Preguntes referents al procés de matematització

From 1982 to 1989, at least 34 states passed anti-takeover laws in response to intense lobbying by companies incorporated in the state, which claimed to be under the threat of takeovers and sought to adopt a protective statute. They threatened that if such a protective anti-takeover law was not passed, they would reincorporate in states that did have one.269 _{Political pressure has also played an important role in the state legislatures} because of the fact that takeovers launched by a raider from outside the state will mean a significant loss of jobs in the company taken over, as well as the loss of community support by the local companies, such as charitable donations.270 Indiana, for example, enacted its first anti-takeover statute mainly aiming to protect Arvin Industries against the Belzberg family, which employed some 2000 employees in Indiana and provided substantial support to local schools.

These anti-takeover laws may take various forms, but their purpose is the same: to help local companies fend off hostile takeovers and make themselves more difficult to be taken over, especially by those from other states.271 As White has observed, although there are variations among the states’ anti-takeover statutes, the standard for regulating and reviewing hostile takeover activity is largely uniform across the states.272 The state anti-takeover laws have gone through three generations of development, with different devices adopted by different states to protect their local companies and challenge hostile bidders.

269 _{For example, the Pennsylvania anti-takeover law was passed partly as a result of the pressure from Armstrong World}

Industries of Lancaster, Pennsylvania, which feared being taken over by the Belzberg family of Canada. Dayton- Hudson and Boeing promoted anti-takeover laws in Minnesota and Washington respectively, while Harcourt Brace Jovanovich and Gillette promoted control share statutes in Florida and Massachusetts respectively.

270 _{Kenyon-Slade (n51) 139.} 271 _{Gaughan (n30) 13.} 272 _{White (n28) 178.}

2.1.1 First Generation

Shortly after the passage of the Williams Act, a wave of state anti-takeover laws emerged to give the directors of target companies powers beyond those of the Williams Act to resist hostile bids. These statutes imposed certain procedural and substantive requirements on the bidders with the aim of creating substantial obstacles for takeover bids.273 _{The problem with these ‘first-generation’ state anti-takeover laws was that they} gave state administrators the power to review offers on various grounds, such as substantive fairness and the adequacy of disclosures.274 By holding a hearing to review the offers, it largely imposed delay between when an offer was filed and when it became effective.275 Moreover, these statutes attempted to govern tender offers made for firms incorporated in other states and were argued to be unfair to bidding companies.276 _Thus, these statutes ultimately led to a judicial review and they were declared by various federal courts to be unconstitutional on the grounds that they interfered either with interstate commerce or with the federal supremacy of the Williams Act.

Edgar v MITE Corp.

In the famous case of Edgar v MITE Corp,277 the US Supreme Court ruled that the Illinois Business Takeover Act was unconstitutional under the dormant Commerce Clause of the United States Constitution. The Illinois law required bidders to notify the target company and the Illinois Secretary of State twenty days before the offer became effective, and permitted the Secretary to block a nationwide tender offer for a state-affiliated target corporation if the bidder failed to comply with the disclosure laws of Illinois. It also

273 _{Armour and Jacobs and Milhaupt (n132) 254.}

274 _{Stephen M. Bainbridge, Mergers and Acquisitions (2}nd _{edn, Foundation Press 2008) 252.} 275 _{Magnuson (n265) 217.}

276 _{Patrick A. Gaughan, Mergers, Acquisitions, and Corporate Restructurings (John Wiley & Sons 2007) 37.}

required the Secretary to hold a hearing at the request of shareholders owning at least 10% of the securities subject to the offer. The Supreme Court ruled that Illinois gave its resident shareholders ‘speculative protections’ and ‘had no legitimate interest in protecting non-resident shareholders’ or in ‘regulating the internal affairs of a foreign corporation’.278

The challenge to the Illinois law made other states which had enacted similar anti- takeover laws to question their constitutionality and revise their provisions. However, belief that hostile takeovers were not in the best interest of the states was unchanged, and in order to continuously impede hostile takeovers, they had to seek a different approach to avoid the constitutional problems in Edgar v MITE Corp.279 This paved the way for a second wave of state anti-takeover statutes.

2.1.2 Second Generation

The second generation state anti-takeover laws emerged in response to the lesson of first generation laws, and relatively narrowed their protection range. They tended to apply only to target companies that were incorporated within the state or that conducted a substantial part of their business activities within state boundaries. They were not directed at regulating disclosure in tender offers, as the first generation laws were. Instead, under the ‘internal affairs doctrine’, they focused on issues of corporate governance of companies incorporated in a specific state, which successfully avoided the constitutional conflict of the first generation because internal affairs traditionally are governed by the corporation law of the chartering state.

278_{Edgar v MITE Corp 457 US 624 (1982), 644.}

The primary objective of the second generation anti-takeover statutes was to protect target shareholders from coercive takeovers.280 These second generation statutes took several different forms. The earliest form is the so-called ‘Fair Price’ statute, which typically required certain specified transactions (including back-end freezeout mergers and second- step business combinations) with ‘interested shareholders’ (typically a shareholder holding more than 10 or 20%) to be approved by a supermajority of shareholder votes unless they all received the highest price paid by the offeror.281 In a later form, the ‘Control Share Acquisition’ statutes provided that a bidder would not have voting rights upon reaching a certain controlling percentage of the target’s voting power (for example, 20-33.3%, or 33.3-50%, or over 50%), unless this voting power was expressly conferred by the affirmative vote of a majority of the target ‘disinterested’ shareholders (of the shares not owned by the bidder).

CTS Corps v Dynamics Corporation of America

In the case of CTS Corps v Dynamics Corps of America, 282 the CTS Corporation fought off a takeover by the Dynamics Corporation based on the Indiana law which required the disinterested shareholders to determine in a shareholders’ meeting whether an acquirer owning more than 20% of outstanding shares would have voting rights to the shares he held. Dynamics challenged the Indiana law by contending that it was unconstitutional on the grounds that it was pre-empted by the Williams Act and violated the Commerce Clause. The court ruled that the Indiana anti-takeover law was constitutional by denying

280 _{Kenyon-Slade (n51) 176.}

281_{See Conn. Gen. Stat. Ann. ss 33-840 to 33-842.}

the existence of ‘an interstate market for corporate control’ protected by the Commerce Clause.283

The CTS decision, giving the Supreme Court’s approval to the second-generation state anti-takeover laws by holding that they were not pre-empted by federal law, was regarded as a sign of a less enthusiastic attitude towards the social benefits that a takeover could bring in the US.284 _{Within a short period of time after the CTS decision of 1987, more} than 40 states enacted various types of anti-takeover law, attempting to take advantage of the new Supreme Court decision.285 As Armour et al have claimed, most hostile offers in the US are now potentially subject to regulation under the second generation anti- takeover statutes.286

2.1.3 Third Generation

There then developed a third generation of anti-takeover laws, enacted from the end of the 1980s, intending to prohibit certain post-bid transactions. The best known are the ‘Business Combination’ statutes which prohibit an ‘interested shareholder’ who has obtained a certain percentage of the target company’s voting right (such as 15% or more) from taking any post-acquisition ‘business combination’ transactions, such as back-end freezeout mergers in the case of a hostile takeover, for a specified period of time (such as five years) following the date on which such person becomes an interested shareholder, unless the business combination transaction was approved by the target board of directors

283 _ibid94.

284 _{Leo Herzel and Richard W. Shepro, ‘Ups and Downs of US Takeover Defense’ (1988) 9 Company Law 84, 84.} 285 _ibid.

or a supermajority of disinterested shareholders, or met specified price and other conditions.287

Amanda Acquisition Corporation v Universal Foods Corporation

In Amanda Acquisition Corp v Universal Foods Corp, 288 the Amanda Acquisition Corporation, a subsidiary of the Boston-based High Voltage Engineering Corporation, launched a tender offer to acquire all the outstanding shares of Universal Foods, a Wisconsin corporation. It was prevented from proceeding by the Wisconsin Business Combination Act which requires a bidder who acquires 10% or more of a target company’s voting share to receive the approval of the target board of directors or wait three years to complete the merger. Amanda Acquisition claimed that the Wisconsin law was pre-empted by the Williams Act and inconsistent with the Commerce Clause. The Seventh Circuit Court of Appeals denied both arguments and upheld the constitutionality of the Wisconsin anti-takeover law. In November 1989, the Supreme Court refused to hear a challenge to the Wisconsin anti-takeover law, which further confirmed the legal viability of state anti-takeover laws. Business Combination statutes, regarded as the most sophisticated form of anti-takeover statute, have been enacted in most of the states today.289