On November 7, Salix Pharmaceuticals Ltd., a leading manufacturer of gastrointestinal disorder drugs and devices announced its proposed acquisition of Santarus Inc., a specialty biopharmaceutical company. The all cash acquisition of common stock was offered at $2.6 billion at $32 dollars per stock. According to a press release obtained from the Santarus website, the $32.00 per share price represents an approximately 36% premium over Santarus’ November 6, 2013 closing price of $23.53 per share and an approximately 39% premium over Santarus’ average closing stock price for the prior 30-day trading period. The proposed transaction has been unanimously approved by both the Boards of Directors of Salix and Santarus, and it is expected that the transaction will close in the first quarter of 2014.
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On November 4th, 2013, BlackBerry announced that it would forgo its plan to sell its business. Instead, the company has decided to replace its CEO Thorsten Heins and obtain a $1 billion cash injection from private placement of convertible debentures. The news was followed by another plunge of BlackBerry’s share price – it dropped 16.4% to a price of $6.49, well below the buyout price of $9 a share offered by Fairfax earlier this year. Has the former phone giant lost yet another battle?
After a period of breathtaking growth, China’s biggest e-commerce company, Alibaba, has recently planned its initial public offering. Now the two major U.S. stock exchanges are ready to fight for the right to host. Though it has not been announced yet, Alibaba’s plan to raise $10 to $15 billion will likely overshadow Twitter’s highly anticipated Nov. 15 listing on the New York Stock Exchange. Relatively loose regulations in the United States, in contrast to Hong Kong’s stringent regulations, may be the fundamental factor that contributes to the biggest IPO since Facebook’s rocky debut last year.
Due in large part to the $9.2 billion it set aside to cover mounting legal expenses, JPMorgan Chase, the nation’s largest bank, suffered its first quarterly loss under CEO Jamie Dimon. JPMorgan reported a loss of $380 million, or 17 cents per share for the third quarter, compared with a profit of $5.71 billion, or $1.40 per share just a year earlier. This cast a somber tone for the unusually humble Dimon, stating that the loss was “very painful for me personally.”
Maurer v. Maurer, 2013 NCBC 44, is a continuation of several Business Court opinions (2005 NCBC 1, 2005 NCBC 4, and 2006 NCBC 1), which involves extensive litigation between Jill L. Maurer (“Ms. Maurer”) and SlickEdit Inc., a software corporation owned by her and her husband, Joseph Clark Maurer (“Mr. Maurer”). In Maurer v. Maurer, a North Carolina superior court found that there is no special fiduciary duty in favor of one fifty percent owner against a fellow fifty percent owner who has effective control.
The allegations arose after the conversion of SlickEdit Inc., into a Subchapter “S” corporation in May 2008. Ms. Maurer and Mr. Maurer, former spouses, each held fifty percent of issued and outstanding shares in the corporation. Ms. Maurer brought individual claim action for breach of fiduciary duties against Mr. Maurer, the sole director, Chief Executive Officer, President and Corporate Secretary of SlickEdit Inc. She alleged that Mr. Maurer abused his control by operating and implementing an overall system designed to exclude her from any knowledge of or participation in corporate affairs despite her equal ownership in the corporation. The Amended Complaint included, inter alia, allegations that Ms. Maurer was precluded from voting in a fair election of directorsand that she had been denied access to details of SlickEdit’s plans, operations, and financials and other corporate books and records.
In an “unprecedented” case, the issue before the court was whether it could extend the line of appellate cases to impose a fiduciary duty in favor of one fifty percent owner against the other fifty percent owner who had effective control.
One of the biggest recent deals in the mobile phone market reveals a curious case of misleading information about Nokia’s former Chief Executive Officer, Stephen Elop, and Microsoft’s “acquisition” of its possible future CEO.
Nokia’s Chairman Risto Siilasmaa announced that Mr. Elop’s service contract with Nokia had “essentially the same” bonus structure as the one of its previous CEO. However, the Finnish Newspaper “Helsingin Sanomat” searched SEC filings and uncovered evidence that fundamental changes to the referred service contract were implemented in 2010.
As a result, Mr. Siilasmaa was later forced to correct the previous information and announced that Mr. Elop’s contract also contained an immediate share price performance bonus, which would be paid in case of a “change of control” situation.
The chain of events that would trigger Mr. Elop’s payout seemed unlikely to happen at the time of the change in his contract. Microsoft’s €5.44billion purchase of Nokia mobile phone business changed this scenario. The deal triggered the “change of control situation” in Mr. Elop’s contract, entitling him to a payout of approximately US$25million.
The trial for United States v. Apple Inc. begins on June 3rd, with some saying that the case will “effectively set the rules for internet commerce.” The Government alleges that Apple conspired with five publishing companies to increase prices while simultaneously plotting to increase market share vis-à-vis Amazon. The five publishing companies originally named in the suit have since reached a settlement with the Justice Department in which they will pay a collective $164 million to recompense consumers harmed by the price-fixing scheme. Read the rest of this entry »
In Carsanaro v. Bloodhound Technologies, Inc., the Vice Chancellor of the Delaware Court of Chancery held that stock dilution claims can be direct when there is a breach of the duty of loyalty by the rest of the board. This decision expands stockholder’s rights to bring claims since derivative claims can only be brought in the name of a corporation and are subject to stricter pleading rules.
Carsanaro also helps reconcile the distinction between direct and derivative claims. Previously, the two main tests came from Tooley and Gentile. Under Tooley’s special injury test, the stock dilution claim can be both derivative and direct; however, the Gentile decision takes the traditional view that stock dilution is characterized as a derivative claim. Read the rest of this entry »
Last year the $25 billion National Mortgage Settlement meant to end mortgage servicing abuses was announced by federal and state officials; however, there is mounting evidence that not all the involved banks are living up to their commitment. The five banks involved with the settlement are Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and Ally Financial Inc. In a recent letter, New York Attorney General Eric Schneiderman claims that Bank of America and Wells Fargo are violating the terms of the settlement. Schneiderman states that the two banks have committed a combined 339 violations of servicing standards, including deliberate delays by Wells Fargo and Bank of America to reviewing loan modification applications, a practice reminiscent of the “same misconduct that precipitated the National Mortgage Settlement.” Schneiderman has plans to sue both banks for failing to uphold their obligations under the settlement. However, in a letter to Schneiderman, Bank of America responded that they cannot be sued since they have not been given ample time to remedy their alleged violations. Both Bank of America and Wells Fargo say they remain committed to the terms of the settlement and deny that they have committed violations.
According to a recent story published by Corporate Crime Reporter, the proxy advisory services firm Institutional Shareholder Services (ISS) was fined by the SEC for failing to prevent one of its employees from distributing confidential material. In exchange for information revealing how more than 100 ISS institutional shareholder advisory clients were voting their proxy ballots, the employee, who no longer works at ISS, received expensive tickets to concerts and sporting events, meals, and an airline ticket. The SEC investigation revealed that ISS lacked sufficient controls over access to confidential client vote information, allowing for the employee to gather the data. As a result of the failure of ISS to protect its confidential information, the SEC has required ISS to pay a $300,000 penalty and allow for an independent compliance consultant to review its procedures and ensure they comply with the Investment Advisers Act’s requirements for treatment of confidential information.
More is better – or so it’s said. That’s bad news for Dell stockholders, as the Blackstone Group has dropped its bid for the company. Blackstone had not formally announced an offer to compete with the $13.65 per share Michael Dell hopes will take the company private. Through the due diligence process, Blackstone became unsatisfied with the world’s third-largest PC maker’s rapidly-atrophying marketshare—notably including a 14% decline in PC volume during 2013 Q1. With Blackstone out, the activist investor Carl Icahn is the only likely competitor. Mr. Icahn has preliminarily discussed a $15-per-share offer, but has not yet put it on the table. For more, see NYTimes and Business Insider.
AIG v. BAC is headed to New York state court. American International Group’s $10 billion lawsuit against Bank of America, filed in August 2011, alleges “fraudulent misrepresentations” regarding $28 billion in residential MBSs (mortgage-backed securities) which resulted in heavy losses for the insurer. The merits of the case have been stalled as each side has jockeyed for jurisdictional advantage. The Second Circuit Court of Appeal ruled this morning that the lower court had improperly denied AIG’s motion the case to state court. For more, see Reuters.