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2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 1

- - - - - - - - Chapter 19 - - - - - - - -
Takeover Defenses
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Introduction
Not all mergers are welcome
Arsenals of devices were developed to
defend against unwelcome proposals
during the 1980s
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Possible motivations for takeover
defenses
Target is resisting to get a better price
Management of target judges that
company will perform better on its own
Management is seeking to entrench itself
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Strategic Perspectives
Management and board of company
must continuously reassess competitive
environment
All forms of M&A activities may impact
firm both as threats and opportunities
Main developments in industry
Opportunities for adding critical capabilities
to participate in attractive growth areas
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Opportunities for rolling-up fragmented
industries into stronger firms
Likelihood of firm to be rolled-up
Improving or deteriorating sales to capacity
relationships in industry
Impact of consolidating mergers on capacity
and cost structure
Enhanced capabilities of competitors as a
result of their merger activity
Preemptive moves
Responses to takeover bids
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Financial Defensive Measures
Efficiency
One view: Highly efficient firms with
favorable sales growth and high profitability
margins provide defense against takeovers
Alternative view: Highly efficient firms
become good takeover targets
Bidder firm seeks to learn from efficiencies of
target
Target firm may be viewed as undervalued
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Financial characteristics that make a firm
vulnerable to takeover
Low stock price in relation to replacement
cost of assets or potential earning power
(low q-ratio)
Highly liquid balance sheet with large
amounts of excess cash, valuable securities
portfolio, and significant unused debt
capacity
Good cash flows relative to current stock
prices; low P/EPS ratios
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Subsidiaries or properties that could be
sold off without significantly impairing cash
flows
Relatively small stockholdings under
control of incumbent management
Combinations of these factors can
simultaneously make firm an attractive
investment and facilitate its financing
Firm's assets can be used as collateral for
acquirer's borrowing
Target's cash flows from operations and
divestitures can be used to repay loans
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Financial defenses
Increase debt use borrowed funds to
Repurchase equity
Concentrate management's percentage holdings
Increase dividends
Loan covenants structured to force
acceleration of repayment in event of takeover
Liquidate securities portfolio
Decrease excess cash
Invest in positive net present value projects
Return to shareholders in dividends or share
repurchases
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Excess liquidity could be used to acquire
other firms
Divest subsidiaries that can be eliminated
without impairing cash flows; or spin-offs to
avoid large cash inflows
Divest low-profit operations
Undervalued assets should be sold
Value increased by restructuring
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Corporate Restructuring and
Reorganization
Restructuring and reorganization policies
can be used positively or defensively
Reorganization of assets
Asset acquisitions can be used to block
takeovers
Dilute ownership position of bidder by using
equity in acquisitions
Create antitrust problems for bidder
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"Selling off crown jewels" firm may
dispose of business segment in which bidder
is most interested
Reorganizing financial claims
Debt-for-equity exchanges increase leverage
to levels unacceptable to bidder
Dual-class recapitalizations increase voting
powers of insider groups to levels that would
enable them to block tender offers
Leveraged recapitalizations incur huge
amounts of debt, using proceeds to pay large
cash dividends and increase ownership position
of insiders "scorched earth" policy
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Other strategies
Joint ventures could represent liaisons that
potential bidders might prefer to avoid
ESOPs can be used to decrease voting
shares available for tender
MBOs and LBOs
Widely used as defense against outside tender
offer
Management can take firm private
Managers may turn to LBO specialist because
their stock ownership position may increase more
than in an outside tender offer
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Target firm may look for international partner
Share repurchase can be used to defend
against takeovers
Increase ownership of insiders
Low reservation price shareholders can be
bought out higher tender offer price needed
for bid to succeed
Proxy contest aim is to change control
group and make performance improvements
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Event studies
Restructuring improves firm's efficiency:
favorable stock price reaction
Restructuring represents scorched-earth
policy: negative stock price reaction
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Duty of Directors
Business judgment rule: Directors must
demonstrate to the courts that the best
interests of shareholders have been
served
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Duty of directors to demonstrate sound
business reasons to reject offer
Duty of directors to approve only a
transaction that is fair to shareholders and
is best transaction available
Duty of directors to fully explore
independent competitive bids and obtain
best offer
Fairness opinion from an investment
banking firm not sufficient
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Greenmail
Definition: Represents targeted
repurchase of large block of stock from
specified shareholders at premium to
end hostile takeover threat
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Two divergent views of greenmails
Greenmailers damage shareholders
Large block investors are corporate "raiders"
who expropriate corporate assets
Raiders' voting power used to give themselves
excessive compensation and perquisites
Raiders receive substantial premium, "looting"
corporate treasury
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Greenmail brings about improvements
Large block investors involved in greenmail
force improvements in corporate personnel or in
corporate strategies and policies
Large block investors have stronger incentives
and superior skills for evaluating potential
takeover targets
Managers make greenmail payments to buy
time to turn around the firm
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Greenmail sometimes accompanied by
standstill agreement
Voluntary contract in which blockholder
agrees not to make further investments in
target company during specified period of
time
If no targeted repurchase is made, large
blockholder agrees not to further increase
ownership percentage of the firm

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Wealth effects of greenmail
Announcement associated with negative
return to shareholders of 2-3% (significant)
Other studies find positive abnormal
returns, both in initial "foothold" period and
in full "purchase-to-repurchase" period
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Greenmail and standstill agreement
Negative returns standstill agreement
viewed as reducing probability of subsequent
takeover
40% of firms experience subsequent control
change within three years of greenmail even
with standstill agreement
Positive market reaction if greenmail
viewed as giving directors more time to
work out better solution
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Antigreenmail developments
Internal Revenue Code Section 5881 of
1986 imposes 50% excise tax on
recipient of greenmail payments
Antigreenmail charter amendments
Require management to obtain approval of
majority or supermajority of nonparticipating
shareholders prior to targeted repurchase
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Bhagat and Jefferis (1991)
Proxy statements proposing antitakeover
amendments include one or more of (other)
antitakeover amendment proposals
Sample of 52 NYSE-listed firms proposing
antigreenmail amendments in 1984-1985
40 firms offered one or more antitakeover
amendments
29 cases, shareholders had to approve or reject
antitakeover provisions and antigreenmail
amendments jointly
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Eckbo (1990)
Average market reaction to charter amendments
prohibiting greenmail payments weakly negative
Subsample of firms with abnormal stock price runup
over three months prior to mailing of proxy: Market
reaction strongly positive
Particularly true if runup associated with
evidence or rumors of takeover activity
Prohibition against greenmail removes barrier to
takeovers with positive gains to shareholders
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Strategic Actions
Pac Man defense
Definition: Target firm counteroffers for
bidder firm
Rarely used; usually designed not to be used
Effective if target much larger than bidder
Implies target finds combination desirable but
seeks control of surviving entity
Target gives up using antitrust issues as
defense
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Extremely costly
Could involve devastating financial effects for
both firms
Large amount of debt used to purchase shares
could cripple firms
Under state law, should both firms buy
substantial stakes in each other, each could be
ruled as subsidiaries of each other
Severity of defense may lead bidder to
disbelieve target will employ such defense
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White knight
Definition: Target company chooses
another company with which it prefers to
be combined
Alternative company preferred by target
because:
Greater compatibility
New bidder may promise not to break up target
or engage in massive restructuring
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White squire
Definition: Modified form of white knight;
white squire does not acquire control of target
Target sells block of its stock to third party it
considers to be friendly
White squire may be required to vote its
shares with target management
Often accompanied by standstill agreement
Limits amount of additional target stock white
squire can purchase for specified period of time
Restricts sale of its target stock, usually giving
right of first refusal to target
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White squire often receives in return
Seat on target board
Generous dividend and/or
Discount on target shares
Preferred stock usually used in white
squire transactions because it enables
board to tailor characteristics of stock as
described
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Antitakeover Amendments
Antitakeover amendments to firm's
corporate charter generally impose new
conditions on transfer of managerial
control of firm "shark repellents"
95% of proposed antitakeover
amendments are ratified
Management introduces amendments that it
feels are sure of success
Failure to pass might be taken as vote of no
confidence
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Brickley, Lease, and Smith (1988)
Institutional shareholders (banks, insurance
companies) more likely to vote with
management on antitakeover amendments
Have continuing business relationships with
management
Pension funds, mutual funds, and college
endowments more likely to be independent
Blockholders participate more actively in voting
than non-blockholders and may oppose
proposals that appear to harm shareholders
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Jarrell and Poulsen (1987)
Amendments having most negative effect on
stock price are adopted by firms with lowest
percentage of institutional shareholders and
highest percentage of insider holdings
Blockholders play monitoring role
institutional holders are well informed and vote
in accordance with their economic interests
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Supermajority amendments
Require shareholder approval by at least
two-thirds vote (sometimes as much as
90%) for all transactions involving change
in control
Involve "board-out" clause that gives
board power to determine when and if
supermajority provisions will be in effect
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Fair-price amendments
Supermajority provisions with board-out
clause and additional clause waiving
supermajority requirement if fair price is
paid by bidder for all purchased shares
Fair price highest market price of target
during a past specified period
Defend against two-tier tender offers
Least restrictive among class of
supermajority amendments
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Staggered or classified boards
Delay effective transfer of control following
takeover
Management's rationale is to assure
continuity of policy and experience
Examples:
One-third of board stands for election to three-
year term each year
Reduce effectiveness of cumulative voting
because greater shareholder vote is required to
elect single director
Directors removable only for cause
Limit number of directors to prevent "packing"
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Authorization of preferred stock
Board authorized to create new class of
securities with special voting rights
Typically preferred stock issued to friendly
parties in control contest (white squire)
Historically, used to provide board with
financing flexibility
Could also include poison pill security to
buy shares at a discount
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Other antitakeover actions
Abolition of cumulative voting where it is not
required by state law
Reincorporation in state with more
protective antitakeover laws
Provisions with respect to scheduling of
shareholder meetings and introduction of
agenda items
Antigreenmail amendments that restrict
company's freedom to buy back raider's
shares at premium
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Lock-in amendments to make it difficult to
void previously passed antitakeover
amendments
Termination of overfunded pension plans
(Iqbal, Shetty, Haley, and Jayakumar, 1999)
Firms can remove a significant source of cash
flows to bidder firms by liquidating excess assets
Stockholders favor termination only when firm
faced takeover and managerial ownership was
high view takeover as threat to their claim on
excess pension assets

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Boyle, Carter, and Stover (1998)
Studied antitakeover provisions adopted by
mutual savings and loan companies converting
to stock ownership (SLAs)
Strength of insider ownership position after
conversion substitutes for strong antitakeover
provisions
Low ownership firms associated with strong
antitakeover protections
High ownership firms adopted less extraordinary
antitakeover protections
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Antitakeover amendments and corporate
policy
Garvey and Hanka (1999)
Effects of antitakeover statutes on firm leverage
Firms protected by state antitakeover statutes
substantially reduced debt ratios
Results not influenced by size, industry, or
profitability
Weak evidence that protected managers
undertook fewer major restructuring programs
Firms eventually covered by antitakeover
legislation used greater leverage in years
preceding adoption of statutes
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Johnson and Rao (1997)
Compared financial attributes (based on income,
expenses, investment, and debt) before and
after antitakeover amendment adoptions
For full sample, firms exhibited no significant
differences from industry means except for
decline in net income to total assets ratio
Fair price amendments
For non-fair price subsample, no significant
differences from industry mean for any of financial
attributes
For fair price subsample, results similar to those of full
sample
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Antitakeover amendments and
shareholder returns
General predictions
Positive returns
Announcement of antitakeover measure signals
increased likelihood of takeover
DeAngelo and Rice (1983) shark repellents may help
shareholders respond in unison to takeover bids
Negative returns
Antitakeover amendments reflect management
entrenchment
Comment and Schwert (1995) decline of less than
1% for most types of antitakeover measures
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Empirical results difficult to interpret because
of number of influences operating concurrently
Antitakeover amendment may have been adopted
to help management obtain better deal
Announcement of takeover may have contagion
effects on industry
Positive runup in abnormal returns because of possibility
of other takeovers
Announcement of antitakeover amendments with typical
1% decline in shareholder wealth should be netted
against prior positive runup
1% decline would be viewed as reflection of reduced
probability of takeover being completed
If 20% is typical runup, small negative event returns from
announcement of antitakeover measures would have little
power to deter takeovers

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State Laws
Background
By 1982, 37 states passed first generation
antitakeover laws
First generation laws ruled to be preempted by
1968 Williams Act in Edgar v. MITE (1982)
In 1987, Supreme Court reversed in Dynamic v.
CTS; ruled that state antitakeover laws were
enforceable as long as they did not prevent
compliance with Williams Act
Many states passed new antitakeover statutes
between 1987-1990
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Janjigian and Trahan (1996)
Studied factors that influenced firms to opt
out of protection under Pennsylvania
Senate Bill 1310 introduced on 10/20/89
20 opt out firms: significant -9.50% return
13 no-opt out firms: insignificant 9.15%
Accounting performance of both groups
deteriorated substantially from 1989 to 1992
Firms that opted out had significantly better
net profit margin, net return on assets, and
operating return on assets in 1992

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Swartz (1996)
Event date was passage of Pennsylvania
Antitakeover Law (Act 36 based on Senate
Bill 1310) on 4/27/90
Event returns (CARs)
Firms that opted out:
For window [-130,+60] = -5.24% (not significant)
For window [-60,+20] = 0.70% (not significant)
Firms that did not opt out:
For window [-130,+60] = -23.35% (significant)
For window [-60,+20] = -4.71% (significant)
Firms that opted out outperformed firms that
did not

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Heron and Lewellen (1998)
Reincorporations to establish stronger
takeover defenses had significant negative
returns
Reincorporations to limit director liability to
attract better qualified directors had
significant positive returns
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Poison Pills
Background
Definition: Creation of securities carrying
special rights exercisable by triggering
event such as accumulation of specified
percentage of target shares or
announcement of tender offer
Make acquisition of control of target firm
more costly
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Can be adopted by board without
shareholders' approval
Poison pill adoptions often submitted to
shareholders for ratification even though
not required to do so
Use of poison pills requires justification to
be upheld by courts adoption of poison
pills in the best interest of shareholders
"business judgment rule"
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Types of plans
Flip-over plans
Bargain purchase of bidder's shares at some
trigger point
Weakness: If rights are exercisable only when
bidder obtains 100% of company stock, bidder
may buy just over 50% to obtain control
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Flip-in plans
Bargain purchase of target's shares at some
trigger point
More widely used than flip-over plans
Ownership flip-in provision allows rights holder
to purchase shares of target at a discount if
acquirer exceeds a shareholding limit rights
of bidder who triggered pill become void
Some plans waive flip-in provision if acquisition
is cash tender offer for all outstanding shares
(defend against two-tier offers)
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Dead-hand provisions
Definition: Provision that grants board the
ability to redeem or amend poison pill only by
continuing directors directors on the board
prior to bidder's takeover attempt
Provision strengthens board's position
Board's ability to redeem poison pill gives it
flexibility in negotiating with bidders
Hostile bidder can put considerable pressure on
the board by making premium cash bid conditional
on redemption of pill
Provision prevents bidder from achieving control
of target's board which then removes pill
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In some 3,000 poison pills nationwide,
200 contained dead-hand features
State laws
New York court invalidated dead-hand
provisions in Bank of New York v. Irving Bank
1988 case
Other state courts upheld dead-hand
provisions Georgia approved dead-hand
pill in Invacare v. Healthdyne Technologies
1997 case
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Some shareholders groups are critical of
poison pills because they can be used to
prevent takeovers
Pension fund TIAA-CREF lobbied 35
companies to remove dead-hand pills
Pressure from Counsel for Institutional
Investors and International Brotherhood of
Teamsters forced Phillip Morris to remove
entire poison pill provisions

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Effects of poison pills on shareholder
returns
Malatesta and Walkling (1988) and
Ryngaert (1988) Early event studies
found about -2% impact on wealth
Comment and Schwert (1995)
Early studies covered only earlier one-fourth of
adopted pills
Sample of entire population of 1,577 poison pills
adopted 1983 to 1991
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Wealth effects of poison pill adoption are
diverse:
May be viewed as signal for increased probability of
takeover positive influence on returns
May enable managers to obtain better price in
negotiations with bidder positive influence on
returns
May deter takeovers negative influence on returns
representing expected present value of future
takeover premiums lost
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Results
Taking into account whether rumors of bid or actual bid
made it likely that control premium was built into issuer's
stock price at time of poison pill announcement:
Wealth effect = negative 2%
Taking into account whether M&A news was announced
at same time as pill:
Wealth effect = positive 3 - 4%
Taking into account year of adoption
In year-by-year results, only 1984 had negative
wealth effects of 2.3% and 2.9%
For later seven years, wealth effects positive by
about 1% or less, significant only in 1988
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Systematic evidence indicates small deterrence
effects from poison pills
Only earliest pills (before 1985) associated with large
declines in shareholders' wealth
Takeover premiums higher when target firms are
protected by state antitakeover laws or by poison
pills
Target shareholders gained even after taking into
account deals that were not completed because of
poison pills
Decline in takeover activity in 1991 and 1992
resulted from general economic factors, not
widespread use of antitakeover measures
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Shareholder Activism
Shareholders may seek to rescind
antitakeover devices
Bizjak and Marquette (1998)
Sample 190 shareholder initiated proposals
during 1987-1993
Sample of firms that received shareholder
proposals to rescind poison pills
Matched sample of firms that adopted poison
pills but did not receive shareholder proposals to
rescind them
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Wealth effects
Cumulative abnormal returns for three-day event
window
Proposal sample = -0.43%
Matched sample = 1.35%
Different announcement dates and event return
windows
Negative market reaction to initial shareholder proposal
Positive market reaction to pill restructuring
Shareholders become active when they are
concerned about managerial actions that
may impede market for corporate control
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Poison Puts
Definition: Poison puts or event risk
covenants give bondholders right to put,
at par or better, target bonds in event of
change in control
Protect against risk of takeover-related
deterioration of target bonds
Especially when leverage increases are substantial
Began to be included in bond covenants in 1986
Place potentially large cash demands on new
owner, raising costs of acquisition
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Economic role and empirical studies
Entrenchment hypothesis
Puts made firms less attractive as takeover
targets
Predicted effects of poison puts
Negative effect on shareholder returns
No effect on debt-holder returns
Bondholder protection hypothesis
Puts protect bondholders from wealth transfers
associated with debt-financed takeovers and
leveraged recapitalizations
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Predicted effects of poison puts
Impact on stock returns would be net of two opposite
effects
If takeovers motivated primarily by wealth transfer
from bondholders to shareholders were deterred
negative influence on shareholder returns
Debt with event risk covenants could be issued at
interest cost lower than unprotected debt; if
interest cost savings outweighed forgone wealth
transfer nonnegative stock price reaction to
sale of protected debt
If puts and related covenants did not increase
protection to existing debt, hypothesis predicts no
effect on price of firm's outstanding debt
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Empirical test:
Test for difference in yield spreads at offering date
for samples of protected and unprotected bonds
Inclusion of event risk protection reduced required
yields on protected bonds by 25-50 basis points in
two studies and no effect in a third
Wealth transfers from bondholders in leveraged
buyouts
No evidence of bondholder losses (Marais, Schipper,
and Smith, 1989)
Small losses (Warga and Welch, 1993)
Losses depend on covenant protections protected
bonds did not experience losses while unprotected
debt experienced significant losses
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Mutual interests hypothesis
Both managers and bondholders seek to prevent
hostile debt-financed takeovers
Managers seek to protect their control positions
Bondholders seek to avoid losses from deterioration in
credit ratings
Predicted effects of poison puts
Stock price reactions would be negative
Effects on price of existing debt would be positive
Wealth effects for debt and equity would be negatively
correlated
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Cook and Easterwood (1994)
Issuance of bonds with poison puts caused negative
returns to shareholders and positive returns to
outstanding bondholders
Control sample of straight bond issues without
poison puts had no effect on stock prices may be
related to economic environment of study period
(1988 and 1989)
Cross-sectional regression: Strong negative relation
between returns for stocks versus returns for
outstanding bonds for put sample but not for nonput
sample
Results consistent with mutual interests hypothesis
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Golden Parachutes (GPs)
Background
Definition: Separation provisions of
employment contract that compensate
managers for loss of their jobs under
change-of-control clause
Provision usually calls for lump-sum
payment or payment over specified period at
full or partial rates of normal compensation
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Extreme cases of GPs viewed as "rewards
for failure"
Cost of GPs estimated to be less than 1%
of total cost of takeover not considered
to be an effective takeover defense
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Regulation
Deficit Reduction Act of 1984
Denies corporate tax deductions for "excess
parachute payments"
Executive has to pay additional 20% income tax
on "excess parachute payments"
GPs have to be entered into at least one
year prior to date of control change to be
legally binding
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GPs are triggered either when manager is
terminated by acquiring firm or when
manager resigns voluntarily after change of
control
Court can invalidate or grant preliminary
injunctions against exercise of GPs
especially when payment could be
triggered by recipient
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Rationale
Implicit contracts
Managers' real contribution to firm cannot be
evaluated exactly in current period
Optimal contract between managers and
shareholders will include deferred
compensation
Since detailing all future possibilities and
contingent payments in written contract is
costly, long-term deferred contract largely
implicit
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Firm-specific investments by managers
Managers not willing to invest in firm-specific
skills and knowledge when likelihood of loss of
job is high
Managers may focus unduly on short term or
even take unduly high risks if there is increased
risk of losing job through takeover
Encourage managers to accept changes of
control that bring shareholders gains
reduce agency problem and transaction
costs from managerial resistance
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Berkovitch and Khanna (1991) model
Tender offer
More desirable for target shareholders as more
information is released in tender offers leading to
competitive bidding for target
Excessive GP payment will tend to motivate managers
to sell firm at too low a gain
Mergers by tying payment to synergy gains in
case of mergers, firm avoids misuse of GPs
Other possible alternatives to GPs
Stock options exercisable in event of change of
control
Increased stock ownership by management
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Silver and tin parachutes
Silver parachutes provide less generous
severance payments to executives
Tin parachutes
Extend relatively modest severance payments to
wider coverage of managers including middle
management, and in some cases, cover all
salaried employees
Number of employees to be covered
Jensen (1988) contract should cover only those
members of top-level management team involved in
negotiating and implementing any transfer of control
Coffee (1988) control-related severance contracts
should be extended to middle management
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Returns to shareholders and GPs
Hypotheses (Mogavero and Toyne, 1995)
Alignment hypothesis
Prearranged severance agreements reduced conflicts
of interest between managers and shareholders
GPs make executives more willing to support
takeover offers beneficial to shareholders
Positive gains to shareholders
Wealth transfer hypothesis
GPs reduce stock values by shifting gains from
shareholders to managers
GPs reduce probability of takeover bids by increasing
costs to bidders
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GPs reduce incentives for executives to manage
firms efficiently
GPs may indicate level of influence of management
over boards
Negative gains to shareholders
Signaling hypothesis
Signal of likelihood of future takeover, which would
be associated with positive gains to shareholders
Signal of increased management influence over
boards, which would have negative implications
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Lambert and Larcker (LL) (1985)
Period 1975-1982
Adoption of GPs resulted in abnormal positive
returns to shareholders = positive 3%
Finding consistent with alignment hypothesis
cost of reducing conflicts of interest between
management and shareholders low relative to
potential gains from takeover premium
Findings consistent with signaling hypothesis
from 1975 to 1982 relatively few firms adopted
GPs, so that GPs could be taken as signals of
likely takeover
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Born, Trahan, and Faria (1993)
Period 1979-1989
Sample firms that announced GPs while in
process of being acquired
There should be no takeover signal effect
No significant abnormal stock returns
Sample firms from 1979 through 1984 not in
process of takeover when GPs adopted
positive stock returns
Combined evidence consistent with takeover
signaling hypothesis, but not with alignment
hypothesis
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Hall and Anderson (1997)
Sample of 52 firms that announced adoption of
GPs during 1982-1990
Adoptions were for new contracts and not
amendments
Firms did not experience pre-existing takeover
bids for three years prior to GP
Mean CAR
Window [-20,+20] = -1.21% (not significant)
Announcement day = 0.46% (not significant)
Window [-5,-2] = -1.19% (significant)
Other event windows were not significant
When three firms were excluded as possible outliers,
for window [-5,0] = -1.29% (significant)
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Mogavero and Toyne (MT) (1995)
Sample of 41 large firms with adoption dates
from 1982-1990
Full sample, CAR = -0.5% not significant
Subsample of 18 firms from 1982-1985,
CAR = +2.3% not significant
Subsample of 23 firms from 1986-1990,
CAR = -2.7% significant
2001 Prentice Hall Takeovers, Restructuring, and Corporate Governance, 3/e Weston - 83
Finding consistent with wealth transfer
hypothesis
Stock returns associated with GPs changed
from positive for 1975-1982 period of LL study
to negative for 1986-1990 in MT
Associated with initiation of legislative restraints on
GPs that may have encouraged boards to adopt
them to avoid further restrictions
Shareholders in later years may have perceived
adoption of GPs as unfavorable signals of
management's ability to control directors in their
interest at expense of shareholders