Monthly Archives: August 2012

August 30, 2012

California Rules Facebook’s Instagram Acquisition is “Fair”

Keith Bishop gives us the news that the result of California Department of Corporations ‘s fairness hearing yesterday regarding Facebook’s purchase of Instagram was favorable for the social media giant.

August 29, 2012

Corp Fin Issues No-Action Letter on Day-20 Pricing in Tender Offers

Here’s news from Gibson Dunn’s “Securities Monitor Blog“:

The SEC’s Division of Corporation Finance recently granted no-action relief to Sonic Automotive, Inc., allowing Sonic to utilize “Day 20” pricing in its recent exchange offer wherein the company offered to exchange common stock and cash for its outstanding convertible debt securities.

The exchange offer employed a VWAP formula pricing mechanism with the final price becoming fixed and publicly announced at 4:30 p.m. on the same day the offer was scheduled to expire at midnight. In addition, the exchange offer incorporated a fixed minimum and maximum purchase price where the company agreed to extend the offer by two business days should the formula result in a purchase price at the maximum amount specified.

Interestingly, it appears that counsel sought and obtained no-action relief during the pendency of the exchange offer. Thus, it seems the 20-day pricing issue may have caught the Staff’s attention during its review. The letter serves as a steady reminder to issuers regarding the need for early consideration of whether to seek no-action relief and consulting with outside counsel before utilizing “Day 20” pricing in a tender offer. We have previously discussed the Staff’s position regarding “Day 20” pricing.

August 28, 2012

Delaware Supreme Court Affirms Damages and Fee Award in Southern Peru

Yesterday, the Delaware Supreme Court affirmed Chancellor Strine’s decision from last year in Southern Peru. Justice Berger filed a brief partial dissent disagreeing with the Chancellor’s attorney’s fee analysis. Here’s analysis from Richards Layton (we are posting memos in our “Minority Shareholders” Practice Area) – and here’s a piece by Alison Frankel.

August 14, 2012

Effecting A Short-Form Merger? Don’t Forget To Give Notice

Here’s some info from Allen Matkin’s Keith Bishop’s blog:

Although California’s General Corporation Law is frequently criticized as overly restrictive, it does have one virtue. It is rationally organized. Thus, it begins with a long series of defined terms, starting with “acknowledged” and ending with “written”. It even provides a definition of “short-form merger”. Cal. Corp. Code § 187.

In California, a short-form merger may either be “upstream” (a merger of the subsidiary into the parent) or “downstream” (a merger of the parent into the subsidiary). Cal. Corp. Code § 1110(a). A short-form merger is only possible if the parent owns at least 90% of the outstanding shares of each class of the subsidiary to be merged. If the parent owns less than all of the outstanding shares, then the board of directors of the subsidiary must also approve the merger. Cal. Corp. Code § 1110(b). In approving the merger, these directors remain subject to their fiduciary duties as directors.

The principal benefit associated with the short-form merger procedure is the lack of any requirement to obtain the approval of the outstanding shares (except in the case of a downstream merger pursuant to Section 1110(c)). However, California does require notice to shareholders when the subsidiary is a domestic corporation and not wholly-owned by the parent. In these cases, the parent corporation must give notice at least 20 days notice before the effective date to the subsidiary’s shareholders that the merger will become effective. Cal. Corp. Code § 1110(h). The notice must contain a copy of the resolution or plan of merger and information concerning dissenters’ rights. The alleged failure to give this notice has engendered litigation. Meadows v. Bicrodyne Corp., 573 F. Supp. 1030 (N.D. Cal. 1983) (finding that the corporation had discharged its obligation to provide notice).

August 9, 2012

PE Buyer/Public Target M&A Deal Study: 2012 Mid-Year Update

Check out Schulte Roth & Zabel’s new “PE Buyer/Public Target M&A Deal Study: 2012 Mid-Year Update,” whose major findings include:

1. Fewer deals were completed in 1H 2012 and average deal size decreased
2. Deals took longer to get signed up
3. The use of the two-step tender offer/back-end merger structure continues to grow
4. Despite the protracted pre-signing process, fewer targets engaged in pre-signing market checks — which likely resulted in the inclusion of more “go-shop” provisions
5. The limited specific performance remedy against the buyer remains the rule
6. The average size of the target break-up fees and buy¬er reverse termination fees were consistent with the 2011 deals, excluding the unusually low fees in one transaction
7. CEOs of the target companies participated in more buy-out groups than in 2011

August 7, 2012

Two Words To Add To Your Legal Vocabulary: You Ever “Argufy” Before The Delaware Supreme Court?

Keith Bishop recently blogged this in his “California Corporate & Securities Law” Blog:

Recently, I received a notice from the Delaware Supreme Court informing me that a case in which one of my clients is a party has been called for argument. The notice asked that the enclosed “oral argument scheduling acknowledgment form” be completed and returned. I was immediately struck by the signature block which calls for the signature of the “Argufier or Local Counsel’s Signature”. I must confess that this is the first time in nearly 30 years of legal practice that I’ve come across the word “argufier”. In fact, I could find only one reported decision in any state or federal court that actually uses the word:

My Brothers note that not “a single applicable case” has been cited to the point “that judges performing forming like functions must receive the same salaries.” Here I cannot resist noting — for the amusement and possible enlightenment of readers in other States — that this is a peculiarly hearty old wheeze of Michigan trial courts (Michigan’s magniloquent own, so to speak). True, it is now hoary and shopworn. Yet it remains an occasional favorite of elder argufiers when they have no authority, and no reasoning of their own, with which to impress the wide-eyed attenders of periodic assizes.

Taylor v. Auditor General
, 103 N.W.2d 769, 786 (Mich. 1960) (Black, J. Dissenting).

I Do Not Love Thee Dr. Fell

Another word that I sometimes run into is “amote,” which means to remove someone, such as a corporate director, from office. See In Re Burkin, 1 N.Y.2d 570, 572 (1956) (“At common law, stockholders have the traditional inherent power to remove a director for cause which is known as ‘amotion’.”) When I see “amote,” however, I think of love, not the unpleasant business of kicking someone out of office. I think of love because “amote” looks like the etymologically unrelated Latin phrase, “amo te”.

In Latin, “amo te” means “I love you.” Thus, whenever I see the word “amote”, I’m reminded of the story of Dr. Fell who was the Dean of Christ Church, Oxford in the 17th century. The story goes that an errant student had been called into Dr. Fell’s office to face possible expulsion. Dr. Fell offered the student absolution if the student could translate on the spot this epigram from the Roman poet Martial: “Non amo te, Sabidi, nec possum dicere – quare; Hoc tantum possum dicere, non amo te.” The student immediately gained pardon with the following translation:

I do not love thee, Dr Fell,
The reason why I cannot tell;
But this I know, and know full well,
I do not love thee, Dr Fell.

Robert Louis Stevenson makes a brief allusion to Dr. Fell in Chapter 2 of his book, Dr. Jeckyll and Mr. Hyde, and Hannibal Lecter uses the alias “Dr. Fell” in the 2001 film, Hannibal.

August 1, 2012

Expansion in Global Reach of U.S. Antitrust Laws

As noted in this Davis Polk memo, the U.S. Court of Appeals for the Seventh Circuit recently potentially expanded the extraterritorial reach of the U.S. antitrust laws. Its unanimous en banc decision in Minn-Chem, Inc. v. Agrium Inc. (7th Cir. 2012) may make it easier for the Department of Justice (“DOJ”), the Federal Trade Commission (“FTC”) and private litigants to challenge the conduct of foreign parties in foreign markets under the U.S. antitrust laws. The decision also creates and entrenches several circuit splits regarding the proper interpretation of the Foreign Trade Antitrust Improvements Act of 1982, and thereby increases the likelihood that the Supreme Court will elect to weigh in on these questions.