23 December 2020
My little Christmas story
Some ten years ago, in the evening before Christmas Eve, when I was driving back home, I saw a man lying in the snow, almost passed out drunk. It was very cold, below -30 C°, and I realised that he could not survive there. I stopped the car, helped the man into the backseat and told him that I would drive him home.
“Where is home”, I asked. “Thherrrr…”, he replied raising his arm and letting it fall effortlessly in an attempt to point forward. I started to drive forward wondering where to go, when he started talking: “I have been drrrinking”, he said with a friendly drunken voice, and continued, “I got out of the jail today”. “Oh”, I replied glancing at my handbag which was lying wide open on the front seat, just in front of the man. “Why were you in the jail”, I asked hoping that we would soon find his home. “I killed a man”, he said. “Oh”, I replied, feeling increasingly uneasy. But this man did not appear violent, just drunk, and I wondered whether the manslaughter could have happened in a bar fight. I did not dare to ask more.
By this time, we had reached the next crossing and I asked which way to go. I interpreted this handwave as an instruction to turn to the left, drove to the end of the street and stopped my car in front of a housing complex. “I hope my wife will take me back”, he muttered when he got out of the car and started swaying towards the housing complex in the freezing cold winter night. I drove away with mixed feelings hoping that he indeed would find his family and get home for Christmas.
With this little story I would like to wish you all a very Happy Christmas and a Wonderful New Year. Let’s take care of each other!
30 November 2020
Takeover defences emerging!
A long time ago, at the end of the bullish 1980’s when I was a law student and an intern at the Ministry of Justice working on the first Finnish securities market laws, I was fascinated by the takeover battle over Leipurin Tukku, a company listed on the Helsinki Stock Exchange at that time. This was when I first learned about poison pills, golden parachutes, crown jewels, cornering, white knights and other classic takeover defences, and read academic writings suggesting that the powers to decide on takeover defences should rest with the shareholders and not with the board of directors, a principle which twenty years later was spelled out in the EU Takeover Directive.
This autumn two takeover bids in the Finnish market have lapsed because of the lack of sufficient shareholder support – one of them because of a shareholder building a sizeable corner in the target. I found this particularly cool, since this takeover defence was undertaken by a shareholder despite the target’s board recommending the bid. It will be interesting to see how the story continues.
Takeover defences are seldom in the Finnish market, but there are some very interesting prior examples. Have a look at the Schibsted/Alma Media case from 2004/2005, for instance: Late in the year, the Norwegian media company Schibsted launched a takeover bid for all shares of the Finnish media company Alma Media. The main driver of the takeover bid was Alma Media’s holding in the Swedish broadcasting company TV 4, which Schibsted was looking to get hold of.
The board of directors and the major shareholders of Alma Media were, however, unhappy with the takeover bid and the price offered, and masterminded a successful defence strategy. The board realised that more value could be created for the company if its broadcasting business was separated from its printing and other businesses and then sold out together with the holding in TV 4, or the crown jewels in takeover defence terms. The company soon found a friendly purchaser for its broadcasting business, a white knight so to say, who also was willing to offer a good price. The board then called a general meeting of shareholders to address the sale of the broadcasting business to the white knight and to approve a set of further measures enabling the company to lighten its balance sheet and distribute the sales proceeds to its shareholders. The shareholders approved the board’s proposals, and Alma Media’s broadcasting business, together with its holding in TV 4, was sold to the white knight, and Schibsted’s takeover bid lapsed. – An almost textbook example of the sale of crown jewels and the use of a white knight as a takeover defence.
In the Schibsted/Alma Media case, the skilful use of classic takeover defences resulted in a better price and deal for the target company and its shareholders. The lesson to be learned by this example is that takeover defences can, indeed, sometimes be in the interest of the target’s shareholders, and be implemented in full compliance with the takeover rules and the spirit of the Takeover Directive. While the target’s board of directors may – and sometimes should – be active in designing and implementing the necessary defensive measures, the Takeover Directive sets out a strict requirement that the target board must obtain the prior authorisation of the general meeting of shareholders before taking any action which may result in the frustration of the bid. Given the time required to set up a defence strategy and to convene a general meeting of shareholders, this may be challenging unless the target board is prepared and has easy access to advisors who can help to assess the merits of the bid, evaluate the alternatives available and, if so desired, set up a defence strategy.
20 October 2020
Takeovers and a few takeaways for directors
The Finnish takeover market has been extraordinarily dynamic in the past 12 to 24 months. An active takeover market often benefits shareholders and is generally positive for the overall securities market. However, for the directors of the target companies, a takeover bid is always a challenge as it calls for a strong view of the company’s vision and strategy to support a balanced consideration of the bid while weighing the interests of the company and its shareholders.
Not all bids are good opportunities, and, in these cases, the directors should have the stomach to recommend against them. In practice, most unwanted bids are rejected by the target board before the market learns anything about them. This is natural, of course, because the support of the target and its directors and major shareholders significantly increases deal security and helps the bidder in integration after the bid. In my experience, however, too many prospected takeover bids are rejected by the directors – or sometimes only by the chairman or the CEO – without a proper investigation of the merits of the bid.
What should a director then do if he/she is approached with an initial takeover proposal? Here are a few takeaways for consideration:
- If you are approached with a takeover proposal, always bring the proposal to the consideration of the entire board of directors. Even where you would dislike the bidder or suspect that the proposal would not have realistic chances, other directors may have different information and consider the situation differently.
- Always think first about the interests of the target company, including its shareholders as a collective. A director serves the company and must act in the best interest of the company. No director should consider him/herself as a representative of any certain shareholder, financier or other party. Only the interests of the company matter and should not be confused with any other interests – whether personal or those of the background nominees.
- Consider the bid and the company’s options thoroughly. Where needed, the company should be prepared to solicit competing bids or to consider defence strategies or alternative corporate restructurings.
- Try not to bind your hands too early. As lucrative as a prospective bid may sound, there may be another suitor behind the corner and the company may need to be free to act. If you believe that it, indeed, is necessary to conclude a combination agreement with the bidder before the launch of the bid, make sure that the agreement includes appropriate walkaway provisions for the event of a competing bid or another interesting proposal.
- Be aware of the completion risk and protect the company’s proprietary information and expertise. Takeover bids seldomly are unconditional and deal security is notoriously lower than in private M&A. Keep the company independent of the bidder and do not share proprietary information with the bidder until the deal is completed.
- Call a shareholders meeting before you take any protective actions or implement defence strategies. Most takeover defences require an express authorisation by the shareholders meeting.
- Be mindful of the insider dealing restrictions. Information about a contemplated takeover bid or combination negotiations constitutes inside information. If you consult shareholders about an undisclosed prospective bid, these shareholders become insiders and are restricted from trading until the bid is disclosed or abandoned.
- Have your advisors readily available. It is imperative that the board of directors has timely support from its professional financial and legal advisors. Bring them along as early as possible to be able to act swiftly when needed.
Case paperitehdas – yhtiön vai kansakunnan etu?
Uutinen sanomalehtipaperituotannon loppumisesta Suomessa ja aikanaan maailman hienoimman paperikoneen sulkemisesta on saanut aikaan paljon polemiikkia yhtiön eduntavoittelusta ja arvoista, ja onpa jopa maan ylin johto kansakunnan edun nimissä arvostellut päätöstä paperitehtaan sulkemisesta.
Yritystoiminnan lainalaisuuksien perusteella on toki aivan selvää, että yritystoimintaa ohjaa yhtiön etu, eikä varsinkaan kansainvälinen pörssiyhtiö voi perustaa päätöksiään sen kotivaltion etuun tai tietyn tehdaspaikkakunnan tilanteeseen. Velvoittaahan jo osakeyhtiölaki yhtiön johtoa huolellisesti toimien edistämään nimenomaan yhtiön etua. Mutta tarkoittaako yhtiön etu vain sen osakkeenomistajien taloudellisen voiton maksimointia vai pitäisikö yhtiön johdon ottaa huomioon myös sen muiden sidosryhmien (”stakeholdereiden”) – työntekijöiden, asiakkaiden, rahoittajien ja yhteiskunnan – intressit?
Kvartaalitaloudessa yhtiön etu ymmärretään helposti kapeasti vain yhtiön lyhyen tähtäimen taloudellisena etuna ja yhtiön tavoitteena maksimoida seuraavan kvartaalin tai ainakin vuoden tuotto. Yhtiön osakkeen arvo heijastaa kuitenkin myös pitkän aikavälin tulevaisuuden odotuksia ja sen myötä kaikkia yhtiön arvoja. Internetin välityksellä nopeasti leviävä tieto vaikkapa lapsityövoiman käytöstä tai ihmisoikeusrikkomuksista vahingoittaa heti brändiä ja voi johtaa vakaviin seurauksiin. Kuluttajaboikotit ovat jo pitkään vaikuttaneet niin öljy-yhtiöihin kuin lihanjalostusteollisuuteenkin. Varsin tuoreessa muistissa on tapaus, jossa keveä suhtautuminen ympäristöarvoihin johti jopa kaivosyhtiön konkurssiin. Monet kansainväliset suursijoittajat seuraavatkin Norjan valtion öljyrahaston esimerkkiä ja tunnustavat yritystoiminnan sosiaalisten ja ympäristövaikutusten merkityksen osakkeiden pitkän aikavälin arvolle ja sijoittavat vain yhtiöihin, joiden arvopohja ja toimintakulttuuri ovat kunnossa.
Jo pelkästään näiden esimerkkien perusteella on helppo todeta, että voitontavoittelu muiden arvojen kustannuksella harvoin edistää yhtiön etua pitemmällä aikavälillä. Yhtiön ja sen osakkeenomistajien taloudellisen edun edistäminen edellyttää siksi, että yhtiön johto arvioi huolellisesti päätöksiensä vaikutukset myös yhtiön tärkeisiin sidosryhmiin ja yhtiön toimintaympäristöön. Julkiselle keskustelulle paperitehtaan sulkemisen sosiaalisista ja taloudellisista vaikutuksista yhteiskuntaan on siis ehdottomasti paikkansa. Yhtiön toimitusjohtajan julkisuudessa esittämä kritiikki Suomen vaikeasta liiketoimintaympäristöstä kertookin osaltaan siitä, että yhtiön johto on perehtynyt kokonaistilanteeseen ja kantaa huolta myös yhtiön kotivaltiosta ja sen kilpailukyvystä. Dialogille yritysten ja yhteiskunnan arvoista on selvästi tilausta.