8/18/2019 Class 22 - Omnicare; State Laws
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Hostile Takeovers
• Tender Ofers – Deensive Measures
• Unocal governs
• Third Party Bids – Lock-up agreeent
8/18/2019 Class 22 - Omnicare; State Laws
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Onicare v! "#$
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Onicare v! "#$
• "#$ – Outcalt %#hairan& and $ha' %#(O&
• Have voting control over the copany
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"#$ De)t
• Total* +,. illion in de)t – +/.0 illion in senior )ank de)t
– +1./ illion in converti)le )onds
• "#$ deaults
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"#$ 6 independentcoittee
• "#$ perorance )egan to iprove
• "#$ appoints coittee oindependent directors to negotiate atransaction
8/18/2019 Class 22 - Omnicare; State Laws
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7enesis Bid
• 7enesis 'as contacted and ofered – Pay senior de)t in ull - +/.0 illion
– Pay or other de)t through cash andcoon stock
– +/8 illion to "#$ shareholders
8/18/2019 Class 22 - Omnicare; State Laws
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(3clusivity agreeent
• 7enesis 'ants e3clusivity agreeent – 7enesis lost a prior )idding 'ar 'ith
Onicare
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Onicare 6 "e' Ofer
• Onicare proposes ofer - +, pershare – #onditioned on due diligence
– "#$ considered )id9 used to negotiateincreased )id ro 7enesis
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7enesis Merger 5greeents
• 7enesis 6 increased )id in responseto Onicare )id – Payof all the "otes - +1./ illion
%akes it ore likely the deal 'ill gothrough&
– 2ncrease in payent to shareholders
–
Lo'ered terination ee to +0 illion
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7enesis Lock-up 5greeent
• 5greeent – "o $hop
• #an only respond i* – Unsolicited 'ritten proposal – Board )elieves in :good aith; the ofer 'as
:likely to result; in a :superior; deal
– Terination
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Board
• 5pproves the deal* – :)alancing the potential loss o the
7enesis deal against the uncertainty o
Onicare?s letter@ results in theconclusion that the only reasona)lealternative or the Board; is the approvethe deal
– Aere advised that the erger andvoting agreeents :'ould prevent "#$ro engaging in any alternative or
superior transaction in the uture!;
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Onicare?s "e' Bid
• Onicare sues and ofers +,!. pershare %no conditions&
• Bid is clearly )etter 6 "#$ )oard'ithdre' its recoendation or7enesis erger@ recoendedOnicare transaction
• Pro)le 6 votes are alreadycoitted
8/18/2019 Class 22 - Omnicare; State Laws
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$tandard o evie'
• evlon does not apply – "o auction
– "o )reak-up
– "o change in control
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Unocal scrutiny reCuired
• Unocal 6 reCuires enhanced scrutinyo the deal protection easures even'hen evlon does not apply – Threat 6 losing ofer
– easona)le response• Unitrin
–
#oercive – Preclusive
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#ourt nds the lock-upinvalid
• Lock-up agreeent – Merger 5greeent 6 erger agreeent
ust )e su)itted to a vote
– =oting 5greeents 6 Outcalt and $ha' 6coit to vote in avor
• Board did not have po'er to grant an
:a)solute; lock-up• Must have a :duciary out;
8/18/2019 Class 22 - Omnicare; State Laws
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Dissent
• ,-/ split decision %Dela'are $upree#ourt is usually unanious&
• #riticiss – Bright-line rule 'hile Dela'are la' is
case )y case
– Aithout agreeent 6 no )id
8/18/2019 Class 22 - Omnicare; State Laws
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5nti-takeover statutes
•
8/18/2019 Class 22 - Omnicare; State Laws
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#T$ #orp! v! Dynaics
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$econd generation statutes
• 2ndiana 6 i )idder acCuires controllingstake 6 no voting rights unless a aEorityo other shareholders approves
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#onFictG
• Aillias 5ct – eCuires disclosure and airness in
tender ofers
– Does it strike a particular :)alance)et'een the investor@ anageent@ andthe takeover )idder;G
•
Dorant #oerce #lause – Prohi)its discriinating against another
state?s coerce
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2ndiana $tatute is =alid
• 2nternal 5fairs Doctrine – $tate la' governs :internal afairs; o a
corporation incorporated 'ithin that state
– The 5ct is like ost corporate la' in thatit governs the rights )et'eenshareholders and corporation• Many e3aples o corporate la' that could
delay a takeover• Liited to 2ndiana corporations 6 so no
attept to regulate out-o-state corporations
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5nti-takeover statutes
• Dela'are 6 D7#L /., 6 , year'aiting period ro tie 'henshareholder acCuires 1> or ore o
a copany@ to a erger agreeent
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(3ceptions to Dela'are 5nti-
takeover statute
• (3ceptions
– $hareholder o'ns I>
– Prior to tie 'hen shareholder )uys stake@
the Board approves erger or transaction'here shareholder )uys stake
– 5ter the shareholder )uys a stake@ the Boardapproves transaction and /J, o shares %other
than those held )y )idder& vote in avor• #orporation can opt-out o the statute@
)ut opt-out only takes efect in 1/ onths
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5nti-takeover statutes and
stakeholders
• Pennsylvania 6 directors can takeinto account interests o eployees@custoers@ custoers@ creditors@
counities9 shareholder interestsare not doinant
• Massachusetts 6 eployees get
severance pay i red as result otakeover
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