DealZone

Staggered boards are staggering threat

April 15, 2010

More than poison pills, staggered boards may be more of a deterrent to hostile takeover bids, experts at the Tulane Corporate Law Institute said on Thursday.

“More people walk away from an unsolicited (bid) because of a staggered board than anything else,” said Douglas Braunstein, JPMorgan’s head of investment banking.

Staggered boards have directors with varied election dates, making it harder to replace an entire slate of directors.  Fighting against an entrenched board is a major obstacle for a company exploring a hostile bid.

As the number of poison pills has dropped to the lowest level in 20 years, companies have fewer takeover defenses at the ready to ward of unwanted overtures.

But for a company to keep a poison pill, or shareholder rights plan, constantly in place may be pointless and may provoke the ire of shareholder activists. Instead, companies can invoke a poison pill if and when a hostile bid emerges.

“Pick the battles that are worth fighting. To me, a shareholder rights plan in this environment — it’s a tool you can take out of the tool kit at the appropriate time,” Braunstein said.

For live coverage of the Tulane M&A Conference click here.

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