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Going Private. - Product Image

Going Private.

  • Published: April 2014
  • Region: Global, United States
  • 1106 Pages
  • ALM Media, LLC

Whether your transaction is completed by LBO, merger, sale or reverse stock split, Going Private provides the practical and thorough analysis you need to help it survive scrutiny under governing legal standards.

Going Private offers pointers on structuring the transaction, preparing the proxy statement and Schedule 13E-3, and defining the roles of the board of directors and committees, independent directors, attorneys, and financial advisors. In addition, it analyzes the entire fairness rule and shifting the burden of proof, state anti-takeover legislation, leveraged buyouts, fairness opinions, squeeze-outs, restructurings, going dark, and the applicability of the business judgment rule to hostile bids for control. The book also provides charts of the principal terms of recent merger and acquisition transactions, and discusses the impact of recent court decisions relating to material adverse change clauses and acquisitions.

CHAPTER 1
Introduction: Definitions and Policy Background
- 1.01 Subject Matter
- 1.02 Definition of a “True” Going Private Transaction
- 1.03 Squeeze-Outs
- 1.04 Second and Third Step Take-Outs
- 1.05 Technical Going Private Transactions
- 1.06 Definition of Neutralized Voting
- 1.07 The Policy Background

CHAPTER 2
A Brief History of the Going Private Issue
- 2.01 The Beginning
- 2.02 Early Cases
- 2.03 The Opening Gun: Bryan v. Brock & Blevins Co., Inc.
- 2.04 Commissioner Sommer's Notre Dame Speech
- 2.05 The 1975 SEC Proposals
- 2.06 The Mid-1970s: Writers and Courts Ponder While Issuers Merge
- 2.07 An Aside on Professor Cary and the Airlie House Symposium
- 2.08 The 1977 Proposal
- 2.09 Subsequent Judicial History: Green, Singer, and Weinberger
- 2.10 Rule 13e-3
- 2.11 Commissioner Longstreth's Toronto Speech
- 2.12 The Rise of the Leveraged Buy-Out
- 2.13 The Effect of the Sarbanes-Oxley Act
- 2.14 Summing Up

CHAPTER 3
State Law: The Statutory Framework for Going Private Transactions; Leveraged Buy-Outs
- 3.01 In General
- 3.02 Forms of Transactions: Cash Transactions
[1] The Tender Offer Alternative
[2] Merger
[3] Reverse Stock Split
[4] Asset Sale and Dissolution Combinations
[5] Leveraged Buy-Outs (LBOs)
[6] ESOP Leveraged Buy-Outs
- 3.03 Non-Cash Transactions
- 3.04 Varieties of Merger Types
- 3.05 Appraisal Rights
[1] Availability of Appraisal
[2] Measure of Value
[3] Procedure
[4] Exclusivity of Appraisal Rights in Short-Form Merger
- 3.06 State Anti-Takeover Statutes
[1] Introduction
[2] Relevance to Going Private Transactions
[3] Control Share Acquisition Statutes
[4] Business Combination Statutes
- 3.07 State Going Private Rules
- 3.08 Summary of Formats

CHAPTER 4
Going Private Issues Under State Law
- 4.01 In General
- 4.02 Failure to Distinguish the Categories of Cases
- 4.03 Defining the Issues: Significance of Delaware Cases
- 4.04 Singer v. Magnavox: “Business Purpose” and “Entire Fairness”
- 4.05 Weinberger: Setting the Standard
[1] What Happened in Weinberger
[2] The Weinberger Decision
- 4.06 The Basic Weinberger Standard
[1] When the Rule Applies
[2] “Entire Fairness”
[3] Entire Fairness Does Not Require a Business Purpose
[4] Application of the Weinberger Standard Where There is a Majority Stockholder
[5] Application of the Standard in the Absence of a Majority Stockholder
[6] Avoiding "Entire Fairness" Review Through Procedural Protections
- 4.07 How to Plead a Weinberger Cause of Action: Judicial Review Versus Appraisal
[1] The Basic Issue
[2] Will Allegations of Unfairness Always Require Judicial Review?: Pleading a Weinberger Cause of Action: Some Examples
[3] Suing for Both Weinberger Relief and Appraisal: The Cede Case
[4] The Weinberger Grandfather Rule
- 4.08 Burden of Proof in a Weinberger Case
[1] In General
[2] Effect of Neutralized Voting
- 4.09 Available Relief in a Weinberger Court Case and in an Appraisal Proceeding: Standard of Value
[1] Weinberger: “Fair Value” in an Appraisal
[2] Weinberger: Damages in a Court Proceeding
[3] Comparing the Remedies
[4] Minority Discounts and Control Premiums
[5] Breach of Fiduciary Duty and Fraud
[6] Appraisal Proceedings
- 4.10 Cinerama, Inc. v. Technicolor, Inc.
[1] Entire Fairness
[2] Duty of Loyalty
[3] No Duty to “Shop” the Corporation
[4] Cleansing Vote
- 4.11 Exclusivity of Appraisal Rights
[1] Fairness Review
[2] Interests of Common Stock
[3] Rights of the Preferred Stockholder: Certificate of Designation
- 4.12 Three More Delaware Rules: Business Judgment, Unocal and Revlon
[1] In General
[2] The Business Judgment Rule
[3] Unocal
[4] Revlon
[5] Lock-Ups and Leg-Ups Generally
- 4.13 The Role of Independent Directors
[1] Significance of Independent Directors
[2] Conduct of Independent Directors: Duty of Care
[3] Conduct of Independent Directors: Duty of Loyalty/Good Faith
[4] Defining Independence
[5] Reviewing Special Litigation Committee Recommendations
- 4.14 Fairness Opinions in Corporate Control Transactions
[1] In General
[2] The Smith v. Van Gorkom Decision
[3] Criticism of Fairness Opinions
[4] Investment Bank Liability in Connection with Fairness Opinions
- 4.15 Financial Advisers (“Bankers”)
[1] In General
[2] Duty to Disclose to the Investment Banker
[3] Bankers Performance of Their Duties
[4] Independence
[5] Liability
- 4.16 Short-Form Mergers and the Singer Rule
- 4.16A Post Closing Adjustments
- 4.17 The New York Cases
[1] In General
[2] The Business Purpose Doctrine
[3] The Weinberger Cause of Action in New York
[4] Election of Remedies
[5] The Martin Act
[6] Structure of the Transaction

CHAPTER 5
Anti-Fraud Strictures of Federal Securities Law
- 5.01 In General
- 5.02 The Federal Anti-Fraud Statutes: Initial Expectations
- 5.03 The Federal Courts Begin to Look at the Issue
- 5.04 Marshel and Green in the Second Circuit
- 5.05 Green in the Supreme Court
- 5.06 Federal Anti-Fraud Statutes: Claims Cut Down by Green v. Santa Fe
- 5.07 Does Rule 10b-5 Ride Again?
[1] The Parklane Decision
[2] The “Sue Fact” Doctrine

CHAPTER 6
Tax Aspects
- 6.01 Introduction
- 6.02 Forms of Transactions
- 6.03 Transactions Taxable to Outside Shareholders (but Not to Target)
[1] In General
[2] Purchase of Target Shares by Acquiring
[3] Purchase of Target Stock in a Reverse Cash Merger
[4] Redemption
- 6.04 Transactions That Result in Recognition of Gain by Both Target and its Shareholders
[1] In General
[2] Asset Sales
[3] Forward Cash Mergers
- 6.05 Transactions Not Taxable to Outside Shareholders
[1] In General
[2] Tax-Free Mergers
[3] Tax-Free Recapitalizations
- 6.06 Choice of Entity
[1] In General
[2] Consequences of Using a C Corporation in a Going Private Transaction
[3] Consequences of Using an S Corporation in a Going Private Transaction
[4] Consequences of Using an Entity Treated as a Partnership for Federal Income Tax Purposes in a Going Private Transaction
[5] Going Private Transactions Involving Private Equity
- 6.07 Financing the Going Private Transaction
[1] In General
[2] Original Issue Discount (“OID”)
[3] Debt/Equity Recharacterization
[4] ESOPs
[5] Other Tax Issues

CHAPTER 7
Business Background
- 7.01 In General
- 7.02 Why the Price Tends to Rise
- 7.03 Facing Up to a Lawsuit
- 7.04 Professional Fees and Other Expenses of the Transaction
[1] Legal Fees
[2] Accounting Fees
[3] Financial Adviser Fees
[4] Financial Commitment Fees
[5] Printing Costs
- 7.05 Margin Rules
- 7.06 Going Private Transaction Timetable and Responsibility Checklist

CHAPTER 8
Basic Structural Features: Legal Precepts in Practice
- 8.01 The Essentials
- 8.02 Fair Pricing
[1] Issues
[2] Some Practical Advice for the Lawyer
- 8.03 The Role of Independent Directors
[1] In General
[2] Seven Golden Rules for Independent Directors
- 8.04 The Role of Independent Financial Advisers
- 8.05 Neutralized Voting
[1] Significance
[2] Techniques of Neutralized Voting

CHAPTER 9
Engaging Counsel and Financial Advisers
- 9.01 The Counsel Problem: Who Is, or Should Be, Acting for Whom?
- 9.02 Financial Advisers
[1] In General
[2] Fixing or Confirming the Price
[3] Qualification and Disqualification
[4] Hiring
[5] What Financial Advisers Do
[6] Negotiating the Engagement Letter
- 9.03 Financial Advisers' Opinion Letters
[1] In General
[2] Form of Financial Advisers' Opinions
[3] Financial Advisers' Opinions: Contents
- 9.04 Who Should Pay the Professionals?

CHAPTER 10
An Analysis of Rule 13e-3 and the General Provisions of Schedule 13E-3
- 10.01 In General: Scope of Discussion
- 10.02 Summary of the Rule
- 10.03 Coverage of the Rule: Definition of a Rule 13e-3 Transaction
[1] The Structure Test
[2] Effects Test and “Series of Transactions” Concept
- 10.04 Exceptions to Coverage
[1] Clean-Up Transactions
[2] Issuing Equity Securities: The (g)(2) Exception
[3] Additional Technical Provisions
- 10.04A A Possible Exemption for Transactions Under Section 3(a)(10)
[1] Section 3(a)(10)
[2] The Brucker Case
[3] The Commission
[4] The Courts' Fairness Determination of Section 3(a)(10)—Exempt Going Private Transactions
[5] A Possible Exemption Under Section 12(h) of the Exchange Act
[6] How a Settlement May Meet the Requirements of Section 3(a)(10)
- 10.05 When the Rule Bites: The Most Common Issues
- 10.06 Filing Requirements
[1] Filing Requirements Where a Disclosure Document Is Otherwise Required
[2] Filing Requirements Where a Disclosure Document Is Not Otherwise Required
[3] Form of Schedule 13E-3 to Be Filed
[4] Fairness Opinions
- 10.07 Dissemination Requirements
[1] Timing of Dissemination Where There Is an Otherwise Required Disclosure Document
[2] Timing of Dissemination Where There Is Not an Otherwise Required Disclosure Document
[3] To Whom Dissemination Is to Be Made
[4] Information Required to Be Distributed Under the Proxy Rules
- 10.08 Disclosure
[1] General Requirement
[2] Application of Other General Rules
- 10.09 Schedule 13E-3
[1] Who Files Schedule 13E-3?
[2] Compliance with the Schedule (Other Than Items 7, 8, and 9)
[3] A 13e-3 Transaction in the Context of Settlement of Litigation
[4] A 13e-3 Transaction in the Context of a Merger
[5] A Second 13e-3 Transaction in the Context of a Merger
- 10.10 The SEC's Plain English Initiative
- 10.11 SEC Adoption of the Regulation M-A Release
[1] Reduction of the Timing Advantage of Cash Tender Offers over Stock Tender Offers
[2] Tender Offer Rules Updated

CHAPTER 11
The Fairness Disclosure Standard of Rule 13e-3
- 11.01 What Is Fair?
- 11.02 Required Fairness Disclosures
- 11.03 The Courts and the SEC Expound on Fairness
- 11.04 Concerning “Purpose”

CHAPTER 12
Fairness Disclosure Items: Analysis and Examples
- 12.01 Methods of Presentation
- 12.02 Item 7: Purposes, Alternatives, Reasons and Effects
- 12.03 Item 1013(a) of Regulation M-A: Purposes
[1] In General
[2] Analysis and Examples
- 12.04 Item 1013(b) of Regulation M-A: Alternatives
- 12.05 Item 1013(c) of Regulation M-A: Structure
- 12.06 Item 1013(c) of Regulation M-A: Timing
- 12.07 Item 1013(d) of Regulation M-A: Effects
- 12.08 [Reserved]
- 12.09 Item 1014 of Regulation M-A: Fairness of the Transaction
- 12.10 Item 1014(a) of Regulation M-A: Reasonable Belief
- 12.11 Item 1014(a) of Regulation M-A: Abstaining or Dissenting Directors
- 12.12 Item 1014(b) of Regulation M-A: Material Factors in Fairness Evaluation
[1] In General
[2] Liquidation Value
- 12.13 Item 1014(c) of Regulation M-A: Neutralized Voting
- 12.14 Item 1014(d) of Regulation M-A: Advisers for the Independent Directors
- 12.15 Item 1014(e) of Regulation M-A: Approval by Independent Directors
- 12.16 Item 1014(f) of Regulation M-A: Other Firm Offers
- 12.17 Item 1015 of Regulation M-A: Reports, Opinions, Appraisals and Certain Negotiations
- 12.18 Item 1015(a) of Regulation M-A: Disclosable Reports
- 12.19 Items 1015(b) and 1015(c) of Regulation M-A: Details of the Outside Report
- 12.20 Contents and Form of a Schedule TO Tender Offer Statement as Required Under Sections 14(d)(1) or 13(e)(1)

CHAPTER 12A
Going Dark
- 12A.01 In General
- 12A.02 Some Considerations in Going Dark
- 12A.03 How to Go Dark
[1] Under 300/500 Holders of Record
[2] Over 300/500 Holders of Record
[3] Reverse Stock Splits
[4] Issuer Self-Tender Offers
- 12A.04 Over the Counter Market
- 12A.05 Form: SEC Form 15
- 12A.06 Form: SEC Form 25
- 12A.07 Press Release Examples

CHAPTER 13
Managing a Going Private Transaction: What Happens When
- 13.01 Starting Out
[1] Should the Transaction Begin with a Price Proposal?
[2] Contingent Cash Payment
[3] Winging It Alone v. Utilizing a Financial Adviser
- 13.02 The First Board Meeting
- 13.03 The First Press Release
- 13.04 The Busy Independent Directors
- 13.05 The Second Board Meeting: Voting
- 13.06 Subsequent Sale Protection
- 13.07 The Rival Offer

CHAPTER 13A
Analysis of a Going Private Transaction
- 13A.01 Introduction
- 13A.02 Rationale for the Offer
- 13A.03 Submission of the Offer by the Proponent
- 13A.04 Formation of the Special Committee
- 13A.05 Advisers to the Special Committee
- 13A.06 Duties and Functions of the Advisers to the Special Committee
[1] In General
[2] Selection of Legal Counsel
[3] Engagement of the Financial Adviser
- 13A.07 Valuation of the Company by the Financial Adviser
[1] Valuation Analysis of the Company
[2] Negotiation of the Proponent's Offer
[3] The Final Offer and the Decision to Proceed
- 13A.08 Structure of the Transaction
- 13A.09 Aspects of the Merger Agreement
[1] In General
[2] The No-Shop Clause
[3] The Break-Up Fee
- 13A.10 Neutralized Voting
- 13A.11 Securities Law Compliance

CHAPTER 14
Closing and Post-Closing Matters
- 14.01 Introduction
- 14.02 Closing Aspects
[1] Stock Transfer
[2] Escheat
[3] Appraisal Rights
[4] Conducting the Meeting
- 14.03 Final Amendment to Schedules 13E-3 and TO
- 14.04 Terminating Filing Requirements

CHAPTER 15
Tender and Exchange Offers in Going Private Transactions
- 15.01 Introduction
- 15.02 What Rule Applies to Which Issuer
- 15.03 An Overview of Rule 13e-4
- 15.04 An Overview of Tender Offer Mechanics
[1] Timing
[2] Proration
[3] Withdrawal Rights
[4] Disclosure
- 15.05 A Possible Exception Under Section 3(a)(10)

CHAPTER 16
A Litigation Postscript
- 16.01 Timing and Nature of Complaints
- 16.02 Defensive Strategies
- 16.03 Settlements
- 16.04 Private Right of Action Under Section 13(e)
- 16.05 Litigation Over Merger Agreements

APPENDICES
Table of Cases
Index

Joel Yunis

Joel A. Yunis, a graduate of New York University Law School, is a partner in the New York firm of Katten Muchin Rosenman LLP, where he specializes in acquisitions, financings and securities law matters.

Arthur M. Borden



Arthur M. Borden (deceased), a graduate of Yale University and Columbia Law School, was a partner and was then Of Counsel to the New York firm of Katten Muchin Rosenman LLP. Mr. Borden was an Adjunct Professor of Law at New York Law School and wrote numerous articles on securities matters.

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