Bear Hugs, Go-Shops, Deal Jumpers

Transcription

1 Bear Hugs, Go-Shops, Deal Jumpers 1

2 and Other M&A Terms you need to know ASAP! 2

3 Janet Peros Wachtell, Lipton, Rosen & Katz 3

4 Introduction Wachtell Lipton reference staff handle hundreds of requests a month. At our law firm, we are often asked to find examples of M&A deals or specific SEC filings using terms of art that are seldom used in the actual filings. Some examples of these terms and how we go about researching them follow. 4

5 Investopedia provides definitions of many M&A terms. 5

6 The term golden parachute sometimes appears in SEC filings, like this example from Mattel. 6

7 Other times, the term does not appear, like in this example from McDonald s. This is true for many terms, so alternate sources to SEC filings need to be employed. 7

8 LawyerLinks is a database we use that provides recent examples for some of these terms. Below is their page for BearHugs. A definition of the term and examples of when the tactic might be used is followed by links to press releases and occasionally SEC filings, if available. 8

9 NYT DealBook blog is a great source to obtain examples of recent deals in clear language. Here is a post about the Microsoft/Yahoo hostile offer. Microsoft sent Yahoo a bear hug letter. 9

10 The WSJ has many blogs like DealJournal that provide useful commentary and descriptions of M&A terms for current deals in the news. 10

11 Press release filed by Yahoo on Form 425 containing text of bear hug letter from Microsoft. 11

12 Factset s MergerMetrics allows searching for M&A deals using various criteria. They provide custom reports in their Library tab such as one on deal jumping situations. 12

13 Here is the first page of the MergerMetrics Deal Jumping Report. It provides a list of deals that meet this criteria with details. Statistics are also provided. 13

14 Description of Longs Drug Stores deal jump between CVS and Walgreen from MergerMetrics Deal Jumping report. The original bidder (CVS) won. 14

15 Merger Agreement filed between CVS and Longs. Despite a higher offer from Walgreens, CVS was the ultimate acquirer. 15

16 MergerMetrics provides a similar report for deals with go-shop provisions. Goshops allow the target company to actively seek other potential acquirers after the original merger agreement has been signed. 16

17 MergerMetrics has a report on deals with Go-shop provisions. It outlines the relevant language. You can then pull the merger agreement. 17

18 Excerpt from Fibernet Telecom merger agreement with goshop language. Indeed, the term go-shop does not appear. 18

19 Poison Pills An important aspect to consider in a merger is whether the target company has any takeover defenses such as a poison pill. These are usually filed on a Form 8-A 8 A or 8-K 8 K as an exhibit 4 and are known as shareholder rights plans. 19

20 More on Poison Pills The poison pill was invented by Martin Lipton n of Wachtell, Lipton, Rosen & Katz,, in 1982, as a response to tender-based hostile takeovers. Factset s s Sharkrepellent is a database that tracks pill adoptions, expirations and various pill attributes like whether they are chewable,, have a sunset provision and virtually any other aspect of a company s s takeover defense you can imagine. 20

21 Sharkrepellent offers many data points as search criteria-one of these is a sunset provision-defined in the below box. 21

22 Another term is chewable. If a pill is chewable -it will be able to be redeemed without board approval in certain instances. 22

23 Stancorp Financial Group s Rights Agreement which is both chewable and has a sunset provision. It was filed as an exhibit 10 to a 10- Q filing. 23

24 LawyerLinks page about poison pills. 24

25 Conclusion Several free and fee sources are available to obtain definitions of M&A terms and obtain examples of such deals. The SEC filings can then be pulled with the knowledge that you are obtaining an on-point example even if the term-of of- art does not appear in the filing itself. Be aware that agreements can and do get filed in odd places (different type of filing or different exhibit number). Be sure to check both the target and the acquirer s s SEC filings. 25