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Approval by the shareholders of a merger, reorganization, or consolidation if more than 60% of the company will now be owned by what were previously non-shareholders (i.e. Under Delaware law, boards must engage in defensive actions that are proportional to the hostile bidder's threat to the target company. In a reverse takeover the shareholders of the company being acquired end up with a majority of the shares in, and so control of, the company making the bid. "Mergers, Acquisitions, and Takeovers: The Takeover of Cadbury by Kraft," Page 3. Therefore, it is in most cases important for a board to develop credible alternatives to the hostile bidders offer. Accessed Dec. 8, 2021. The Comeback of Hostile Takeovers - The Harvard Law School Forum on Circuit Court of Appeals for the District of Columbia, Thomas should have recused himself in a case involving a company in which his former boss . The only shareholder excluded from these new shares is the entity attempting to acquire the company. (This is nevertheless an excellent bargain for the takeover artist, who will tend to benefit from developing a reputation of being very generous to parting top executives.) In such a case, the acquiring company would only need to raise 20% of the purchase price. U.S. Securities and Exchange Commission. Existing stakeholder(s) (equity or debt) may be able to levera. The target company's management does not approve of the deal in a hostile takeover. A reverse takeover is a type of takeover where a public company acquires a private company. [1] A takeover is considered hostile if the target company's board rejects the offer, and if the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. For example, in 1988, there were no less than 160 unsolicited takeover bids for U.S. companies. Types of Takeover Bids. The strategy worked, and nine months after the first proposal, Sanofi-Aventis bought Genzyme in a $20.1 billion cash offer. Genzyme produced drugs for the treatment of rare genetic disorders and Sanofi saw the company as a means to expand into a niche industry and broaden its product offering. One reason for an acquiring company to target another company in a hostile takeover is to use the acquisition to obtain valuable technology or research. It allows existing shareholders to buy newly issued stock at a discount if one shareholder has bought more than a stipulated percentage of the stock, resulting in a dilution of the ownership interest of the acquiring company. Posted by Kai Liekefett, Sidley Austin LLP, on, Harvard Law School Forum on Corporate Governance, The Case Against Board Veto in Corporate Takeovers, Toward a Constitutional Review of the Poison Pill.