update pp takeover

7/30/2019 Update Pp Takeover

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Take Over Defenses

Citra Aryani

Dian Agustina

Luna Mantyasih M

Ratna Nugrahaningsih


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What is it?


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What is it?

Not all mergers are welcome

During the 1980s, a variety of

devices were developed to

defend firms from unwelcome

takeover proposals


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Periodic or continual measures a firm's management

takes to discourage unwanted or hostile takeovers.

One example of a takeover defense is the macaronidefense, in which the company issues a large number

of bonds with the proviso that they must be

redeemed at a high price if the company is taken

over. It is also called an shark repellent.

Anti take over defenses

Corporate charter amendments

Preventive measures Active measures


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Why do it?


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Why do it?

Target is resisting to get

a better price

Management of target

judges that company

will perform better on

its own


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How to do it?


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How to do it?

Corporate charter amendments

Shark Repellant Legal existence

Classified boards

Super majority provisions

Fair price amendment

Dual Capitalization


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How to do it?

Poison pills

Flip in plan

Flip over plan

Back end plans

Dead hand provisions

Poison puts

Golden parachute

Silver parachute

Tin parachute

Preventive measures

Greenmail

Standstill agreement

White knights

White squire

Pac man defense

Restructuring

Active measures


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Poison Pills

A poison pill is a defensive strategythat involves a security with specialrights exercisable by a triggering event.

A flip-over is one types of poison pillswhich current shareholders of atargeted firm will have the option topurchase discounted stock after thepotential takeover.

The flip-in is a provision in the targetcompany's corporate charter orbylaws.


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Poison Pills

The dead-hand provision prevents an unfriendly

acquirer from seizing control of the board and

removing the pill.

A back-end plan is a different variety of a poison pill.

A back-end plan provides the target shareholders

with rights. At the option of the targets stockholder,

a right and a share of the targets stock can beexchanged for cash or senior debt at a specific price

set by the targets board.


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Poison Puts

Poison puts or event risk covenants give

bondholders right to put, at par or better, target

bonds in event of change in control

Protect against risk of takeover-related deterioration oftarget bonds

Place potentially large cash demands on new owner,raising costs of acquisition


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Parachutes

Employee severance agreements that are

triggered when a change in control takes place.

Varieties :

- Golden Parachutes

- Silver Parachutes- Tin Parachutes


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Golden Parachutes

Separation provisions of employment contract

that compensate managers for loss of their jobs

under change-of-control clause

Provision usually calls for lump-sum

payment or payment over specifiedperiod at full or partial rates of normal

compensation


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Silver and Tin Parachutes

Silver parachutes

Provide less generous severance payments to executives

Tin parachutes

Extend relatively modest severance payments to wider

coverage of managers including middle

management, and in some cases, cover all

salaried employees


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Corporate Charter Amendments


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Classified Boards

Divided into different classes

Preventing the entire board from

being replaced at the same time. Delays effective transfer of control in take over

Example:

Suppose nine members in a group

Divided into group of three

Hostile bidder has to wait two annual meetings


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Super Majority Provisions

Approval by large number of votes

2/3rd or 80% votes for merger

approval The board has discretion in imposing

the supermajority rule

Difficult for someone to conduct atakeover by buying enough stock


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Acquirer to pay fair price to

shareholders of the firm

State in form of minimum price

or P/E multiple

Use at two tiered bid by theacquirer

Fair Price Amendments


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A firm may issue shares with

different numbers of votes per

share

Investors can purchase stocks,

but they can't purchase control

of the company

Management retains the voting

power

Dual Capitalization


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Active Anti-takeover Defenses


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Buying back of share at premium

Signing a Standstill Agreement

Greenmail


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Standstill Agreement

Not to increase holdings for particular period

Accompanied by targets agreement

Prevents falling into hands of anotherbidder


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Another company more acceptable

More favorable terms than original

bidders Not to disassemble

No layoffs

White Knights


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The Hostile Firm is making an offer more lucrative

than the White Knight's, so that the shareholders

consider rejecting the White Knight's bid.

The Hostile Firm launches a takeover offer for theWhite Knight. This takeover offer is generally a

hostile one.

Hostile Firms Strategies


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White Squire

Target sells only a block of its stock to third

party it considers to be friendly

In return, white squire may receive: board

seats, dividend, discounted shares


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Pac-Man Defense

Highly aggressive defense technique

Possible only if financial resources

permissible

May result into

May defend

May end up extremely destructive

High debts


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Restructuring

Going private

Buying bulk of the shares

Sales of attractive assets

Making less attractive

Liquidating the firm

When liquidation is better than the bid


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PRO-DEFENSE


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Permasalahan

Apakah takeover defense menguntungkan

atau merugikan shareholderdari

perusahaan target?


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Tujuan

Mengetahui:

Pengaruh dari takeover defense ini terhadap

perusahaan target, dimana dilihat dari kepentingan

shareholderdan manajemen. Motivasi perusahaan target untuk melakukan

takeover defense.


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Target management has to try to get a higher bid from bidder

like buying cars or appliances -- negotiation is assumed to beimportant

if target saw a good bid and took it without resisting at all they arelikely to be sued by stockholders because they should have gotten

an even better deal

Benefits from using defenses are:

(1) stall for more time to find a "White Knight"

(2) directly compete with bidder (LBO, leveraged recap, Pac Man)

(3) threaten high transaction costs (litigation, etc.) as part ofbargaining strategy

Uses of Takeover Defenses


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Do pills poison operating performance?Morris G. Danielson a, Jonathan M. Karpoff b

(2006)

Kinerja operasi sederhana meningkat selama periode 5tahun setelah ditetapkanpoison pill.

Hal ini tidak konsisten dengan pandangan bahwa pilmendegradasi kinerja.

Perlindungan yang ditawarkan oleh pil paling kuat ketikadigabungkan dengan staggered board, perubahan kinerjajuga tidak ada hubungannya dengan staggered board.

Bukti ini melemahkan pandangan luas bahwa poison pilltelah memberikan efek negatif terhadap kinerja

perusahaan. Sampel data dari perusahaan yang melakukan poison pill

selama tahun 1984-1992.


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The Impact of Bid Defences in HostileAcquisitions

RICHARD SCHOENBERG, DANIEL THORNTON (2006)

ksatria putih dan manajemen buyout sebagai takeoverdefenses yang paling efektif.

Bila dilihat dari sisi takeover yang disetujui, hostile bid tidakhanya memberikan return yang lebih tinggi untukpemegang saham target, tetapi juga memiliki probabilitasyang lebih rendah menghasilkan akuisisi selesai .

Oleh karena itu, daripada menyetujui takeover, menolaktawaran pendekatan yang dapat melayani kepentingankedua pihak akan lebih baik.

Pemegang saham, dengan meningkatkan tingkatpengembalian saham, dan manajer, dengan meningkatkankemungkinan bahwa status quo akan dipertahankansebagai akibat dari tawaran gagal.


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Hostile takeover defenses that maximizeshareholder wealth

John A. Pearce II, Richard B. Robinson

Perusahaan menetapkan pertahanan terhadaphostile takeover untuk melindungi kemerdekaanmereka dan inisiatif manajemen, atau untukmembantu memastikan bahwa hostile bidditekan untuk hadir menawarkan yang terbaik.Tantangan kritis bagi para eksekutif adalah untukmenentukan-untuk mengantisipasi serangan

terhadap mereka yang perusahaan-strategipertahanan terbaik akan membentengi investasipemegang saham.


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Case Study: Kraftbury

The Kraft Foods Inc. is the secondlargest food and beverage company inthe world. The company headquarter isin Northfield, Illinois, United States.

The Cadbury plc is a Britishconfectionery and beverage companyand second worlds largestconfectionery manufacturer. The

company headquarters is in City ofWestminster, London, United Kingdom.


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September 2009, Kraft FoodsInc. made an offer to buyCadbury. On a previous deal,Cadbury rejected the Krafts10.5 billion pounds. The Kraftfaces UK Takeover Panel

deadline to increase its bid forthe Cadbury shareholders.

Now, The Kraft Foods Inc(KFT.N) agrees on a deal to buyCadbury (CBRY.L) on January

19th, 2010 after four monthsof conversation for about 11.9billion pounds or 19.55 billiondollars.


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Dalam mengembangkan aktivitas bisnisnya, Kraft dan Cadbury memiliki dua misi

besar yakni pengusaaan pangsa pasar dan maksimalisasi profit.

Kraft lebih berjaya di AS sementara Cadbury menguasai pasar Eropa.

Cadbury lebih menonjol dalam hal bisnis permen karet terutama di Eropa dan

Amerika Latin sementara Kraft memiliki lebih sedikit pengalaman dalam hal

tersebut (Economist, 19 Januari 2010). Kedua perusahaan dapat saling melengkapi dalam hal jenis produksi dan wilayah

pasar sehingga apabila terjadi akuisisi di antara kedua perusahaan ini, pangsa

pasar Kraftbury menjadi lebih luas.

Maksimalisasi perolehan profit akan terjadi menyusul terciptanya perluasan

pangsa pasar.

Kraftbury dapat memperkuat kapasitas sumber daya manusia, sumber daya

teknologi, dan mampu mengembangkan ide-ide inovasinya.

Meskipun Kraft membeli Cadbury dengan harga mahal, imbal hasil yang diraih

akan jauh lebih besar terlebih kedua perusahaan harus menghadapi ancaman

produk China yang merupakan produsen gula-gula terbesar kedua di dunia.

Analisis


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CEO Cadbury, Roger Carr:

It was about management achievement, and the Kraft

achievement relative to the Cadbury one was less. Therefore,

you would only sell this business for the right price.

(Reuters, 20 Januari 2010)

CEO Kraft, Irene Rosenfield:Proses akuisisi ini justru akan menguntungkan seluruh pihak

karena inilah saat yang tepat bagi dua perusahaan untuk

bersama-sama menciptakan kerajaan confectionery and

beverage terbesar dunia

(Economist, 19 Januari 2010)

update pp takeover

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