Academic Paper on Proxy Fights and Tender Offers

[Panpan Wang]

A little dense, but interesting reading related to this week's case. http://www.economics.harvard.edu/faculty/hart/files/proxyo.pdf

Abstract:

This paper evaluates the primary mechanisms for changing management or obtaining control

in publicly traded corporations with dispersed ownership.  Specifically, we analyze and compare

three mechanisms: 

(1) proxy fights (voting only); 

(2) takeover bids (buying shares only); and 

(3) a combination of proxy fights and takeover bids in which shareholders vote on acquisition offers.  

We first show how proxy fights unaccompanied by an acquisition offer suffer from substantial

shortcomings that limit the use of such contests in practice. We then argue that combining voting

with acquisition offers is superior not only to proxy fights alone but also to takeover bids alone.

Finally, we show that, when acquisition offers are in the form of cash or the acquirer’s existing

securities, voting shareholders can infer from the pre-vote market trading which outcome would be

best in light of all the available public information.  Our analysis has implications for the ongoing

debates in the US over poison pills and in Europe over the new EEC directive on takeovers.

[Peter Goodson]

Great read

 

 

 

Peter Goodson

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