provision and a 3.2% break-up fee.
Lyondell had moved for summary judgment in the Court of Chancery. That court had refused to grant summary judgment, setting the stage for a trial. But the state's highest court has now short-circuitesd any trial, holding that "the directors are entitled to the entry of summary judgment."
This is precisely the sort of decision that ticks me off, and that has me convinced there has to be a serious shareholder-rights movement, which would among other goals put pressure upon managements to incorporate in places other than Delaware. For the record, you can find the decision yourself here.
Sunday, March 22, 2009
More than just not taking personal advantage
The Harvard Program on Corporate Governance has issued a discussion paper entitled, "Loyalty's Core Demand: The Defining Role of Good Faith in Corporation Law."
The authors predict that "the legal standards used to evaluate whether directors have complied with their fiduciary duties will be a subject of growing international policy interest" -- not a lot of risk to that call, IMHO.
The abstract of the paper says this: We conclude, consistent with the Delaware Supreme Court’s recent decision in Stone v. Ritter, that in the American corporate law tradition, the basic definition of the duty of loyalty is the obligation to act in good faith to advance the best interests of the corporation. What this article also shows is that the duty of loyalty has traditionally been conceived of as being much broader than the duty to avoid acting for personal financial advantage. The duty of loyalty also precludes acting for unlawful purposes, and affirmatively requires directors to make a good faith effort to monitor the corporation’s affairs and compliance with law.
The authors? Lawrence Hamermesh, R. Franklin Balotti, Jeffrey M. Gorris, and (surely the most newsworthy so I saved it for last) Leo E. Strine Jr.
Strine's views will have extra weight with many readers because he is Vice Chancellor, Delaware Court of Chancery.
Enjoy the read.
The authors predict that "the legal standards used to evaluate whether directors have complied with their fiduciary duties will be a subject of growing international policy interest" -- not a lot of risk to that call, IMHO.
The abstract of the paper says this: We conclude, consistent with the Delaware Supreme Court’s recent decision in Stone v. Ritter, that in the American corporate law tradition, the basic definition of the duty of loyalty is the obligation to act in good faith to advance the best interests of the corporation. What this article also shows is that the duty of loyalty has traditionally been conceived of as being much broader than the duty to avoid acting for personal financial advantage. The duty of loyalty also precludes acting for unlawful purposes, and affirmatively requires directors to make a good faith effort to monitor the corporation’s affairs and compliance with law.
The authors? Lawrence Hamermesh, R. Franklin Balotti, Jeffrey M. Gorris, and (surely the most newsworthy so I saved it for last) Leo E. Strine Jr.
Strine's views will have extra weight with many readers because he is Vice Chancellor, Delaware Court of Chancery.
Enjoy the read.
Wednesday, February 25, 2009
Three brief items
1. Delaware state bar discussing corporate law change
The Delaware State Bar Ass'n has under consideration a proposal to amend the famously-influential Delaware General Corporate Law. If the bar association approves of them, the changes will be submitted to the General Assembly.
The proposed amendments include the creation of two new DGCL sections, Sections 112 and 113, that would (I quote a memo available through the website of Schulte Roth & Zabel) "greatly increase access to a corporation's proxy statement and the right to reimbursement for nominating directors to the corporation's board."
2. The Mark Cuban case
Mark Cuban is the defendant in an insider-trading complaint brought by the SEC in the US district court, northern district of Texas last fall. The SEC's theory of the case pushes at the outer boundaries of what had been considered 'insider trading,' or even 'tippee' status. That's enough reason to send a cheer or two his way.
I discussed the case when it was filed and won't repeat myself unduly.
Instead, I'll simply note that the judge hearing the matter, Sidney Fitzwater, has signed a scheduling order.
The parties have until July 1, 2009 to join other parties.
The party with the burden of proof on a given issue has until September 1 to designate its expertwitnesses, and the other party has until November 1 to designate its rebuttal expert witness.
They have until March 1, 2010 to file their motions for summary judgment.
After all that is disposed of, if nobody gets a summary judgment, the judge will consider the question of a date for trial.
3. Rambus antitrust case
The U.S. Supreme Court, on Monday, rejected a request by the FTC to review an appeals court ruling in favor of Rambus Inc. and against FTC's antitrust allegations. This should put an end to the controversy, underwy for seven years now, about whether Rambus, the owner of the patents to certain memory chips, had improperly manipulatred an industry standards setting group with anti-competitive intent.
The standards setting group was known as the Joint Electron Device Engineering Council (or JEDEC), and the allegation was in essence that Rambus' participation in the deliberations of JEDEC was that of a classic "mole." JEDEC was trying to enable its members to avoid patent hold-ups, and enable members of the industry to move ahead with common standards and without a lot of litigation. Rambus supposedly hid information about its own plans to patent certain technologies, so that in time it could say "aha!" to firms that had acted in the belief they could rely upon JEDEC standards.
In April 2008 the appeals court sided with Rambus, not because it rejected the general view that anti-competitive conduct could take that form but because the FTC had failed to show that Rambus's behavior gave it unlawful monopoly power.
The Delaware State Bar Ass'n has under consideration a proposal to amend the famously-influential Delaware General Corporate Law. If the bar association approves of them, the changes will be submitted to the General Assembly.
The proposed amendments include the creation of two new DGCL sections, Sections 112 and 113, that would (I quote a memo available through the website of Schulte Roth & Zabel) "greatly increase access to a corporation's proxy statement and the right to reimbursement for nominating directors to the corporation's board."
2. The Mark Cuban case
Mark Cuban is the defendant in an insider-trading complaint brought by the SEC in the US district court, northern district of Texas last fall. The SEC's theory of the case pushes at the outer boundaries of what had been considered 'insider trading,' or even 'tippee' status. That's enough reason to send a cheer or two his way.
I discussed the case when it was filed and won't repeat myself unduly.
Instead, I'll simply note that the judge hearing the matter, Sidney Fitzwater, has signed a scheduling order.
The parties have until July 1, 2009 to join other parties.
The party with the burden of proof on a given issue has until September 1 to designate its expertwitnesses, and the other party has until November 1 to designate its rebuttal expert witness.
They have until March 1, 2010 to file their motions for summary judgment.
After all that is disposed of, if nobody gets a summary judgment, the judge will consider the question of a date for trial.
3. Rambus antitrust case
The U.S. Supreme Court, on Monday, rejected a request by the FTC to review an appeals court ruling in favor of Rambus Inc. and against FTC's antitrust allegations. This should put an end to the controversy, underwy for seven years now, about whether Rambus, the owner of the patents to certain memory chips, had improperly manipulatred an industry standards setting group with anti-competitive intent.
The standards setting group was known as the Joint Electron Device Engineering Council (or JEDEC), and the allegation was in essence that Rambus' participation in the deliberations of JEDEC was that of a classic "mole." JEDEC was trying to enable its members to avoid patent hold-ups, and enable members of the industry to move ahead with common standards and without a lot of litigation. Rambus supposedly hid information about its own plans to patent certain technologies, so that in time it could say "aha!" to firms that had acted in the belief they could rely upon JEDEC standards.
In April 2008 the appeals court sided with Rambus, not because it rejected the general view that anti-competitive conduct could take that form but because the FTC had failed to show that Rambus's behavior gave it unlawful monopoly power.
Tuesday, February 10, 2009
Selectica Goes Nuclear?
When we checked in January, Selectica had "exercised the poison pill" as the expression goes. Logically, shouldn't one say that it has swallowed the poison pill, thereby carrying the metaphor forward?
Anyway, it had doubled the number of shares of common stock held by all of its shareholders except for the would-be acquirers, Versata and Trinity.
It had also decided that it would be the plaintiff in the inevitable litigation, rather than waiting to become the defendant. Selectica filed in Delaware Chancery Court looking for a declaratory judgment patting it on the back for this.
On January 16, Versata and Trilogy jointly filed their answer to the complaint.
As I read the answer, the lawyers involved seem to ave worked rather hard to come up with an intensified form of the "poison pill" metaphor for what Selectica has done. They came up with "nuclear pill" and "reloaded nuclear pill." Sounds rather awkward, but hey ... I'm sure they gave this literary endeavor their best shot.
Appended to the Answer is a Counterclaim, which is the course in such a battle.
Here's some emphatic language from the Counterclaim.
"The case of Selectica reflects a 'how-to' for directors seeking to breach and rebreach the fiduciary obligations owed to shareholders of a public company. Selectica has a long and undistinguished history. It began auspiciously in March 2000, however, when the company commenced an initial public offering at an offering price of $30.00 per share. On the first day of public trading, per share prices increased over 371% and closed at $141.23 per share. Since that promising beginning, the company has executed a poorly-managed business strategy and has experienced consistent losses. Indeed, the nearly nine-year public company record of Selectica is replete with unfulfilled and unrealized promises. From a trading high of $154.44 in March 2000, Selectica’s stock price has utterly disintegrated, reaching a record-low closing price of $.69 on January 5, 2009 (since that date, trading in Selectica stock has been halted)."
Part of the problem, the defendants continue, is that Selectica has spent "time and resources resolving patent infringement claims related to its use, licensing and sales of its sales configuration software. Between April 2004 and October 2007, Selectica was required to defend itself in two suits claiming infringement of patents held by Trilogy and Versata."
Whoa! I hadn't been aware that patent infringement was a part of this case at all. My bad.
Frankly it seems bizaare to me that party A, owning an equity interest in party B, should sue B for patent infringement and then complain in a shareholders' lawsuit that B violated its fiduciary duty by spending time and money to resist that lawsuit. It means what? that the defendant in a patent infringement lawsuit can have a fiduciary duty to allow a default judgment?
Anyway, it had doubled the number of shares of common stock held by all of its shareholders except for the would-be acquirers, Versata and Trinity.
It had also decided that it would be the plaintiff in the inevitable litigation, rather than waiting to become the defendant. Selectica filed in Delaware Chancery Court looking for a declaratory judgment patting it on the back for this.
On January 16, Versata and Trilogy jointly filed their answer to the complaint.
As I read the answer, the lawyers involved seem to ave worked rather hard to come up with an intensified form of the "poison pill" metaphor for what Selectica has done. They came up with "nuclear pill" and "reloaded nuclear pill." Sounds rather awkward, but hey ... I'm sure they gave this literary endeavor their best shot.
Appended to the Answer is a Counterclaim, which is the course in such a battle.
Here's some emphatic language from the Counterclaim.
"The case of Selectica reflects a 'how-to' for directors seeking to breach and rebreach the fiduciary obligations owed to shareholders of a public company. Selectica has a long and undistinguished history. It began auspiciously in March 2000, however, when the company commenced an initial public offering at an offering price of $30.00 per share. On the first day of public trading, per share prices increased over 371% and closed at $141.23 per share. Since that promising beginning, the company has executed a poorly-managed business strategy and has experienced consistent losses. Indeed, the nearly nine-year public company record of Selectica is replete with unfulfilled and unrealized promises. From a trading high of $154.44 in March 2000, Selectica’s stock price has utterly disintegrated, reaching a record-low closing price of $.69 on January 5, 2009 (since that date, trading in Selectica stock has been halted)."
Part of the problem, the defendants continue, is that Selectica has spent "time and resources resolving patent infringement claims related to its use, licensing and sales of its sales configuration software. Between April 2004 and October 2007, Selectica was required to defend itself in two suits claiming infringement of patents held by Trilogy and Versata."
Whoa! I hadn't been aware that patent infringement was a part of this case at all. My bad.
Frankly it seems bizaare to me that party A, owning an equity interest in party B, should sue B for patent infringement and then complain in a shareholders' lawsuit that B violated its fiduciary duty by spending time and money to resist that lawsuit. It means what? that the defendant in a patent infringement lawsuit can have a fiduciary duty to allow a default judgment?
Tuesday, December 9, 2008
Hain Celestial
Yes, some stockholders at some corporations are interested in pressing for the re-incorporation of the corporations out of Delaware and into North Dakota in order to get what they see as the advantages of the ND new-model corporate charter.
Among the few corporations where this issue has arisen so far is health-food concern Hain Celestial Group. Its best known for its Celestial Seasoning tea, it is headquartered in NYS and ... chartered in Delaware.
Here's a link for more.
The shareholders proposed a non-binding resolution on this subject in July. In October, Hain Celestial asked the SEC for permnission to ignore it on procedural grounds (via a no-action letter). They were denied. So it appears there will have to be a vote.
Among the few corporations where this issue has arisen so far is health-food concern Hain Celestial Group. Its best known for its Celestial Seasoning tea, it is headquartered in NYS and ... chartered in Delaware.
Here's a link for more.
The shareholders proposed a non-binding resolution on this subject in July. In October, Hain Celestial asked the SEC for permnission to ignore it on procedural grounds (via a no-action letter). They were denied. So it appears there will have to be a vote.
Monday, December 8, 2008
North Dakota
I don't know that this blog has ever been visited by anyone from North Dakota. But if you drop by in the future and see this message: Hail!
I understand that last year your state enacted a remarkable corporate-governance statute.
It creates a new chapter of the state's corporations law, 10-35, by which a company chartering in that state can opt to be governed. If it does, it will get a low franchise fee, only half of what it would pay if it incorporated in Delaware, but it will have to abide by various rules designed to keep the management responsive to the shareholders.
For example: the term of directors shall not exceed one year and will not be staggered into different classes. So every annual meeting will involve the re-election (or not) of the entire board.
The chairman of the board will be ineligible from holding any executive office. We've become accustomed to seeing the phrase "chairman and CEO" after a bigwig's name. The new 10-35 corporations will have two people for those two distinct posts.
Provision is made for access to the company's proxy materials by major shareholders -- provisions analogous to those recently considered, but never adopted, by the SEC.
Shareholders must approve of certain public issuances of shares: in other words, they can veto actions that would dilute their voting power.
There are other important provisions in 10-35, but those examples will give you an idea of the direction of the whole package.
What difference might this make? Are a lot of firms going to beat down the door to re-charter in North Dakota, either for the low franchise fee or because their shareholders are pressuring them to do so or for any other reason?
More on this tomorrow.
I understand that last year your state enacted a remarkable corporate-governance statute.
It creates a new chapter of the state's corporations law, 10-35, by which a company chartering in that state can opt to be governed. If it does, it will get a low franchise fee, only half of what it would pay if it incorporated in Delaware, but it will have to abide by various rules designed to keep the management responsive to the shareholders.
For example: the term of directors shall not exceed one year and will not be staggered into different classes. So every annual meeting will involve the re-election (or not) of the entire board.
The chairman of the board will be ineligible from holding any executive office. We've become accustomed to seeing the phrase "chairman and CEO" after a bigwig's name. The new 10-35 corporations will have two people for those two distinct posts.
Provision is made for access to the company's proxy materials by major shareholders -- provisions analogous to those recently considered, but never adopted, by the SEC.
Shareholders must approve of certain public issuances of shares: in other words, they can veto actions that would dilute their voting power.
There are other important provisions in 10-35, but those examples will give you an idea of the direction of the whole package.
What difference might this make? Are a lot of firms going to beat down the door to re-charter in North Dakota, either for the low franchise fee or because their shareholders are pressuring them to do so or for any other reason?
More on this tomorrow.
Wednesday, November 5, 2008
Cliffs meeting re-scheduled
The Cleveland, Ohio based mining company, Cliffs Natural Resources, has rescheduled its special shareholder meeting, called to approve its proposed merger with Alpha Natural Resources.
The company was known as Cleveland-Cliffs until last month, and it had planned to hold the special meeting on November 21.
Now they have set a new date -- almost a month later. The meeting will take place December 19, with a "record date" of November 19.
Ohio statutes require a supermajority of shareholders to approve of such a merger, so opponents can block this deal with 35%. Such opposition does exist, as those who've been following the matter along with me know.
My reading of the delay is that the management at Cliffs knows they don't yet have the votes to push this through. But they think they can persuade some of the dissidents to vote their way given the extra month they've now given themselves.
Alpha is unhappy. It has brought a lawsuit in Delaware seeking to obtain an order invalidating this re-scheduling. What gives there? Does Alpha want to push the deal through quickly? or do they want to kill the deal by holding the vote befoe any of the dissidents can be persuaded to change their views? (Seller's remorse?)
The company was known as Cleveland-Cliffs until last month, and it had planned to hold the special meeting on November 21.
Now they have set a new date -- almost a month later. The meeting will take place December 19, with a "record date" of November 19.
Ohio statutes require a supermajority of shareholders to approve of such a merger, so opponents can block this deal with 35%. Such opposition does exist, as those who've been following the matter along with me know.
My reading of the delay is that the management at Cliffs knows they don't yet have the votes to push this through. But they think they can persuade some of the dissidents to vote their way given the extra month they've now given themselves.
Alpha is unhappy. It has brought a lawsuit in Delaware seeking to obtain an order invalidating this re-scheduling. What gives there? Does Alpha want to push the deal through quickly? or do they want to kill the deal by holding the vote befoe any of the dissidents can be persuaded to change their views? (Seller's remorse?)
Wednesday, October 1, 2008
Three brief items
1. The credit crunch is having a predictable impact on merger and acquisition activity.
Still, a deal is a deal. Parties ought to be deterred from simply walking away when performance of their agreed-upon obligations has become onerous.
Vice Chancellor Stephen Lamb of the Delaware Chancery Court has refused to let Hexion Specialty Chemicals abandon its $6.5 billion buyout of Huntsman Corp.
Lamb's ruling came down Monday. "We are reviewing the decision and our options," said Hexion in a statement.
2. Ciena Capital has sought the protection of the bankruptcy courts. Ciena, a real estate lender, is 95% owned by Allied Capital, the bête noire of famed short seller David Einhorn.
Indeed, Einhorn wrote a book last year chiefly devoted to venting his frustrations at short selling Allied. He had begun making a public case for short selling, on the basus of the illiquidity of its portfolio, in the spring of 2002. Here's a link to an informative review of that book subscription required but free.
Short selling is all about timing. If you take a short position, you're betting not just that the stock will fall sometime, but that it will fall within the framework needed to make that position pay off. Einhorn's position in Allied over the period discussed inhis book was no diaster, but it proved no bonanza either.
No matter how badly the bankruptcy of Ciena may hurt Allied, then, it comes rather too late to vindicate views asserted in 2002. Though, let it be noted, Allied Capital stocks fell 14% yesterday, as general market indexes were rising.
3. Maurice Greenberg. A few days ago I would have saids that "Hank" Greenberg had given up on playing a continuing role at his old company, AIG.
He had filed a statement on September 25, after all, to the effect that he and entities under his control are selling 40 million shares of AIG stock. They took a big loss in doing so, too.
But AIG is being effectively nationalized, and its new Washingtonian masters want it to sell off assets.
This has created an opening for Greenberg to play a different sort of role. No longer as boss, no longer as quite so large a shareholder. But now he shows up as ... willing buyer.
Meanwhile the revolving door in from of the CEO office at AIG continues to twril. Greenberg sent his letter asking to be allowed to bid on the assets to ... Edward Libby. Who has been CEO for all of two weeks.
Still, a deal is a deal. Parties ought to be deterred from simply walking away when performance of their agreed-upon obligations has become onerous.
Vice Chancellor Stephen Lamb of the Delaware Chancery Court has refused to let Hexion Specialty Chemicals abandon its $6.5 billion buyout of Huntsman Corp.
Lamb's ruling came down Monday. "We are reviewing the decision and our options," said Hexion in a statement.
2. Ciena Capital has sought the protection of the bankruptcy courts. Ciena, a real estate lender, is 95% owned by Allied Capital, the bête noire of famed short seller David Einhorn.
Indeed, Einhorn wrote a book last year chiefly devoted to venting his frustrations at short selling Allied. He had begun making a public case for short selling, on the basus of the illiquidity of its portfolio, in the spring of 2002. Here's a link to an informative review of that book subscription required but free.
Short selling is all about timing. If you take a short position, you're betting not just that the stock will fall sometime, but that it will fall within the framework needed to make that position pay off. Einhorn's position in Allied over the period discussed inhis book was no diaster, but it proved no bonanza either.
No matter how badly the bankruptcy of Ciena may hurt Allied, then, it comes rather too late to vindicate views asserted in 2002. Though, let it be noted, Allied Capital stocks fell 14% yesterday, as general market indexes were rising.
3. Maurice Greenberg. A few days ago I would have saids that "Hank" Greenberg had given up on playing a continuing role at his old company, AIG.
He had filed a statement on September 25, after all, to the effect that he and entities under his control are selling 40 million shares of AIG stock. They took a big loss in doing so, too.
But AIG is being effectively nationalized, and its new Washingtonian masters want it to sell off assets.
This has created an opening for Greenberg to play a different sort of role. No longer as boss, no longer as quite so large a shareholder. But now he shows up as ... willing buyer.
Meanwhile the revolving door in from of the CEO office at AIG continues to twril. Greenberg sent his letter asking to be allowed to bid on the assets to ... Edward Libby. Who has been CEO for all of two weeks.
Monday, July 21, 2008
Director Centered? Not Really, Part 2
There's another side to the AFSCME case.
Although the incumbent directors won that particular lawsuit and avoiding the meta-proxy contest that offended their sensibilities, they also inspired the Delaware Supreme Court to provide a road map for shareholder proponents in the future.
The court's opinion makes clear what is required for such resolutions to pass muster and get into the proxy materials. They must demand the reimbursement only of "reasonable" expenses -- which the AFSCME resolution did; and they must leave discretion in the board to withhold even reasonable reimbursement on "fiduciary" grounds.
One might initially react that any resolution that meets the second of those tests will be toothless. But that is, I think, to misunderstand the significance of the word "fiduciary." A fiduciary isn't "someone who has discretion to run the business as he damn well pleases." A fiduciary is somewho under enforceable obligations.
The courts suggestion, then, is that if AFSCME re-words its resolution to allow for fiduciary denials, resubmits it, and wins on that basis, and if after some future proxy contest a board of CA refuses to pay reasonable expenses despite the passage of this resolution, THAT decision will be subject to judicial review.
The decision is available here.
On page 23 there, in footnote 35, you'll find a plain statement of fact: "A decision by directors to deny reimbursement on fiduciary grounds would be judicially reviewable."
And don't say it's "only a footnote." The famous language of the Carolene Products case, about "discrete and insular minorities," is only a footnote too. It has had weighty consequences.
The Anglo-Saxon common law principles of contract and property, as they've developed in the corporate law of pertinent jurisdictions, aren't especially director centered. Directors, like other fiduciaries, are to be kept watch over. They are the employees of the real owners of a company, the equity investors.
That's a simple truth, but appears to need regular re-affirmation.
Although the incumbent directors won that particular lawsuit and avoiding the meta-proxy contest that offended their sensibilities, they also inspired the Delaware Supreme Court to provide a road map for shareholder proponents in the future.
The court's opinion makes clear what is required for such resolutions to pass muster and get into the proxy materials. They must demand the reimbursement only of "reasonable" expenses -- which the AFSCME resolution did; and they must leave discretion in the board to withhold even reasonable reimbursement on "fiduciary" grounds.
One might initially react that any resolution that meets the second of those tests will be toothless. But that is, I think, to misunderstand the significance of the word "fiduciary." A fiduciary isn't "someone who has discretion to run the business as he damn well pleases." A fiduciary is somewho under enforceable obligations.
The courts suggestion, then, is that if AFSCME re-words its resolution to allow for fiduciary denials, resubmits it, and wins on that basis, and if after some future proxy contest a board of CA refuses to pay reasonable expenses despite the passage of this resolution, THAT decision will be subject to judicial review.
The decision is available here.
On page 23 there, in footnote 35, you'll find a plain statement of fact: "A decision by directors to deny reimbursement on fiduciary grounds would be judicially reviewable."
And don't say it's "only a footnote." The famous language of the Carolene Products case, about "discrete and insular minorities," is only a footnote too. It has had weighty consequences.
The Anglo-Saxon common law principles of contract and property, as they've developed in the corporate law of pertinent jurisdictions, aren't especially director centered. Directors, like other fiduciaries, are to be kept watch over. They are the employees of the real owners of a company, the equity investors.
That's a simple truth, but appears to need regular re-affirmation.
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