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Webinar: Dealing with Activist Shareholders

Webinar: Dealing with Activist Shareholders

Penn State Law's Center for the Study of Mergers and Acquisitions presents a free, public interest webinar entitled “Dealing with Activist Shareholders: From (a) Board Adoption of Protective Bylaws and a Two-Tier Pill, to (b) Mock Arguments Challenging the Bylaws and Pill in Delaware Chancery Court.”

Watch the Archived Video

In light of the significant role activist shareholders are playing in corporate governance and mergers and acquisitions, this webinar will present mock arguments for and against actions taken by a target’s board in fighting a campaign by an activist shareholder.  The webinar participants are:

  • Trevor S. Norwitz of Wachtell, Lipton, Rosen & Katz, New York, N.Y.
    Mr. Norwitz will make a mock presentation to the board of Potential Target of Activist, Inc. (PTofA) regarding bylaws and a two-tier pill the board will adopt to fight off an activist shareholder.​
     
  • William M. Lafferty of Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Del. 
    Mr. Lafferty will challenge the bylaws and pill in the Delaware Court of Chancery on behalf of shareholders and an activist.
     
  • Raymond J. DiCamillo of Richards, Layton & Finger, P.A., Wilmington, Del.
    Mr. DiCamillo will represent PTofA in defending the bylaws and pill.
     
  • Stephen P. Lamb of Paul Weiss, Wilmington, Del., and former Vice Chancellor of the Delaware Court of Chancery.
    Mr. Lamb will act as the judge hearing the arguments. 
     
  • Samuel C. Thompson, Jr., professor of law and director of the Center for the Study of Mergers and Acquisitions at Penn State Law.
    Professor Thompson will moderate the discussion.

Background on Activist Shareholders

Activist shareholders, who principally act through hedge funds, have become an important element in corporate governance and mergers and acquisitions.  For example, an October 29, 2014, article in The New York Times entitled “Investor Activism, Already Robust, Expected To Rise In Next Year” states: “Recent data suggests that the success of activism campaigns has more than doubled over the last decade, to more than 70 percent.” 

The following are some of the recent campaigns pursued by activist hedge funds: 

  1. Pershing Square’s establishment (together with Valeant, a large publicly held pharmaceutical firm) of a 9.7 percent position in Allergan, another large publicly held pharmaceutical firm, with a view to facilitating the acquisition of Allergan by Valeant;  
  2. Activist funds Trian Group (and more recently Icahn Capital) investment in Family Dollar Stores, a publicly held firm, with a view to enhancing shareholder value by changing Family Dollar’s business strategy;
  3. Third Point’s establishment of a 9.4 percent position in Sotheby’s, a publicly held firm, with a view to changing its business strategy; and
  4. Elliott Management’s establishment of an 8.2 percent position in Compuware Corporation in Elliott’s efforts to have its nominees placed on the board of Compuware. 

Pershing Square is run by William “Bill” Ackman; Icahn Capital is run by Carl Icahn; Third Point is run by Daniel Loeb; and Elliott Management is run by Paul Singer, all prominent figures in the activist field.  

The Valeant/Pershing Square proposal to take over Allergan was the subject of litigation in Delaware Court of Chancery, which was settled, and also subject to litigation in a California Federal District Court, where the court found serious questions as to whether Pershing Square and Valeant violated the securities laws in acquiring their stake but refused Allergan’s request to enjoin them from voting at a special meeting of its shareholders set for December 2014, provided Valeant/Pershing Square makes certain disclosures regarding the potential violations of the securities laws. 

In part as a result of activist involvement with Family Dollar Stores, that company was put in play and is now subject to a bidding war between two potential acquirers: Dollar Tree and Dollar General.  

The Third Point campaign against Sotheby’s was the subject of a 2014 court decision in Delaware, which upheld Sotheby’s two-tier poison pill. Although the court decision went against Third Point, Third Point continued to wage a “short-slate” proxy contest against Sotheby’s, and the contest was settled with Sotheby’s agreeing to add three Third Point designees to its board, one of whom was Dan Loeb. 

In settling its year-long dispute with Elliott, Compuware agreed to (1) give Elliott two board seats (in addition to the appointment of two other directors supported by Elliott in November 2013),  and (2) establish an advisory committee for the purpose of advising on and recommending to the Compuware board strategies to enhance the company's value.

All of the participants have deep experience in dealing with activist issues. For example, Mr. Norwitz’s firm represented Sotheby’s in its defense against Third Point, and Mr. Lafferty’s firm represented Third Point in that action. Mr. DiCamillo’s firm (with Mr. Norwitz’s firm) represents Allergan in its defense against Valeant/Pershing Square, and Mr. Lamb’s firm represented Elliott Management in its campaign against Compuware.

Date/Time: 
Monday, November 17, 2014 - 12:30pm to 2:00pm
Location: 
Sutliff Auditorium, Katz Building, University Park, Pa., and 116 Katz Hall in Carlisle, Pa.
Faculty Reference: 

Memorandum to the Board of The Great American Corp (2)

Watchell, Lipton Client Memos including: 
1. Delaware Court of Chancery Upholds Rights Plans as a Defense to Activism
2. With a Note of Caution, Delaware Rules Fee-Shifting Bylaw Facially Permissible
3. Progress and Challenges in the Battle Against Multiforum Stockholder Litigation
4. Delaware Court of Chancery Upholds Forum Selection Bylaws
5. ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws
6. ISS Addresses Dissident Director Compensation Bylaw

In Re Allergan Inc  Shareholder Litigation Del Chancery Ct Nov  7 2014

Allergan v. Valeant Cal Fed Dist Ct Opinion Nov 4 2014

Third Point v. Sotheby's Del Chancery Court May 2 2014

Excerpt from Ch 28, Shareholder Activism and Merger Arbitrage, of Thompson, Mergers, Acquisitions and Tender Offers (2010, Periodically Updated, PLI, with permission)

More information on the full text of Mergers, Acquisitons and Tender Offers (2010- last updated September 2014), is available on the PLI website

ATP Tour v  Deutscher Tennis Del S C  May 8 2014

Boilermakers v  Chevron Del  Chancery Ct  2013

City of Providence v First Citizens Del Chancery Ct Sept 8 2014

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