Indian Takeover Legislation

There have been a lot of acquisitions of late that have involved one party in the nation of India, another somewhere else. For example, India's Reliance Industries in November offered to buy LyondellBasell Industries. Last month it sweetened that bid. Separately, Bharti Airtell has lately made a USD$9 billion offer for Zain Africa. This is its third attempt in two years to get an African presence.

Those are two instances in which Indian companies are the would-be buyer. But it stands to reason that Indian assets will come into the sights of outside corporations, as well. Accordingly, Sandeep Parekh, of the Indian Institute of Management, has offered us all a primer on Indian Takeover Regulation, which he calls "Under Reformed and Over Modified".

One paragraph from his abstract: "This paper argues that the complexity in the trigger points for disclosure and tender offer introduced over the years lacks a philosophy, and most of the amendments can not only be deleted but a very simple structure can be introduced making compliance of the regulations straight forward and easy to understand by management of listed companies. Certain other areas which need amendments have also been discussed. Chief amongst these are the provisions relating to consolidation of holdings, conditional tender offers, hostility to hostile acquisitions, definitional oddities, payment of control premium in the guise of non compete fees, treatment of differential voting rights, treatment of Global Depository Receipts and disclosure enhancements.

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.