It is quite common in negotiated acquisitions for companies to perform a pre-signing market canvass and to enter into an acquisition agreement that contains a “no-shop” provision with a fiduciary out clause for unsolicited third-party proposals, as well as a break fee payable in the eventuality of the target company accepting a superior offer. Less common is the practice of foregoing the pre-signing market canvass and combining a “go-shop” provision that allows the target company to actively solicit superior proposals for a specified period of time after entering into the acquisition agreement with a two-tiered break fee that provides for … Continue Reading
One of the key questions in connection with the decision to adopt a poison pill, or shareholder rights plan, is whether the rights plan should be “shareholder-approved” or “tactical”. A shareholder approved plan is implemented for an extended period of time to serve as general protection against future unsolicited bids. A tactical plan, on the other hand, is adopted in response to a particular bid (or threat of a bid). Historically tactical plans typically had a term of less than six months and would not be submitted to shareholders for approval, though there have been recent instances in which issuers … Continue Reading
A poison pill, or shareholder rights plan, is a device implemented by a company’s board of directors in order to deter unsolicited or hostile acquisition proposals. The rights plan originated in the United States and was introduced in Canada in 1988 when Inco adopted its first rights plan. The introduction of poison pills in both countries was met with questions as to their legality. In the divergent approaches through which these questions were resolved in Canada and the United States (in particular Delaware), the rights plan and its effectiveness as a take-over defence have followed divergent paths.
In Delaware, the … Continue Reading