If you own stock in a company that announces it’s being acquired, and you think the acquisition price undervalues the company, there are three things you can do about it: you can vote down the deal, you can find or propose an alternate deal, or you can sue. No I’m kidding of course you can’t do any of those things: you don’t have enough shares to vote down anything, you don’t have the money to propose something else, and you aren’t a plaintiff’s lawyer (are you?) so you aren’t in the business of suing companies, which turns out to be the sort of specialized skill you can’t just acquire in a fit of pique. Those are the tools, but they can only be wielded by specific people.
[L]ast year, 92 percent of all transactions with a value greater than $100 million experienced litigation. The average deal brought five different lawsuits. In addition, half of all transactions experienced multi-jurisdictional litigation, typically litigation in Delaware and another state.
Left out of that description is what percentage of last year’s mergers were agreed to by lazy corrupt self-dealing boards of directors who were putting their own interests above those of shareholders. I submit that it’s strictly between 0 and 92%.
Take the recently announced buyout of Dell. There are already 21 lawsuits pending in Delaware Court of Chancery, and three more pending in Texas state court.
AIG is in the news today for two very small numbers in connection with much larger numbers. First: AIG is no longer bailed out! I know, you thought that happened like six months ago, and then again three months ago, but today AIG got rid of the last little bits of government ownership, really this time:
American International Group, Inc. (NYSE: AIG) announced today that it completed the repurchase of warrants issued to the United States Department of the Treasury (U.S. Treasury) in 2008 and 2009. … AIG and the U.S. Treasury agreed upon a repurchase price of approximately $25 million for the warrants. The U.S. Treasury does not have any residual interest in AIG after AIG’s repurchase of these warrants.
“With AIG repurchasing all outstanding warrants issued to the U.S. Treasury, we are turning the final page on America’s assistance to AIG,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “We appreciate the opportunities this support allowed and are proud to have returned to America every cent plus a profit of $22.7 billion.”
Back in December, I speculated baselessly about why AIG didn’t just buy back these warrants in connection with Treasury’s final sale of stock back in December, since they were just rounding error on the $7.6bn offering. I figured waiting would let the government get a better deal, and it seems to have: I ballparked a value of $18,000,000.393 for those warrants in December, so Treasury made an extra $7mm by waiting three months.1 One possible explanation is that AIG and Treasury enjoyed the dynamic of announcing “AIG HAS PAID OFF ITS BAILOUT” every three months, so they milked it for all it was worth. I’m sure someone from Treasury left a pen or something at AIG’s offices, and its return will be announced with great fanfare in a few months.
Mike Tyson has sued SFX Financial Advisory Management Enterprises, saying that one of its advisors embezzled more than $300,000 from him and cost him millions of dollars in potential future earnings. The lawsuit claims that although SFX has returned some of the money, it is still well short of returning what it embezzled. Tyson is seeking more than $5 million in damages, claiming breach of fiduciary duty, negligent hiring, unjust enrichment and other charges. “Defendants did not secure, protect, safeguard and appropriately apply the Tysons’ finances for their intended purposes,” the former boxer’s lawsuit states, “but instead misappropriated said funds for the benefit and enrichment of SFX/Live Nation.” SFX Financial Advisory Management Enterprises is owned by Live Nation. Live Nation Entertainment Inc. told the Associated Press that it had not yet been served with the lawsuit and thus could not comment on it. [LA Times]
According to the police, they found Brian Mulligan high on bath salts after “several” calls had been placed about a man in the area “trying to break into cars” that fit Mulligan’s description. He supposedly told them he was “tired,” which they say is why they drove him to a motel to get some shuteye. When he (allegedly) emerged hours later and started running through traffic despite officers’ orders to get out of the street, later assuming a “fight stance,” they decided it was necessary to deal with him in an aggressive manner. Didn’t want to, felt they owed it to him. According to Mulligan, it was more like this: Read more »
The Dell deal documents are out and they are short of juicy details; we’ll have to wait for the proxy for details on things like just how much of a discount Michael Dell is taking on his shares or what exactly the terms of Microsoft’s loan are. There is, though, the information that that loan will take the form of $2 billion of subordinated debt, and that the total cash equity investments from Silver Lake, Michael Dell and MSD will total $2.25bn. This seems pretty sensible; Microsoft is effectively writing half of the equity check, though for a fixed-but-subordinated return, plus emotional benefits or what have you. And if you’re worried about how easily debt markets will swallow some $3.25bn of bonds, $5.5bn of Term B/C, and billions of assorted other secured financing,1 which with $4bn of existing bonds brings Dell to around 4x total leverage, making $2 billion – almost half a turn – of the debt subordinated, long-term, and emotionally committed can’t hurt.
But for most of the fun stuff we’ll have to look forward to the proxy. And that isn’t good enough for some people. Reuters reports that the first shareholder lawsuit over the deal has already been filed, one day after announcement, which I assume means it was in the works before the deal was announced. This sort of amazed me: Read more »
American International Group Inc. filed a lawsuit against a Federal Reserve vehicle created during AIG’s bailout that held some of its troubled mortgage bonds, in a dispute over rights to sue over the bonds. … At issue is whether AIG, in selling billions of dollars in troubled mortgage bonds to the New York Fed in late 2008, transferred its rights to sue for losses it incurred on the securities.
So it’s not quite as big as the Hank Greenberg give-me-back-my-$25-billion lawsuit that AIG opted out of, but it’s pretty big; AIG thinks it has over $7 billion in damages against Bank of America/Countrywide alone. If it’s right, either AIG or the Fed should be entitled to about $7bn of BofA’s cash. So call this 1/4 as big as joining the Greenberg suit, though considerably less than 1/4 as offensive.
One way to resolve this dispute amicably might be to conclude that both AIG and the Fed should be entitled to $7bn of BofA’s cash. After all, who decided that only one investor gets to sue BofA per mortgage? We’ve talked before about the fact that BofA’s liability for Countrywide mortgages does not seem to be limited by the amount of mortgages that Countrywide wrote; several lawsuits now cover overlapping pools of mortgages. How much BofA ends up paying for those mortgages will depend on political and PR factors, on the existence of embarrassing emails, on technicalities of contract drafting and legal doctrines, and on how much money BofA, y’know, has, but it seems unlikely that it will depend on some sort of one-mortgage-one-lawsuit principle. You write enough bad mortgages and you give up your expectations of tidiness. Read more »