Hostile Takeover
Eddie Kramer
Ethics – 568
Chapter 5 – Boatright
December 4, 2012
Hostile Takeovers – A Case Study of InBev and Anheuser-Busch Co.
In early June 2008, Belgian-based InBev NV launched an unsolicited $46.4 billion bid to acquire Anheuser-Busch Co. On June 26, 2008, Anheuser’s board formally rejected InBev’s original proposal of $65 a share, saying it substantially undervalued the company. In mid-July, InBev raised its offer to $70 a share, and the Anheuser board voted to accept the deal, recognizing that a better offer was unlikely. (Sorkin and Merced) The $70 price, which was accepted on November 18, 2008, represented a substantial premium for Anheuser shareholders. This case provides an opportunity to review the economic and ethical impacts of hostile takeovers on American companies.
Before delving into the facts and analysis of this case, I believe it would be helpful to discuss common takeover tactics and briefly review a number of existing arguments for and against corporate takeovers as we endeavor to answer three main questions: Are corporate takeovers good or bad for the American economy? Should there be a market for corporate control? What is the fiduciary duty of officers and directors in their response to take over bids?
A hostile takeover typically involves an insurgent group, known as a ‘raider’, who makes a tender offer to buy a controlling block of stock in a target corporation from its present shareholders. The price is generally at a premium. If enough of the current shareholders take the offer, the insurgent group receives a controlling interest at which time the “raider” fires the current management and makes additional changes to the company. The insurgent group’s responsibility is then to add value to show the premium paid for the company’s stock was a smart investment.
The proponents for hostile takeover activity argue that a corporation becomes a takeover target because current management is not increasing the share
Ethics – 568
Chapter 5 – Boatright
December 4, 2012
Hostile Takeovers – A Case Study of InBev and Anheuser-Busch Co.
In early June 2008, Belgian-based InBev NV launched an unsolicited $46.4 billion bid to acquire Anheuser-Busch Co. On June 26, 2008, Anheuser’s board formally rejected InBev’s original proposal of $65 a share, saying it substantially undervalued the company. In mid-July, InBev raised its offer to $70 a share, and the Anheuser board voted to accept the deal, recognizing that a better offer was unlikely. (Sorkin and Merced) The $70 price, which was accepted on November 18, 2008, represented a substantial premium for Anheuser shareholders. This case provides an opportunity to review the economic and ethical impacts of hostile takeovers on American companies.
Before delving into the facts and analysis of this case, I believe it would be helpful to discuss common takeover tactics and briefly review a number of existing arguments for and against corporate takeovers as we endeavor to answer three main questions: Are corporate takeovers good or bad for the American economy? Should there be a market for corporate control? What is the fiduciary duty of officers and directors in their response to take over bids?
A hostile takeover typically involves an insurgent group, known as a ‘raider’, who makes a tender offer to buy a controlling block of stock in a target corporation from its present shareholders. The price is generally at a premium. If enough of the current shareholders take the offer, the insurgent group receives a controlling interest at which time the “raider” fires the current management and makes additional changes to the company. The insurgent group’s responsibility is then to add value to show the premium paid for the company’s stock was a smart investment.
The proponents for hostile takeover activity argue that a corporation becomes a takeover target because current management is not increasing the share