16 September 2011

A hostile few quarters

Recent months have seen a number of companies announce hostile or unsolicited takeovers. Indeed, the third quarter of 2011 may not have ended, but with 14 such transactions already reported it is the busiest quarter in two years.

Q2 2011 had the highest aggregate deal value for hostile and unsolicited approaches since Q2 2007; at USD 27.86 billion, the transactions are worth more than 48 times Q1 2011’s total of USD 575.00 million and over ten times those of the same period in 2010.

When Volkswagen launched a public takeover offer for German transport engineering group MAN worth EUR 9.71 billion in May, the approach turned out to be the largest hostile takeover bid of 2011 to date after the target’s directors said it was insufficient and they would not be recommending it to stockholders.

Stock exchange operators Nasdaq OMX and IntercontinantalExchange announced their intention to make a hostile offer for NYSE Euronext the same month, although they withdrew less than a fortnight later after talks with the US Department of Justice’s antitrust division. That deal would have been priced at around USD 11.12 billion.

Other notable hostile bids include Validus Holding’s USD 3.48 billion plan to buy Transatlantic Holdings – the target’s management opted to back a superior rival approach by Allied World – and a USD 3.31 billion offer for corrugated packaging concern Temple-Inland from International Paper Company. The latter has just been upped to USD 3.48 billion: it remains to be seen if directors will be swayed into supporting a deal.

A number of businesses have also been prompted to look into strategic reviews by zealous shareholders recently. Last week Canadian merchant bank and activist investor Jaguar Financial declared it was urging the directors of Blackberry developer Research In Motion to find ways to maximise stockholder value in the week’s largest rumour. Jaguar said the process should consider a sale of the company - which had a market cap of CAD 15.51 billion (USD 15.67 billion) at the time of the announcement - or spinning out its patent portfolio.

Billionaire Carl Icahn was also implicated in a takeover, when in July Californian metal products manufacturer Commercial Metals Company stated it was planning to look into strategic alternatives after he took a stake of just under 10.0 per cent. Just days later Commercial Metals announced it had adopted a shareholder rights plan with a threshold of 10.0 per cent, indicating any takeover approach would be a hostile one.

However, not all activist shareholder activity has been troublesome. Icahn called an end to the power struggle for Canadian entertainment corporation Lionsgate at the end of last month when he agreed to sell stocks in the business. The move means that litigation between the parties which has been in progress for some years now is finally over. 

© Zephyr