Summary
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 Covers
situations where a
third party bidder attempts to acquire one of the parties to a pending M&A
transaction
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Recent Competing Offers
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ABN AMRO:
Barclays - Ameristar
Aztar:
Pinnacle - Colony Capital - Ameristar
Guidant:
Johnson & Johnson - Boston Scientific Inamed: Medicis - Allergan ShopKo:
Buyout firms (Sun Capital - Goldner Hawn) Maytag:
Ripplewood - Haier - Whirlpool Unocal:
Chevron - CNOOC (China)
MCI: Verizon - Qwest
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Fiduciary Out - Superior Proposal
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Often
included in M&A agreements
- Contractual fiduciary out in the event that
the target board determines a competing offer
could lead to a superior proposal
- Typically included in deal's no shop covenant
- Typically triggers payment of break-up fee to
original bidder
Lessons
from recent precedent:
- Less than a 10% premium probably isn't a superior proposal
- Especially if original deal has a timing
advantage
- Nominal price alone isn't necessarily determinative
- E.g, larger cap bidders are often favored;
Especially when stock is part of mix of consideration
- But see Revlon Duties
- First bidder gets its break-up fee
Recent precedent:
 Aztar:
- Colony Capital bids 7.9% more than Pinnacle's agreement
- Recent development
3.30.06
- Ameristar bids 10.5% more than Pinnacle's agreement
- Recent development
4.03.06
- AZR - PNK no shop covenant:
- For more information, see
Aztar
Guidant:
- Boston Scientific bid 13% more than J&J agreement
- Accepted by GDT as a superior proposal
1.25.06
- J&J gets $705 million break-up fee
- Followed two rounds of counter-bidding
- BSX bid was supported by
- GDT-J&J no shop covenant:
Inamed:
- Allergan bid 12% more than Medicis agreement
11.15.05
- Target board determined this a superior
proposal
- Medicis had half the market cap of the target
- Allergan had four times the market cap of the
target
- Medicis got its $90mm break-up fee
- IMDC - MRX no shop covenant:
ShopKo
Stores:
SEC_CODE_REF_0090001192884
- Bidding contest between private equity buyers
- Sun Capital bid 10.4% higher than original deal
- Target board determined this could be a superior
proposal
- Led to counter bidding
- Sun Capital won with a bid 20.8% higher than
original deal
- Determined to be a superior
proposal
- Triggered payment of $13.5 mm break-up fee
Maytag:
- Whirlpool's initial competing bid was 21% higher
- Wasn't found a superior proposal
- Situation was complicated by a third competing
bidder
- Whirlpool ultimately bid 50% higher
- Target board determined that to be a superior
proposal
- Triggered payment of $40 mm break-up fee
- MYG - Ripplewood no shop covenant:
- MYG - Ripplewood break-up fee:
Unocal:
- CNOOC (China) made a competing bid that was 8%
higher
- Offer turned out to be a "day late and a dollar
short"
- Offer was only made after
Chevron deal was near closing
- CNOOC bid faced US regulatory delays,
including need for Exon-Florio review
- CNOOC gave no indication it
would raise its offer
- Chevron increased its bid by 1.5%
- Narrowed CNOOC premium to 6.3%
- CNOOC never raised its bid
- Unocal never found CNOOC bid to be a superior proposal
- For more information, see Unocal / Chevron
MCI:
- Qwest got in a bidding war with Verizon
- Qwest repeatedly offered 20%-30% more than
Verizon
- MCI at one point accepted Qwest bid as
superior
- Verizon conceded that 30% more was superior
before rebidding
- Verizon won the bidding with a bid 15% lower than
MCI
- MCI board found Verizon's final bid
to be superior
- MCI - Verizon no shop covenant:
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Older Precedent
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SunTrust
Banks: First Union - Wachovia
- Wachovia had agree to merge with First Union
- SunTrust's interloping bid was unsuccessful
AIG:
American General - Prudential plc (UK)
- AmGen had agreed to sell to Prudential
- AIG's interloping bid was successful
North
Fork: Dime - HUBCO
- HUBCO had agree to merge with Dime
- North
Fork's efforts to acquire Dime broke up that deal
- Dime was subsequently acquired by
Washington Mutual
- HUBCO was later acquired by TD Bank North
Pfizer:
Warner-Lambert - American Home Products
- W-L had agree to merge with AHP
- Maintaining rights to Lipitor drug was
critical motivation for Pfizer
- Pfizer's interloping bid for W-L was successful
- Despite merging parties use of
reciprocal stock-option lock-ups
- AHP's exercise of W-L option would have
precluded Pfizer from using attractive pooling accounting
- AHP got its $1.8 billion termination fee
- W-L merged into Pfizer with
pooling accounting treatment
- Pfizer got an asset lock-up on rights to
Lipitor
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Commentary
Related Topics
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