tag:blogger.com,1999:blog-3202774368551476669.post3250353340549199497..comments2023-09-15T16:21:31.980+05:30Comments on INDIAN CORPORATE LAW: CSX/TCI Judgment – Some Thoughts on the SEBI Takeover RegulationsUmakanth Varottilhttp://www.blogger.com/profile/12438677982004444359noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-3202774368551476669.post-67270831264501631882008-11-02T23:38:00.000+05:302008-11-02T23:38:00.000+05:30Dear Sir,I am writing from Germany today, having c...Dear Sir,<BR/><BR/>I am writing from Germany today, having conferred and confirmed with my colleagues in Singapore (from where we conduct our India-Practice) and Hong Kong (from where we conduct our China-Practice) with respect to the ramifications of the CSX-decisions for Asia. We believe that according to the latest writings of U Texas Professors Henry Hu and Bernard Black on the matter of empty voting and the new vote buying, the CSX decision is somewhat poorly reasoned. We do not know the appellate reasoning yet. Why do we feel so inclined? It is because the fact pattern in the CSX case conjures up a scenario where two hedge funds stir things up a bit so as to be in a position to assume board seats and eventually prompt a change-of-control. It is a matter of construing this coordination between two such funds a 13D group under the 1934 Securities and Exchange Act. In our world-wide experience in these matters, however, we view a different factual pattern as more important and believe that anti-hedge fund sentiments and measures do not actually capture this trend and might, actually, be misplaced. We see scenarios most often where hedge funds simply create some noise so as to provoke senior management of a target company to undertake certain share-value enhancing measures, notably share buybacks, dividend distributions, etc. In connection with change-of-control scenarios in Europe and the U.S., we view them acting as instigators rather than predators. It is actually strategic buyers or consortiums consisting of a mix of strategic and private equity purchasers that undertake the actual takeover. While it may be instigated through hedge funds, they rather act in the shadow and under the umbrella of giants. <BR/><BR/>The issue therefore turns from a single or group of hedge funds and alleged "acting in concert" on their part to the relationship between a corporate strategic raider and their banking relations with whom they engage in equity swaps. Here, the New Zealand appellate case Perry Corporation vs Ithaca (Custodians) Ltd dating November 3, 2003 and the Australian appellate decision Glencore International AG (CAN 114 271 055) v Takeovers Panel [2006] FCA 274 seem more pertinent. While there may be rare incidences from time to time where a fact pattern like the one before Federal Judge Kaplan in the CSX case are germane (two hedge funds vying for a control change of a target), worldwide the phenomenon is more realistically assessed when and as hedge funds operate as instigators but it is a large corporate actor or consortium (that my well contain a private equity player or two) goes for the kill and goes for the jugular. Judge Kaplan and the Cravath firm in New York have isolated what they call a "control scheme" between two hedge funds as overriding point of departure. In distinction, the New Zealand case operates on far more subtle assumptions and slices with a finer blade: An unwritten "understanding" or "arrangement" between the corporate raider and its banks with whom such raider is engaged in separate total return equity swaps (holding the economic rights) where the banks exercise the separated voting rights is what that decision is looking for. This 2003 case from New Zealand is highly recommended reading, it's one of the best-reasoned decisions I've ever come across in my career.<BR/><BR/><BR/>Dr. Ami de Chapeaurouge, LL.M. (Columbia)<BR/>S.J.D. (Harvard)<BR/>Rechtsanwalt (Frankfurt am Main)<BR/>Member of the New York Bar<BR/><BR/>de Chapeaurouge + Partner<BR/>Rechtsanwälte<BR/><BR/>Frankfurt: <BR/>Wilhelm-Leuschner-Str. 13<BR/>60329 Frankfurt am Main, Germany<BR/>Phone: +49 69 26 95 88 - 51<BR/>Fax: +49 69 26 95 28 - 68<BR/><BR/><BR/>New York:<BR/>45 Broadway, Suite 2200<BR/>New York, N. Y., 10006, U.S.A. <BR/>Phone: +1 212 363 37 - 86 <BR/>Fax: +1 212 363 37 - 90<BR/><BR/>adc@dechapeaurouge.com<BR/><BR/> ______________________________________________Anonymousnoreply@blogger.com