As the New Year begins, people throughout the world review the past year and make resolutions for 2015. After reviewing some of the unresolved transactions and issues of 2014, the New Year promises unique and interesting legal resolutions. The list of unresolved issues consists of possible friendly transactions, hostile takeovers, and SEC and FTC rulings. Looking ahead, the following transactions and issues promise interesting legal developments in the corporate world.
Family Dollar
The possible Family Dollar acquisition by either Dollar Tree or Dollar General is one such transaction. All three large discount retailers; have been entangled in the possible acquisition of Family Dollar since the summer of 2014. Family Dollar has been considering Dollar Tree’s $8.5 billion proposal for several months despite Dollar General’s higher bid for $9.1 billion. Family Dollar postponed their shareholder vote on the Dollar Tree deal because they did not have enough shareholder votes to approve the deal. Both Dollar Tree and Dollar General are awaiting approval from the Federal Trade Commission for their proposed deals with Family Dollar. Shareholders of Family Dollar have not approved the acceptance of Dollar General’s higher bid because they are concerned that the similar business models of Family Dollar and Dollar General will raise antitrust issues, and that the company will be required to make divestitures before the deal is approved. Divestitures are reductions in the assets that the company owns, meaning that the companies would most likely have to close some stores. However, Dollar General has already pledged to close 1,500 stores in order to eliminate any antitrust issues. Dollar Tree is a smaller competitor of Family Dollar with a different business model and thus fewer antitrust concerns. This issue is ongoing with the most recent shareholders meeting taking place January 22, 2015.
Comcast-Time Warner Merger
Announced on February 13th 2014, the Comcast-Time Warner $45 billion dollar merger is awaiting approval from the Federal Communications Commission. The FCC is considering whether the merger is in the public interest. The Merger is a stock for stock transaction with Comcast acquiring 100 percent of Time Warner’s outstanding shares. In anticipation of any antitrust concerns, Comcast has announced that they would be prepared to make significant divestitures. The FCC’s review of the merger was paused until January 12, 2015 due to delays in retrieving documents from Time Warner. Currently the review is paused on day 104 of the 180 day period of review. This period of review is an informal timeline that the FCC uses to consider applications for complex mergers. The period of review is used to promote transparency and allow for transactions to be reviewed on the FCC’s website. There has been a lot of backlash from rivals and customers who believe that the merger would result in a near monopoly of the cable and Internet market. Customers argue that approval of this merger would result in less consumer choice in choosing their cable and Internet provider. With the review period picking back up on January 12, 2015, we hope that a decision will be made early this year.
Aftermath of Allergan-Valeant
Shareholder activism emerged as an important legal issue during 2014. Shareholder activism is when a person uses their equity stake in a company in order to promote changes in the corporation. For example, Activist Starboard Value was able to successfully unseat all of the directors of Darden. Another example was the Allergen-Valeant/Pershing Square deal, and more specifically, the unique bidder-activist model pursued by Pershing Square and Valeant in 2014. This transaction is different because instead of Pershing Square using their position in the company to promote change, they partnered with Valeant (the bidder) in order to make the unsolicited acquisition stronger. This led to a lawsuit where Allergan alleged that Valeant and Pershing Square’s partnership constituted insider trading under SEC Rule 14e-3. This rule prohibits “fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer.” In November, the Central District of California held that the transactions made prior to the hostile offer by Pershing Square/ Valeant constituted substantial steps towards a hostile takeover. Therefore, Pershing Square/ Valeant possessed nonpublic information and needed to disclose that information prior to their purchase of Allergan Shares. Allergan, Inc. v. Valeant Pharms. Int’l, Inc., 2014 U.S. Dist. LEXIS 156227, 43 (C.D. Cal. Nov. 4, 2014). Since the court held that there was a violation of Rule 14e-3, it is uncertain whether other corporations in their acquisitions in 2015 will use this model again. Shareholder Activism will continue in 2015. Specifically, activist Starboard Value recently has been attempting to persuade Yahoo to buy AOL and to refrain from attempting large acquisitions.
February 4, 2015