Tune in tomorrow for our webcast – “Critical FCPA Diligence in Deals Today” – to hear Brian Saulnier of K&L Gates, Soren Lindstrom of K&L Gates, Keith Hennessee of National Oilwell Varco and Susan Munro of Steptoe & Johnson discuss the latest in how diligence is being conducted and how reps & warranties related to FCPA violations are being negotiated.
Monthly Archives: June 2010
With the Senate and House expected to vote upon the Dodd-Frank Act – formally known as the “Dodd-Frank Wall Street Reform and Consumer Protection Act” – within the next few days – with President Obama then signing it before the 4th of July – the 2000-pages of the Act have been posted. Note that the passing of Senator Byrd last night might delay adoption of the legislation, according to this WSJ article.
Poll: The Acronym for the Dodd-Frank Act?
Back when the Sarbanes-Oxley Act was passed in ’02, it took a while for “SOX” and “Sarbanes-Oxley” to become the common way that folks referred to the historic legislation. An early movement towards “SarBox” never took off – thankfully – although a few still use that term for some reason. So now we have a new piece of legislation to “name.” I personally like the “DFA” – but doubt that will catch on. Please participate in this anonymous poll about how we should refer to the Dodd-Frank Act on a shorthand basis:
In the ISS Blog, Ted Allen reported last night:
During negotiations on financial reform legislation on Tuesday, U.S. Senate conferees agreed to drop their opposition to a House provision to require public companies to hold separate shareholder votes on “golden parachute” payments, according to Dow Jones Newswires.
The conference committee’s negotiations will continue on Wednesday. House and Senate lawmakers still have not reached an agreement on a Senate proposal to require investors to hold a 5 percent stake to nominate board candidates under the SEC’s proposed proxy access rule, according to Dow Jones. House lawmakers and investor advocates argue that a 5 percent threshold would be too high.
Last week, this Reuters article noted that a provision in the regulatory reform bill being negotiated by the House-Senate conference committee would limit deal activity of US banks. This so-called “Volcker Rule” is one of the provisions being hotly debated and it’s unknown in what form it will end up – but the Base Text would prohibit banks that engage in proprietary trading from merging if the liabilities of the resulting institution exceeded 10 percent of total US liabilities.
In this podcast, John Grossbauer of Potter Anderson & Corroon provides some insight into this year’s changes to the Delaware General Corporation Law.
From Kevin Miller of Alston & Bird: In a recent decision – Berger v. Pubco Corp. – Delaware Chancellor Chandler held that the application of a control premium in an appraisal action under Delaware law is not appropriate where the appraisers did not rely upon a comparable company valuation methodology. Here is a notable quote from the opinion:
“First, as to the control premium issue, I conclude that the addition of a control premium in this case is not appropriate. Both appraisers used the discounted cash flow and book value methodologies. Under Delaware law, it is appropriate to add a control premium when appraisers use a comparable public company methodology. This has been the teaching of cases following the Delaware Supreme Court’s decision in Rapid-American Corp. v. Harris.
Since the comparable public company methodology was not a methodology used by either appraiser in this case, I decline to extend the rule of Rapid-American in these circumstances. Even the Court in Rapid-American held that the inclusion of a control premium was required “under the unique facts” of that case, which was based on comparable values using the market price of similar shares of stock.
Cases decided in the Court of Chancery since Rapid-American have clearly held that the addition of a control premium to a discounted cash flow valuation, as here, is not appropriate.
Authoritative commentators have likewise observed that it is improper and illogical to add a control premium to a discounted cash flow valuation. Accordingly, the value of Pubco’s shares should not be increased by a control premium because no such premium was implicit in any valuation methodology used by the appraisers.”
This May-June issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– Loyal to Whom? Recent Delaware Decisions Clarify Common Stockholders Are Primary Beneficiaries of Directors’ Fiduciary Duties
– Recent Trends in Earnout Use: A Cautionary Note
– The Shareholder Activism Report: Recommendations to Consider
– Delaware Chancery Opens Door for Next Gen Poison Pill
– More Takeaways from Selectica
If you’re not yet a subscriber, try a 2010 no-risk trial to get a non-blurred version of this issue on a complimentary basis.
In this podcast, Jude Carluccio of Barnes & Thornburg explains how ESOPs are being used in deals these days, including:
– How are ESOPs considered a special type of shareholder?
– What are recent examples of ESOPs being used in deals?
– What factors might lead an acquiror to consider using an ESOP in a deal?
– What are the types of issues that companies should consider before using an ESOP?
Here is an excerpt from a Richards Layton memo: In In re CNX Gas Corp. Shareholders Litigation last Tuesday, the Delaware Chancery Court attempted to clarify the standard applicable to controlling stockholder tender offers and mergers. In a challenge to a controlling stockholder’s proposed freeze-out transaction (a first-step tender offer followed by a second-step short-form merger), the Court applied a standard derived from In re Cox Communications, Inc. Shareholders Litigation to hold that the presumption of the business judgment rule would apply to a controlling stockholder freeze-out only if the first-step tender offer is both (i) negotiated and recommended by a special committee of independent directors and (ii) conditioned on a majority-of-the-minority tender or vote (as the case may be) condition.
The Court held that, because CNX’s special committee did not make a recommendation in favor of the tender offer, the transaction would be reviewed under the entire fairness standard. While that fact, under the Court’s analysis, was sufficient to trigger the application of the entire fairness standard, the Court also noted that the special committee was not provided with the authority to bargain with the controller on an arm’s-length basis and that the majority-of-the-minority tender condition may have been ineffective. Nonetheless, the Court declined to issue an injunction since any harm to the stockholders could be remedied through post-closing money damages.