Tag: Shareholder rights


2015 Year-End Activism Update

Barbara L. Becker is partner and co-chair of the Mergers and Acquisitions Practice Group at Gibson, Dunn & Crutcher LLP, and Eduardo Gallardo is a partner focusing on mergers and acquisitions, also at Gibson Dunn. The following post is based on a Gibson Dunn M&A Client Alert. The full publication, including charts and survey of settlement agreements, is available here.

This post provides an update on shareholder activism activity involving domestically traded public companies with market capitalizations above $1 billion during the second half of 2015, together with a look back at shareholder activism throughout 2015. While many pundits have suggested shareholder activism peaked in 2015, shareholder activism continues to be a major factor in the marketplace, involving companies of all sizes and activists new and old. Activist funds managed approximately $122 billion as of September 30, 2015 (vs. approximately $32 billion as at December 31, 2008). [1] In 2015 as compared to 2014, we saw a significant uptick in the total number of public activist actions (94 vs. 64), involving both a higher number of companies targeted (80 vs. 59) and a higher number of activist investors (56 vs. 34). [2]

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ISS Proxy Access FAQs: Problematic Proxy Access Provisions

Howard B. Dicker is a partner in the Public Company Advisory Group of Weil, Gotshal & Manges LLP. This post is based on a Weil publication by Mr. Dicker, Lyuba Goltser, Joanna Jia, and Kaitlin Descovich.

Institutional Shareholder Services (ISS) has published revised FAQs for its U.S. Proxy Voting Policies and Procedures, including two new FAQs directly related to proxy access. This post provides an update to our Alerts dated October 21, 2015 (available here) on Navigating Proxy Access and November 23, 2015 (available here, and discussed on the Forum here) on ISS and Glass Lewis Updated Voting Policies.

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NASDAQ Shareholder Approval Rules

Janet T. Geldzahler is Of Counsel at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell publication by Ms. Geldzahler, Robert E. Buckholz, Melissa Sawyer, and Marc Trevino.

Last Wednesday [November 19, 2015], the NASDAQ Stock Market requested public comments on whether and how to improve its rules requiring shareholder approval before a NASDAQ-listed company issues securities in connection with certain acquisitions, changes of control, and certain private placements. The request for comments is being made in light of changes that have occurred in the capital markets, securities laws, and the nature and type of share issuances since the rules were adopted 25 years ago.

The comment period will run until February 15, 2016. The request for comment is available here.

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Lessons Learned from a Highly Successful Proxy Contest Defense

M. Ridgway Barker is a partner focusing on corporate finance and securities law at Withers Bergman LLP. This post is based on a Withers memorandum by Mr. Barker, Clyde Tinnen, and Michael Rueda.

Recently, our client, a NYSE-listed publicly traded firm, successfully defended against a proxy contest brought by an activist fund that in the first part of this year acquired 5.5% stake in the company. Following on earlier indications that it would do so, the fund notified the company in September that it intended to nominate six individuals for election to the seven member board of directors at the 2015 annual meeting of stockholders to be held in November. At the meeting, stockholders elected all seven incumbent director nominees and flatly rejected all of the fund’s six nominees, despite ISS’s recommendation in favor of three of the fund’s nominees and Proxy Mosaic’s recommendation in favor of all six of the fund’s nominees. These results offer key lessons to companies under attack by dissidents, notwithstanding strong activist pressure with backing from ISS or other proxy advisors.

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The Soviet Constitution Problem in Comparative Corporate Law

This post comes to us from Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance. This post is based on Chief Justice Strine’s recent essay, The Soviet Constitution Problem in Comparative Corporate Law: Testing the Proposition that European Corporate Law is More Stockholder Focused than U.S. Corporate Law, issued as Discussion Paper of the Program on Corporate Governance and forthcoming in the Southern California Law Review. Related research from the Program on Corporate Governance includes Toward Common Sense and Common Ground? Reflections on the Shared Interests of Managers and Labor in a More Rational System of Corporate Governance, by Chief Justice Strine; and The Case for Increasing Shareholder Power, by Lucian Bebchuk.

Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance, recently issued an essay that is forthcoming in the Southern California Law Review. The essay, titled The Soviet Constitution Problem in Comparative Corporate Law: Testing the Proposition that European Corporate Law is More Stockholder Focused than U.S. Corporate Law, is available here. The abstract of Chief Justice Strine’s essay summarizes it as follows:

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Is 2015, Like 1985, an Inflection Year?

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here), and The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here).

In an October 2015 post, I posed the question: Will a New Paradigm for Corporate Governance Bring Peace to the Thirty Years’ War? As we approach the end of 2015, I thought it would be useful to note some of the most cogent recent developments on which the need, and hope, for a new paradigm is based. These developments include, among other things, the accumulation of a critical mass of academic research that discredits the notion that short-termism, activist attacks and shareholder-centric corporate governance tend to create rather than destroy long-term value.
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2016 Proxy Advisor Policy Changes

Shirley Westcott is a Senior Vice President at Alliance Advisors, LLC. This post is based on an Alliance Advisors whitepaper. The complete publication, including footnotes, is available here.

In preparation for the 2016 proxy season, proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis & Co. have issued updates to their proxy voting guidelines, which take effect for annual meetings held on or after Feb. 1, 2016 (ISS) and Jan. 1, 2016 (Glass Lewis). [1] The policy changes and their expected impact on issuers are discussed in more detail in Alliance Advisors’ November newsletter.

The key revisions deal with various situations where the proxy advisors recommend against directors. These include the following:

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SEC’s “Unbundling Rule” Interpretation

Philip E. Richter is partner and co-head of the Mergers and Acquisitions Practice and Gail Weinstein is of counsel at Fried, Frank, Harris, Shriver & Jacobson LLP. The following post is based on a Fried Frank publication.  Related research from the Program on Corporate Governance includes Bundling and Entrenchment by Lucian Bebchuk and Ehud Kamar (discussed on the Forum here).

The SEC has issued two new compliance and disclosure interpretations on the so-called “Unbundling Rule.” The SEC appears to have been motivated to issue the CDIs as part of the political reaction against, and desire to deter, inversion transactions.

The CDIs relate to proposed M&A transactions in which an acquiror would be issuing its equity securities to the target stockholders and the transaction agreement requires the acquiror to make material changes to its organizational documents (such as corporate governance changes). The SEC staff has established a new requirement for separate, precatory (i.e., non-binding) target stockholder votes on material changes to the acquiror’s organizational documents (“unbundled” from the target vote on the transaction itself)—which is designed to heighten the visibility to target stockholders of proposed acquiror corporate governance changes.

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The Dutch Poison Pill: How is it Different from an American Rights Plan?

Leonard Chazen is a Senior Counsel of Covington & Burling LLP, and a member of the New York Bar. Peter Werdmuller is the founding partner of Werdmuller & Co. B.V., and a member of the New York and Rotterdam (the Netherlands) Bar. This post is based on an article authored by Mr. Chazen and Mr. Werdmuller.

During the spring and summer of this year, the so-called “Dutch Poison Pill” made it to the front pages of the business sections of The New York Times [1] and The Wall Street Journal. [2] The Dutch Poison Pill received this extraordinary attention because of its use by Mylan N.V. (“Mylan”), a NASDAQ-quoted Dutch public limited liability company (or, “Dutch N.V.”) to ward off an unsolicited takeover bid by the Israeli pharmaceutical company Teva Pharmaceutical Industries Ltd. (“Teva”). Mylan, which had previously been a Pennsylvania corporation, became a Dutch N.V. in early 2015 through an inversion, which involved merging Mylan into a newly created Dutch acquisition vehicle that also acquired certain non-U.S. businesses of Abbott Laboratories.

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SEC Guidance on Voting During M&A Transactions

Ettore A. Santucci and John T. Haggerty are partners and David W. Bernstein is counsel at Goodwin Procter LLP. This post is based on a Goodwin Procter publication by Messrs. Santucci, Haggerty, and Bernstein. Related research from the Program on Corporate Governance includes Bundling and Entrenchment by Lucian Bebchuk and Ehud Kamar (discussed on the Forum here).

On October 27, 2015, the Division of Corporation Finance of the SEC modified Section 201 of its Question and Answer guidance regarding SEC Rule 14a-4(a)(3) to require that if a material amendment to an acquiror’s organizational documents would require shareholder approval under state law, stock exchange rules or otherwise if presented on a standalone basis, if the change is effected by a merger (including a triangular merger) and is required by the transaction documents, the shareholders of both the acquiror and the target company must be given the opportunity to vote on the change in the organizational documents separately from their vote on whether to approve the merger or the merger agreement.

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