September 12, 2007

The Evolution of Deal Rooms

In this podcast, Joel Lessem, the CEO of Firmex, explains how deal rooms are evolving, including:

– How are your deal rooms different from your competitors?
– How do you see the use of deal rooms evolving?
– What are some surprising ways that deal rooms are being used?

Board Committee Can Reschedule Merger Vote, SEC Unwritten Policy Noted

From Jim Hamilton’s World of Securities Regulation Blog: The Delaware Chancery court has ruled that a special committee of independent directors can reschedule an imminent meeting of stockholders to consider an all cash, all shares offer from a third-party acquirer when they believe that the merger is in the best interests of the stockholders and know that if the meeting proceeds the stockholders will vote down the merger and the acquiror will irrevocably walk away from the deal and the company’s stock price will plummet.

The special committee also wanted more time to provide information to the stockholders before their vote on the merger. Finally, the meeting was rescheduled within a reasonable time period and the committee did not preclude or coerce the stockholders from freely voting on the merger. (Mercier v. Inter-Tel Inc., Del. Chancery Court, Aug 14, 2007, CA No. 2226).

In finding that the committee acted in good faith, Vice Chancellor Strine found no evidence that it failed to explore the possibility of a more valuable alternative takeover bid from interested parties. By contrast, it appears that the special committee diligently responded to all interested parties and tried to facilitate attractive bids.

Thus, the court rejected a request for a preliminary injunction based on the argument that the directors had no discretion as fiduciaries to reschedule a vote once a stockholder meeting is imminent and they know that the vote would not go their way if it was held as originally scheduled.

In an interesting aspect of the ruling, the court noted that the proxy materials also indicated that the stockholders would vote on a second ballot item, which involved a proposal to adjourn the special meeting to solicit additional proxies if there were not sufficient votes in favor of the adoption of the merger. Apparently, the second ballot item was included as a result of a general practice of the SEC that encourages issuers to seek stockholder pre-approval for an adjournment. Here, the court cited an SEC roundtable discussion on the proxy rules and state corporation laws held on May 7, 2007 discussing the fact that the SEC has some unwritten policies regarding shareholder voting on adjournments of meetings.

The fact that, at the SEC’s prodding, the company included on its proxy ballot a proposal regarding whether or not to adjourn the special meeting if there were not sufficient votes to approve the merger, and that a majority of stockholders voted against an adjournment, did not put the special committee in a graceful position to seek to justify its actions in calling a time out on the merger vote. But as a formal matter, noted the court, the special meeting was not adjourned because it was never convened in the first place. Rather, the committee postponed the special meeting on the morning it was scheduled, and their legal authority to do so was unquestioned.

Apparently, the court’s cite to the SEC roundtable was to remarks by panelist James Hanks of the Venable firm, who expressed concern that there is a lot of confusion among the corporate bar and among state corporate lawyers on the SEC’s view of voting for adjournments of meetings. He noted that the SEC has some unwritten policies that some people know about and some people don’t know about. Adjournments are becoming an increasingly important thing in corporate governance, said Mr. Hanks, adjournments to win, adjournments for other purposes. If the SEC has a policy on adjournments or on the use of proxies to vote for adjournment, he urged that such policy be published in the usual way.