Chapter 12
TENDER OFFERS
A. HOSTILE
TENDER OFFERS
The hostile tender offer is one of
the most intriguing areas of modern corporate finance. Much of the financial press covers the
latest battle between corporate raiders and their prey.[1] Not only is the control of vast corporate
treasuries at stake,[2]
but also are large investment banking fees and legal fees.[3]
This area is one that evokes a
considerable amount of emotionalism, which is unusual for the business arena.[4] Many political issues, as well as issues of
economic, sociological and psychological importance, exist in large hostile
takeover attempts.[5] Entire communities, especially in locations
where the target company might be a dominant industry, will usually mobilize.[6] Complaints of all types reach regulatory
authorities.[7] Lawsuits in many different courts, both
state and federal, allege various claims and counterclaims against the raider
and the target company.[8] These include claims involving antitrust
laws, securities laws, state takeover laws, omissions of material information
in disclosure documents or misleading disclosure releases.[9]
Section 299.9(a) of the Federal
Securities Code[10]
proposes to provide a definition of a tender offer to mean an offer to buy a
security, or a solicitation of an offer to sell a security, directed to more
than thirty-five persons.
SECTION 14(e) OF THE
SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. § 78n(e) (1988)
PIPER v. CHRIS-CRAFT
INDUS., INC., 430 U.S. 1 (1977)
SEC RULE 14e-3,
17 C.F.R. § 240.14e-3 (1990)
SCHREIBER v. BURLINGTON
NORTHERN, INC., 472 U.S. 1 (1985)
SEC RULE 14d-10,
17 C.F.R. § 240.14d-10 (1990)
LERRO v. QUAKER OAKS CO., 84 F.3d 239 (7th Cir. 1996)
One of the major factors in the
great increase of hostile tender offers was the entrance of the large
investment banking firms into the area in the 1970s.[11] These firms had made large fees by advising
their corporate clients in mergers and acquisitions during the conglomerate
days of the 1960s.[12] Such mergers and acquisitions were usually
friendly, negotiated deals.[13] The investment bankers then realized that
much larger fees were available over very short periods of time in a hostile
tender offer and they then became active in advising their corporate clients to
proceed.[14]
The investment banking firms can
provide financing to their clients for hostile tender offers by raising funds
through the sale of junk bonds.[15]
The investment banking firms have
also provided financing to recently formed shell companies by selling junk
bonds or preferred stock, usually in private transactions, for use in possible
hostile tender offers.[16]
These shell companies can then
proceed to acquire stock in a potential target company in secret, until
acquiring 5% of the stock.[17] Any person or group acquiring 5% or more of
the equity securities of a public company must make a timely filing of a report
with the SEC.[18] At that time, the filing of a report with
the Securities and Exchange Commission causes the ownership to become public
information.[19] When the filing of such a report takes
place, it can cause an increase in the market activity of the stock of the
company because of speculation that the company is in play.[20] This term means that a company has attracted
a potential purchaser.[21]
When a company is in play, the
possibility exists that another person, group, or raider might try to acquire the
company at an even higher price.[22] The speculators and the risk arbitrage firms
will often purchase large amounts of stock based on these reports, especially
if a known corporate raider has filed the SEC report.[23] Risk arbitrage firms attempt to position
themselves to make a profit on the differences in prices between the current
market price of a stock and a higher price if the company is later acquired in
a merger or tender offer.[24]
SEC RULE 13d-1,
17 C.F.R. § 240.13d-1 (1990)
The corporate raider then can
consider or at any time may make a hostile tender offer for a majority of the
outstanding stock so as to gain control of the target company.[25] Of course, the corporate raider can elect to
acquire less than control of a target company and hold the stock for possible
resale in the market or to another company who might become interested in
making a higher tender offer.[26]
The raider might actually decide to
sell the acquired stock back to the target company in a greenmail transaction.[27] A greenmail transaction involves the
purchase of all of the stock owned by a raider at a profit in order to cause
the threat of a hostile takeover to go away.[28]
B.
STATE LAWS
Because of the presence of the hostile
takeover threat to the modern public corporation, many such corporations have
devised a number of defensive strategies and adopted defensive corporate
measures.[29]
Since many public corporations
incorporate in Delaware, national attention has focused on the Delaware
Chancery Court and the Delaware Supreme Court, especially in the decisions and
opinions concerning the business judgment rule.[30] Because of the business judgment rule,
courts are reluctant to substitute their judgment for the judgment of the board
of directors of a corporation concerning business matters.[31]
In the 1970s, in response to the
growing use of the hostile tender offer to take control of public corporations,
many states began to enact state take-over laws.[32] These laws appeared to corporate raiders as
favoring incumbent management of locally important industries to the state and
offering protection to such local corporations from unwanted hostile takeovers.[33] As a result, much litigation has taken place
over the state take-over laws.[34]
The hostile tender offer has continued
through the 1980s and into the 1990s as a viable mechanism for the corporate
raider.[35] Likewise, many states have continued to show
an interest in enacting such state take-over laws and litigating over them.[36]
C.
MERGERS AND ACQUISITIONS
The area of mergers and acquisitions
is very active today and has remained so for over two decades.[37] Many corporations are continually seeking
other companies for expansion purposes that they perceive as undervalued in
their own business lines or even in attractive new business lines.[38] In most corporate combinations, either by
merger or acquisition, securities transfer to the shareholders of at least one
of the corporations.[39] These securities are often the common stock
of the surviving corporate entity, but can also consist of preferred stock or
debt instruments.[40] It is imperative that these securities only
transfer after registration with the Securities and Exchange Commission, or
pursuant to an appropriate exemption from such registration.[41]
SEC RULE 145, 17
C.F.R. § 230.145 (1990)
A significant problem has existed
for a number of years in the stock market due to shell corporations.[42] These are corporations that have no business
activity and virtually no assets or liabilities.[43] Many such shells were once viable
corporations that underwent a valid public offering, but expended all of their
funds in business activities, and then went out of the business.[44] These shell corporations often trade in the
stock market with very little public information available, or with substantial
misinformation present because of rumors or speculation.[45] Because of earlier problems with many of
these shells, the Securities and Exchange Commission has taken steps to require
that the securities distributions of any such shell corporations register with
the SEC or be subject to an appropriate exemption.
SEC RULE 15c2-11,
17 C.F.R. § 240.15c2-11 (1990)
More recently, problems have evolved
around the creation of a shell corporation by the process of having a
corporation go public with the sole purpose of merging with a yet unidentified
company, or, in effect being a blank check or blind pool offering.[46] These shells created by a blank check or
blind pool offering then trade in the market with very little substantiated
information until the corporation might publicly announce a potential merger.[47]
In modern corporate finance
transactions, including business combinations, many kinds of securities are issued.[48] It is important that full disclosure of all
corporate finance aspects of a transaction be given to shareholders in order to
increase investor confidence in the securities markets.[49]
An aspect of corporate finance for
consideration and disclosure is the accounting treatment of a transaction in
the financial statement of a company.[50] Such accounting treatment on the balance
sheet of a company can have an effect on the income statement so as to reflect
on the reported earnings.[51] In a merger or acquisition transaction,
consideration must be given to whether the accounting treatment will be
reflected as a purchase or as a pooling of interests.[52] A purchase accounting treatment can increase
the cost basis for assets and provide for a larger depreciation base.[53] A pooling of interests accounting treatment
can result in higher earnings being reported by a company if the acquired
company had earnings itself.[54]
An aspect of corporate finance that must
be considered and disclosed in transactions is the income tax treatment
pursuant to the Internal Revenue Code as relates to the corporation and its
shareholders.[55] Most merger or acquisition transactions are
structured so that the surviving or parent corporation does not recognize any
income tax gains and the shareholders can defer any income tax gains until the
securities held are sold.[56]
An aspect of corporate finance is
the consideration and disclosure of the state corporation law under which the
corporation operates so as to determine the authority of a company to enter
into various transactions.[57] Because a large number of publicly traded
industrial corporations are incorporated in Delaware, such state has become the
choice of many new incorporations each year.[58] Consequently, the Delaware General
Corporation Law is essential to understanding corporate finance transactions.[59] This is especially necessary in the
mechanics of merger and acquisition transactions.[60] Fairness in the determination of value of
the combining companies is important to the shareholders.[61] Dissenting minority shareholders may have
appraisal rights to have value determined.[62]
The Board of Directors of a corporation who does not give proper
consideration to fairness of value or shareholder rights can become subject to
derivative lawsuits brought by shareholders.[63] In such a situation, the corporation and
members of the Board of Directors can also become subject to lawsuits brought
by shareholders, including class actions.[64] Today, a Board of Directors facing a
decision on a business combination will likely request a fairness opinion
before voting, with such fairness opinion usually rendered by an investment
banking firm.[65]
An aspect of corporate finance that must
be considered and disclosed, if applicable, in tender offers as well as mergers
and acquisitions is the effect of federal antitrust law on the combined entity,
especially if the resulting company will be large and a dominant force in the
industry.[66] In a tender offer involving large companies,
notice must be given to federal governmental authorities pursuant to antitrust
law.[67]
D.
GOING PRIVATE
Many companies go public by having
an initial public offering (IPO) of securities, usually common stock, sold to
public investors.[68] This normally will result in a trading
market for the shares of common stock with price quotations provided by various
broker-dealers who act as market makers.[69] It also will result in the company becoming
subject to various periodically required governmental disclosure filings as
well as the requirement of the disclosure of any extraordinary event.[70]
Most companies have an IPO in times
of euphoric rises in the stock market.
At those times, investors are very receptive to equity ownership and
such offerings will attract substantial attention. Also, because of the prevailing attitude among investors, many of
the new issues of shares of common stock will rise in price in the aftermarket. If the company is in an industry considered
glamorous or hot by the marketplace, the rise in price might be spectacular.[71]
Of course, stock market activity
will almost invariably turn downward at some point. The result is that new issues will then cool off, especially if
the drop is extreme as happened on October 27, 1987, Black Monday.[72]
It is often at this juncture that
the founders of a company may decide that the stock market has undervalued its
shares, especially after a precipitous drop in market price, and the company
can repurchase such shares from the public shareholders at a fraction of the
initial issue price. Thus, the result
could be a going private transaction.[73] Afterwards, the founders could own a private
company much better capitalized as a result of the IPO, with a going business,
and no longer subject to extensive governmental reporting requirements.[74]
SEC RULE 13e-3,
17 C.F.R. § 240.13e-3 (1990)
E.
LEVERAGED BUY-OUTS
A leveraged buyout (LBO) of a
company is the purchase of a company by the use of extensive borrowed capital,
secured by the assets of the business, with the debt paid from the earnings,
and possibly partial sale of assets, of the company.[75]
Despite the extensive media coverage
of the LBO lately, such corporate financing is not a new phenomenon.[76] Actually, for many years companies have used
LBOs in the sale of corporate divisions.[77] Often companies would be eager to dispose of
subsidiaries with stodgy earnings or in unpopular industries that may reflect
on the overall image or perceived image of the parent company.[78] Such parent companies would sell the
division to members of management or to other companies at a very attractive
price, often assisting in arranging extensive debt financing for the sale.[79]
Of course, the recent upsurge in LBOs
and management buyouts (MBOs) has not always involved the traditional company
division, but has also involved attractive private companies, and even more
interestingly, public companies.[80]
Such LBOs can utilize several
different steps, including tender offers, mergers, acquisitions and going
private transactions.[81] The result of an LBO is a company owned by a
few individuals or investment groups, with several layers of debt, and
expecting to liquidate the debt through earnings and sale of divisions, assisted
by large tax write-ups of assets and consequently much larger tax depreciation
schedules than previously existed.[82]
Many of the highly leveraged corporate
combinations obtain financing through junk bonds.[83] The term junk bond means a bond that does
not have a rating or has a rating of less than investment grade.[84] A bond of this type is a speculative
investment.[85] As a result, the bond will usually have a
much higher yield to attract investors.[86]
AOL/NETSCAPE,
Form S-4 Registration Statement (March 2, 1998)
©
2000 Harry Stansbury
[1] See MOIRA JOHNSTON, TAKEOVER 1-31 (1986).
[2] See SEC, INSTITUTIONAL INVESTOR STUDY REPORT, H.R. DOC. NO.
92-64, 92d Cong., 1st Sess., at 2771-2774 (1971); MOIRA JOHNSTON, TAKEOVER
232-35 (1986); LOUIS NIZER, MY LIFE IN COURT 427‑428 (1961); 1 SHARK
REPELLANTS AND GOLDEN PARACHUTES: A HANDBOOK FOR THE PRACTITIONER 3-4 (Robert
H. Winter, Mark H. Stumpf & Gerard L. Hawkins eds., 1991); Arthur
Fleischer, Jr. & Robert H. Mundheim, Corporate Acquisition by Tender Offer,
115 U. Pa. L. Rev. 317, 317‑38 (1967); Note, Cash Tender Offers, 83 Harv.
L. Rev. 377, 377-88 (1969).
[3] See GEORGE ANDERS, MERCHANTS OF DEBT 109-10 (1992);
RICHARD M. CLURMAN, TO THE END OF TIME 236-37 (1992); Peter Petre, Merger Fees
That Bend the Mind, Fortune, Jan. 20, 1986, at 18; Randall Smith, In Failed Bid
for UAL, Lawyers and Bankers Didn't Fail to Get Fees, Wall St. J., Nov. 30,
1989, at A1.
[4] See William S. Rukeyser, Getting Tough with Tenders,
Fortune, Aug. 1967, at 108.
[5] See PAUL HOFFMAN, THE DEALMAKERS 141-59 (1984); PAUL
HOFFMAN, LIONS OF THE EIGHTIES 176-96 (1982); JAMES B. STEWART, THE PARTNERS
245-82 (1983); Joseph H. Flom, The Role of the Takeover in the American
Economy, 32 Bus. Law. 1299, 1299-1300 (1977).
[6] See RICHARD PHALON, THE TAKEOVER BARONS OF WALL STREET
240 (1981); James H. Fogelson, Joanne R. Wenig & Brian P. Friedman,
Changing the Takeover Game: The SEC's Proposed Amendments to the Williams Act,
17 Harv. J. on Legis. 409, 410-12, 438-40, 459-63 (1980).
[7] See HOPE LAMPERT, TILL DEATH DO US PART 67, 109-16
(1983).
[8] See Lucien A. Bebchuck, Toward Undistorted Choice and
Equal Treatment in Corporate Takeovers, 98 Harv. L. Rev. 1693, 1742-44 (1985);
Ida C. Wurczinger, Note, Toward a Definition of "Tender Offer", 19
Harv. J. on Legis. 191, 191-94, 197-205, 210-12 (1982); Roundtable Discussion:
Takeovers, Wall St. Transcript, Nov. 2, 1981, at 63,470.
[9] See EDWARD R. ARANOW, HERBERT A. EINHORN & GEORGE
BERLSTEIN, DEVELOPMENTS IN TENDER OFFERS FOR CORPORATE CONTROL 1‑2
(1977); EDWARD R. ARANOW & HERBERT A. EINHORN, TENDER OFFERS FOR CORPORATE
CONTROL 64‑116 (1973); 1 ARTHUR FLEISCHER, JR., TENDER OFFERS: DEFENSES,
RESPONSES, AND PLANNING 297-321 (1983); 1 MARTIN LIPTON & ERICA H.
STEINBERGER, TAKEOVERS & FREEZEOUTS §6.06[1], at 6-121 to 6-122 (1992);
J.P. MARK, THE EMPIRE BUILDERS 197-98 (1987); Herbert M. Wachtell, Special
Tender Offer Litigation Tactics, 32 Bus. Law. 1433, 1433‑42 (1977);
Steven Brill, Conoco, Am. Law., Nov. 1981, at 39.
[10] FEDERAL SECURITIES CODE § 299.9(a) (1980).
[11] See Ruthlessness By the Rules, Forbes, Feb.
1, 1976, at 24.
[12] See Diversification's Marriage Brokers, Forbes, Feb. 15,
1967, at 38.
[13] See JOHN BROOKS, THE GO‑GO YEARS 170-73 (1973).
[14] See SAMUEL L. HAYES III & PHILIP M. HUBBARD,
INVESTMENT BANKING: A TALE OF THREE CITIES 131-33 (1990); Connie Bruck,
Kamikaze, Am. Law., Dec. 1985, at 75; Craig Forman, A Hot New Export To Europe
Takes Hold: The Hostile Takeover, Wall St. J., Apr. 19, 1988, at 1.
[15] See MOIRA JOHNSTON, TAKEOVER 145-47 (1986); Power On
Wall Street, Bus. Wk., July 7, 1986, at 56; Randall Smith, How Drexel Wields
Its Power in Market For High-Yield Bonds, Wall St. J., May 26, 1988, at 1.
[16] See Roberta S. Karmel, Applying Margin Rules To Junk
Bonds, N.Y. L.J., Feb. 20, 1986, at 1; James B. Stewart & Rhonda L. Rundle,
Drexel Burnham Mulls A Future Threatened By Junk-Bond Curbs, Wall St. J., Dec.
13, 1985, at 1; John D. Williams, How `Junk Financings' Aid Corporate Raiders
In Hostile Acquisitions, Wall St. J., Dec. 6, 1984, at 1.
[17] See MOIRA JOHNSTON, TAKEOVER 235-36 (1986).
[18] See KENNETH M. DAVIDSON, MEGAMERGERS 49-51 (1985).
[19] See CONNIE BRUCK, THE PREDATOR'S BALL 154 (1988).
[20] See ALLAN SLOAN, THREE PLUS ONE EQUALS BILLIONS 139-41
(1983).
[21] See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN,
CORPORATE FINANCE 677-79 (3d ed. 1987); THOMAS PETZINGER, JR., OIL & HONOR
125-253 (1987); James B. Stewart & Daniel Hertzberg, Investment Bankers
Feed a Merger Boom And Pick Up Fat Fees, Wall St. J., Apr. 2, 1986, at 1.
[22] See BRYAN BURROUGH & JOHN HELYER, BARBARIANS AT THE
GATE 205-08 (1990); see also Ronald J. Gilson & Reinier H. Kraakman, The Mechanisms
of Market Efficiency, 70 Va. L. Rev. 549, 554-88 (1984).
[23] See MOIRA JOHNSTON, TAKEOVER 111-14 (1986).
[24] See JOHN BROOKS, THE TAKEOVER GAME 141‑44 (1987);
KENNETH M. DAVIDSON, MEGAMERGERS 32-41 (1985); RICHARD PHALON, THE TAKEOVER
BARONS OF WALL STREET 125-39 (1981); Kim Masters, Arbs' Counsel Keep Sharp Eye
on Battle, Legal Times of Wash., Dec. 7, 1981, at 1; Richard Vilkin, Advising
Risk Arbitraguers Challenges M&A Lawyers, Legal Times of Wash., June 1,
1981, at 28.
[25] See 1 MARTIN LIPTON & ERICA H. STEINBERGER,
TAKEOVERS & FREEZEOUTS §1.06[4], at 1-40 to 1-49 (1992); William Meyers,
How Ron Perelman Became The Richest Man In America, Institutional Inv., May
1989, at 140.
[26] See RON CHERNOW, THE HOUSE OF MORGAN 600-01 (1990); ADAM
SMITH, THE ROARING EIGHTIES 193-99 (1988).
[27] See JOHN TAYLOR, STORMING THE MAGIC KINGDOM 112-37
(1987).
[28] See Note, Preferred Greenmail: Targeted Stock
Repurchases and the Management-Entrenched Hypothesis, 98 Harv. L. Rev. 1045,
1045-47 (1985).
[29] See 1 ARTHUR FLEISCHER, JR., TENDER OFFERS: DEFENSES,
RESPONSES, AND PLANNING 3-65 (1983); 1 SHARK REPELLANTS AND GOLDEN PARACHUTES:
A HANDBOOK FOR THE PRACTITIONER 5-9 (Robert H. Winter, Mark H. Stumpf &
Gerard L. Hawkins eds., 1991); Michael Bradley & Michael Rosenzweig,
Defensive Stock Repurchases, 99 Harv. L. Rev. 1377, 1378-84 (1986); Note,
Protecting Shareholders Against Partial and Two-Tiered Takeovers: The
"Poison Pill", 97 Harv. L. Rev. 1964, 1964-68 (1984); see, e.g.,
Field v. Trump, 850 F.2d 938 (2d Cir. 1988), cert. denied, 109 S. Ct. 1122
(1989); Chromalloy Am. Corp. v. Sun Chem. Corp., 611 F.2d 240 (8th Cir. 1979);
Smallwood v. Pearl Brewing Co., 489 F.2d 579 (5th Cir.), cert. denied, 419 U.S.
873 (1974); Applied Digital Data Sys. Inc. v. Milgo Elec. Corp., 425 F. Supp.
1145 (S.D.N.Y. 1977).
[30] See ROBERT C. CLARK, CORPORATE LAW § 3.4, at 123-25
& nn.3-4 (1986); Maurice A. Hartnett, III, The History of the Delaware
Court of Chancery, 48 Bus. Law. 367, 367-70 (1992); E.N. Veasey, The National
Court of Excellence, 48 Bus. Law. 357, 357-58 (1992); William Meyers, Showdown
In Delaware: The Battle To Shape Takeover Law, Institutional Inv., Feb. 1989,
at 64.
[31] See, e.g., R.F. Balotti & James J. Hanks, Rejudging
the Business Judgment Rule, 48 Bus. Law. 1337, 1337-52 (1993); Charles Hansen,
The Duty of Care, the Business Judgment Rule, and The American Law Institute
Corporate Governance Project, 48 Bus. Law. 1355, 1355-74 (1993); Paul M.
Bernstein, Something for Everyone In Cash Out Merger, N.Y. L.J., Mar. 22, 1983,
at 1; Karen Donovan, Corporate Directors Take Beating From Del. Supreme Court,
Nat'l L.J., Dec. 27, 1993/Jan. 3, 1994, at 17; James C. Freund & Rodman
Ward, Jr., What's `In,' `Out' in Takeovers In Wake of Paramount v. Time, Nat'l
L.J., Mar. 26, 1990, at 22; E.P. Welch & A.J. Turezyn, Courts Took Quick
Action in Paramount, Nat'l L.J., Jan. 10, 1994, at 20. See generally Curtis Hearn & Walter
Baus, Director Liability and the Use of Advisory Directors, 10 La. Corp. Newsl.
No. 2 (La. St. B. Ass'n Sec. on Corp. & Bus. L., New Orleans, La.), Fall
1986.
[32] See EDWARD R. ARANOW, HERBERT A. EINHORN & GEORGE
BERLSTEIN, DEVELOPMENTS IN TENDER OFFERS FOR CORPORATE CONTROL 207-57 (1977);
EDWARD R. ARANOW & HERBERT A. EINHORN, TENDER OFFERS FOR CORPORATE CONTROL
153-72 (1973); Manning G. Warren III, Reflections on Dual Regulation of
Securities: A Case Against Preemption, 25 B.C. L. Rev. 495, 513 & n.146
(1984).
[33] See RONALD J. GILSON, THE LAW AND FINANCE OF CORPORATE
ACQUISITIONS 1073-78 (1987).
[34] See Donald C. Langevoort, Comment, The Supreme Court and
the Politics of Corporate Takeovers: A Comment on CTS Corp. v. Dynamics Corp.
of America, 101 Harv. L. Rev. 96, 97 & n.7 (1987).
[35] See 5 LOUIS LOSS & JOEL SELIGMAN, SECURITIES
REGULATION 2123-2309 (3d ed. 1990).
[36] See Thomas L. Hazen, State Anti-Takeover Legislation:
The Second and Third Generations, 23 Wake Forest L. Rev. 77, 77-88 (1988);
Evelyn Sroufe & Catherine Gelband, Business Combination Statutes: A
"Meaningful Opportunity" for Success?, 45 Bus. Law. 891, 891-93 (1990);
Barbara Franklin, Shifting Fight To the States On Hostile Bids, Nat'l L.J.,
Sept. 25, 1989, at 1.
[37] See GEORGE ANDERS, MERCHANTS OF DEBT 9 (1992); SARAH
BARTLETT, THE MONEY MACHINE 42 (1991); RICHARD M. CLURMAN, TO THE END OF TIME
49-50 (1992); ROBERT LENZNER, THE GREAT GETTY 223-28 (1986); DAVID MCCLINTIC,
INDECENT EXPOSURE 96‑110 (1982); RUSSELL MILLER, THE HOUSE OF GETTY
334-45 (1986); WILLIAM SHAWCROSS, MURDOCH 134-39 (1993); SYDNEY L. STERN &
TED SCHOENHAUS, TOYLAND 258-60 (1990); ANDREW TOBIAS, THE FUNNY MONEY GAME 34‑37
(1971); see, e.g., Stanley H. Brown, Dr. Hammer's Magic Tingle, Fortune July
1968, at 98; Getty Oil: The House That J. Paul Built, Forbes, Mar. 1, 1974, at
30; Look Who's Playing with Toys, Forbes, Dec. 15, 1971, at 22; John McDonald,
J. Paul Getty's Changed Plans, Fortune, Dec. 1967, at 108; Meshulam Riklis: The
Power, the Profit and the Glory, Forbes, Mar. 15, 1971, at 24; Occidental
Petroleum: Lucky Like a Fox, Forbes, June 1, 1968, at 24; Randall Smith, Merger
Activity Falls for Fourth Straight Year But Some Say the Worst Is Finally Over,
Wall St. J., Jan. 4, 1993, at R8; Shawn Tully, The Man Who Scored in
Cola-Columbia, Fortune, Feb. 22, 1982, at 73.
See generally Arthur In Paley-Land, Forbes, May 1, 1975, at 20; Revlon
After Revson, Forbes, Sept. 15, 1975, at 26; The Gilt‑Edged Profession,
Forbes, Sept. 15, 1971, at 30; The Movies: Why Everyone Wants In, Forbes, Dec.
15, 1967, at 22.
[38] See JOSEPH R. DAUGHEN & PETER BINZEN, THE WRECK OF
THE PENN CENTRAL 242-51 (1971); ROY C. SMITH, THE MONEY WARS 314-17 (1990);
Joann S. Lublin & Craig Forman, Europe's Merger Boom Triggers an Invasion
By U.S. Deal Makers, Wall St. J., Aug. 23, 1989, at A1.
[39] See ROY C. SMITH, THE MONEY WARS 89-90 (1990); James C.
Freund & Robert L. Easton, The Three-Piece Suitor: An Alternate Approach to
Negotiated Corporate Acquisitions, 34 Bus. Law. 1679, 1684-87 (1979); see also
Laurie M. Grossman & Gabriella Stern, Blockbuster to Buy Controlling Stake
In Spelling in Swap, Wall St. J., Mar. 9, 1993, at B10; Lawrence Rout, A Risk
Arbitrgeur Plays Dangerous Game Of Betting on Mergers, Wall St. J., Feb. 22,
1979, at 1.
[40] See ROBERT C. CLARK, CORPORATE LAW § 10.23, at 413-14
(1986); RONALD J. GILSON, THE LAW AND FINANCE OF CORPORATE ACQUISITIONS 26-28
(1987).
[41] SEC Securities Act Release No. 5316 (Oct. 6, 1972); see
Edward F. Greene & James J. Junewitz, A Reappraisal of Current Regulation
of Mergers and Acquisitions, 132 U. Pa. L. Rev. 647, 649-77 (1984).
[42] See Leib Orlanski, Going Public Through the
Backdoor and the Shell Game, 58 Va. L. Rev. 1451, 1451-85 (1972).
[43] See DAVID L. RATNER, SECURITIES REGULATION 364-71 (3d
ed. 1986).
[44] See RICHARD W. JENNINGS & HAROLD MARSH, JR.,
SECURITIES REGULATION 451-52 (6th ed. 1987).
[45] See Anthony De Toro, Market Manipulation of Penny
Stocks, 17 Sec. Reg. L.J. 241, 242-43 (1989).
[46] See Anthony De Toro, Market Manipulation of Penny
Stocks, 17 Sec. Reg. L.J. 241, 242-43 & n.10 (1989).
[47] See LOUIS LOSS, FUNDAMENTALS OF SECURITIES REGULATION
708 & n.27 (2d ed. 1988).
[48] See Louis Loss, Teaching the Regulatory Aspects of
Corporate Finance, Harv. L. Sch. Bull., Dec. 1953, at 3; see also KURT EICHENWALD, SERPENT ON
THE ROCK Ch.14 (1995); DIANA B. HENRIQUES, FIDELITY'S WORLD Ch. 6 (1995); G.W. MILLER, TOY WARS Ch. 3 (1998);
HILARY ROSENBERG, THE VULTURE INVESTORS Ch.1 (1992).
[49] See, e.g., JOEL SELIGMAN, THE TRANSFORMATION OF WALL
STREET 561-62 (1982).
[50] See DETLEV F. VAGHTS, BASIC CORPORATION LAW 731-32 (2d
ed. 1979).
[51] See, e.g., What Are Earnings? The Growing Credibility Gap, Forbes, May 15, 1967, at 28.
[52] See DAVID R. HERWITZ, BUSINESS PLANNING 782-95 (1966);
DAVID R. HERWITZ, BUSINESS PLANNING 720-33 (Temp. 2d ed. 1984).
[53] See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE
FINANCE 594-618 (3d ed. 1987).
[54] See RONALD J. GILSON, THE LAW AND FINANCE OF CORPORATE
ACQUISITIONS 258-86 (1987).
[55] 26 U.S.C. §§ 351, 354, 357-358, 361, 368 (1986); see
BORIS I. BITTKER & JAMES S. EUSTICE, FEDERAL INCOME TAXATION OF CORPORATIONS
AND SHAREHOLDERS §§ 14.30-14.35, at 14-92 to 14-125 (4th ed. 1979); VICTOR
BRUDNEY & MARVIN A. CHIRELSTEIN, CORPORATE FINANCE 620-25 (3d ed. 1987).
[56] See BORIS I. BITTKER & JAMES S. EUSTICE, FEDERAL
INCOME TAXATION OF CORPORATIONS AND SHAREHOLDERS §§ 14.10-14.35, at 14-16 to
14-91 (4th ed. 1979); DAVID R. HERWITZ, BUSINESS PLANNING 801-35 (1966); DAVID
R. HERWITZ, BUSINESS PLANNING 739-806 (Temp. 2d ed. 1984); RONALD J. GILSON,
THE LAW AND FINANCE OF CORPORATE ACQUISITIONS 449-98 (1987).
[57] See WILLIAM L. CARY, CORPORATIONS 10-11 (4th ed.
unabridged 1969); see, e.g., Robert C. Clark, The Four Stages of Capitalism:
Reflections on Investment Management Treatises, 94 Harv. L. Rev. 561, 563 &
n. 5 (1981).
[58] See WILLIAM L. CARY, CORPORATIONS 9-10 (4th ed. unabridged
1969); MOIRA JOHNSTON, TAKEOVER 261-62 (1986); LOUIS NIZER, MY LIFE IN COURT
496-523 (1961).
[59] Del. Code Ann. tit. 8, §§ 251, 259, 261-262 (1974); see
RONALD J. GILSON, THE LAW AND FINANCE OF CORPORATE ACQUISITIONS 501-57 (1987);
DETLEV F. VAGHTS, BASIC CORPORATION LAW 74-75 (2d ed. 1979).
[60] See DETLEV F. VAGHTS, BASIC CORPORATION LAW 714-15 (2d
ed. 1979).
[61] See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN,
CORPORATE FINANCE 668-805 (3d ed. 1987); DETLEV F. VAGHTS, BASIC CORPORATION
LAW 751-75 (2d ed. 1979); see, e. g., Paramount Communications, Inc. v. QVC
Network, Inc., 637 A.2d 34 (Del. 1994); Cede & Co v. Technicolor, Inc., 634
A.2d 345 (Del. 1993); In re Tri-Star Pictures, Inc. Litigation, 634 A.2d 319
(Del. 1993); Paramount Communications, Inc. v. Time, Inc., 571 A.2d 1140 (Del.
1989); Revlon v. MacAndrews & Forbes Holdings, 506 A.2d 173 (Del. 1986);
Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985); Weinberger v. UOP, Inc., 457
A.2d 701 (Del. 1983); Singer v. Magnavox, 380 A.2d 969 (Del. 1977).
[62] See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN,
CORPORATE FINANCE 647-68 (3d ed. 1987); Victor Brundy & Marvin A.
Chirelstein, Fair Shares in Corporate Mergers and Takeovers, 88 Harv. L. Rev.
297, 304-07 & nn. 19-20 (1974); James Vorenberg, Exclusiveness of the
Dissenting Shareholder's Appraisal Right, 77 Harv. L. Rev. 1189, 1199 & nn.
35-36 (1964).
[63] See, e.g., WILLIAM L. CARY, CORPORATIONS 868-1007 (4th
ed. unabridged 1969); Victor Brudney, The Independent Director - Heavenly City
or Potemkin Village?, 95 Harv. L. Rev. 597, 607-31 & nn. 50-51, 85 & 87
(1982).
[64] See, e.g., WILLIAM L. CARY, CORPORATIONS 1008-20 (4th
ed. unabridged 1969); Carol J. Loomis, A Squeeze on the Directors, Fortune, May
15, 1969, at 120.
[65] See Robert J. Giuffra, Jr., Note, Investment Banker’s Fairness Opinions in Corporate Control Transactions, 96 Yale L.J. 119, 137-139 & n.104 (1986); see also EUGENE F. BRIGHAM & LOUIS C. GAPENSKI, FINANCIAL MANAGEMENT 233-267 (8th ed. 1997).
[66] See, e.g., PAUL HOFFMAN, LIONS OF THE EIGHTIES 1-25 (1982);
JAMES B. STEWART, THE PARTNERS 53-113 (1983).
[67] See JOHN BROOKS, THE TAKEOVER GAME 261 (1987); RONALD J.
GILSON, THE LAW AND FINANCE OF CORPORATE ACQUISITIONS 1079-94 (1987).
[68] See DAVID R. HERWITZ, BUSINESS PLANNING 200-02 (1966).
[69] See KEN AULETTA, GREED AND GLORY ON WALL STREET 11-14
(1986).
[70] See JOEL SELIGMAN, THE TRANSFORMATION OF WALL STREET
312-23 (1982).
[71] See, e.g., SEC, REPORT OF SPECIAL STUDY OF SECURITIES
MARKETS, H.R. DOC. NO. 95, 88th Cong., 1st Sess., pt. 1, at 514-516 (1963);
JOHN BROOKS, THE TAKEOVER GAME 67-69 (1987); KIM I. EISLER, SHARK TANK 38
(1990); MICHAEL C. JENSEN, THE FINANCIERS 24‑37 (1976); MICHAEL S.
MALONE, GOING PUBLIC 16-25 (1991); STEPHEN MANES & PAUL ANDREWS, GATES
301-07 (1993); JOSEPH WECHSBERG, THE MERCHANT BANKERS 243-44 (1966); Daniel J.
McCauley, Jr., The Securities Laws ‑ After 40 Years: A Need For
Rethinking, 48 Notre Dame Law. 1092, 1098‑1100 (1973); John C. Boland,
High-Flying Fledglings, Barron's, Dec. 13, 1982, at 8; Rhonda Brammer, Outpour
of Offerings, Barron's, June 27, 1983, at 13; Sara Calian, IPOs Raise a Record
$39.4 Billion for '92, Wall St. J., Jan. 4, 1993, at C1; Thomas N. Cochran,
Year of the IPO, Barron's, Jan. 4, 1993, at 20; Golden Eggs? Or Lemons?, Forbes, July 15, 1969, at 24;
Arthur M. Louis, The Fastest Richest Texan Ever, Fortune, Nov. 1968, at 168;
Gene C. Marcial, Ripe Young Stocks, Ready For the Picking, Bus. Wk., Dec. 30,
1991/Jan. 6, 1992, at 76.
[72] See, e.g., JOHN BROOKS, THE GO-GO YEARS 1-14 (1973);
ADAM SMITH, PAPER MONEY 271-73 (1981); Fred R. Bleakley, A Decade of Debt Is
Now Giving Way To the Age of Equity, Wall St. J., Dec. 16, 1991, at A1;
Laurence J. DeMaria, Stocks Plunge 508 Points, A Drop of 22.6%; 604 Million
Volume Nearly Doubles Record, N.Y. Times, Oct. 20, 1987, at A1; Laurence J.
DeMaria, Stocks Widely Battered Again But The Dow Rises By 102 As Biggest
Issues Find Buyers, N.Y. Times, Oct. 21, 1987, at A1; Roberta S. Karmel, Black
Monday, N.Y. L.J., Dec. 17, 1987, at 1; Cary Reich, Apocalypse Now?,
Institutional Inv., Nov. 1987, at 79; Richard E. Rustin & George Getschow,
New-Issue Stock Boom Nears a Danger Point, Some Regulators Warn, Wall St. J.,
Nov. 21, 1980, at 1; James B. Stewart & Daniel Hertzberg, How the Stock
Market Died and Rose Again A Day After the Crash, Wall St. J., Nov. 20, 1987,
at A1.
[73] See ARTHUR M. BORDEN, GOING PRIVATE § 1.02, at 1-3
(1991); Note, Going Private, 84 Yale L.J. 903, 903-11 (1975).
[74] See ARTHUR M. BORDEN, GOING PRIVATE § 1.07, at 1-8 to
1-14 & nn.6 & 14 (1991); Arthur M. Borden, Going Private - Old Tort,
New Tort or No Tort?, 49 N.Y.U. L. Rev. 987, 987-1020 (1974).
[75] See SARAH BARTLETT, THE MONEY MACHINE 45-47 (1991);
Robert L. Frome, SEC Takes Position On Leveraged Buy-Outs, N.Y. L.J., Apr. 5,
1979, at 1; John D. Williams, King of the Buyouts, Kohlberg Kravis Helps Alter
Corporate U.S., Wall St. J., Apr. 11, 1986, at 1.
[76] See VICTOR BRUDNEY & MARVIN A. CHIRELSTEIN,
CORPORATE FINANCE 437-64 (3d ed. 1987).
[77] See CARY REICH, FINANCIER 222-41 (1983).
[78] See JOHN BROOKS, THE GO-GO YEARS 153-58 (1973); see also
Wendy Bounds, Kodak to Sell Sterling Winthrop Drug And Two Other Units to Focus
on Film, Wall St. J., May 4, 1994, at A3; William M. Bulkeley, Conglomerates
Make A Surprising Comeback - With a '90s Twist, Wall St. J., Mar. 1, 1994, at
A1; Christina Duff, Kmart to Sell PayLess to Firm For $1 Billion, Wall St. J.,
Nov. 1, 1993, at A3; Daniel Pearl & Gautam Naik, Georgia-Pacific Signs
Letter of Intent To Sell Butler Paper to Alco Standard, Wall St. J., Mar. 16,
1993, at A7; Anita Sharp, Flagstar Plans to Sell Most of Canteen To Compass for
$450 Million; End Loss, Wall St. J., Apr. 28, 1994, at A3.
[79] See KENNETH M. DAVIDSON, MEGAMERGERS 19 (1985).
[80] See William T. Allen, Independent Directors In MBO Transactions:
Are They Fact or Fantasy?, 45 Bus. Law. 2055, 2055-56 (1990); Carl Ferenbach,
L.B.O.s: A New Capital Market (And How to Cope With It), Mergers &
Acquisitions, Fall 1983, at 21.
[81] See SARAH BARTLETT, THE MONEY MACHINE 157-69 (1991);
Stephen R. Waite & Martin S. Fridson, Do Leveraged Buyouts Pose Major
Credit Risks?, Mergers & Acquisitions, July-Aug. 1989, at 43.
[82] See G.C. Hill & John D. Williams, Leveraged
Purchases Of Firms Keep Gaining Despite Rising Risks, Wall St. J., Dec. 29,
1983, at 1; Allan Sloan, Luring Banks Overboard?, Forbes, April 9, 1984, at 39.
[83] See JOHN BROOKS, THE TAKEOVER GAME 207-08 (1987); Note,
Distress-Contingent Convertible Bonds: A Proposed Solution to the Excess Debt
Problem, 104 Harv. L. Rev. 1857, 1857 & n.2 (1991).
[84] See SARAH BARTLETT, THE MONEY MACHINE 253 (1991);
Richard Lieb, Junk Bond Holders Face Bankruptcy Risk, N.Y. L.J., Dec. 4, 1989,
at 44; Constance Mitchell, Junk Bond Issuance Posts a Strong Rebound, Partly
Reflecting Late 1991 Good Performance, Wall St. J., Jan. 4, 1993, at R36;
Patrick M. Reilly, Ralph Ingersoll Finds Newspapers Are Fun, Junk Bonds Are
Not, Wall St. J., Mar. 26, 1990, at A1.
[85] See Note, Distress-Contingent Convertible Bonds: A
Proposed Solution to the Excess Debt Problem, 104 Harv. L. Rev. 1857, 1858
& n.8, 1866, 1877 (1991); Ford S. Worthy, The Coming Defaults in Junk
Bonds, Fortune, Mar. 16, 1987, at 26.
[86] See CONNIE BRUCK, THE PREDATOR'S BALL 27-39 (1988);
JAMES B. STEWART, DEN OF THIEVES 45-47 (1991); Janet Bush & Anatole Kaletsky,
When the Junk Heap Topples, Fin. Times, Feb. 14, 1990, at I26; John Liscio, The
Buyout Bubble, Barron's, Oct. 31, 1988, at 6; see also Nick Gilbert, A Closer
Look at First Executive, Fin. World, May 5, 1987, at 22.