M&A “clear day” defenses can cloud investor rights

Corporate defenses can hurt investors, rain or shine. Anti-takeover measures adopted on so-called “clear days” – before threats arise – are more likely to weather legal scrutiny. It’s one reason Allergan was able to beat back Valeant’s unwanted $52 billion advance. When such protections are triggered in the heat of battle, though, they’re considered unfair surprises. Either way, shareholders usually get unneeded cover.

U.S. companies have plenty of leeway to set reasonable ground rules for investors. They can pick where to be sued, require lengthy notice of shareholder proposals and use pre-existing business plans to reject hostile bids, so long as they don’t penalize particular investors.

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