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outside counsel is muted because the underlying benefits of the tender offer route are more

ambiguous. For example, when the controller is small, the standard of review benefits of the

tender offer route may be offset by the supermajority vote required; and when the target is not a

Delaware corporation, the Siliconix/Glassman precedent may not apply.

To explore this “sweet spot” concept more closely, I examine the 29 freeze-outs in my

sample involving Delaware targets in which the controller held more than a 70% stake.

Seventeen of these deals were executed as tender offers (59%), and the remaining 12 (41%) were

executed as mergers. However, dividing this sub-sample by the controller’s outside counsel

reveals an important difference: when the controller retained “highly experienced” M&A

counsel, the freeze-out was executed as a tender offer in 10 out of 11 deals (91%), compared to 7

out of 18 deals (39%) when the controller retained other outside counsel.

Interestingly, the one exception among the eleven “sweet spot” deals involving experienced

outside counsel was Samuel Heyman’s freeze-out of the minority shareholders of International

Specialty Products (ISP) in July 2002. Heyman has established a reputation over the past three

decades as a tough bargainer in the takeover arena. For example, according to Bruck (1989:287),

even junk bond king Michael Milkin, at the height of his power at Drexel Burnham in the mid-

1980s, was willing to “take a beating” from Heyman in deal financing negotiations. Heyman’s

reputation, then, may have given him considerable bargaining power against the ISP special

committee despite going through the merger route. Consistent with this view, Heyman increased

his first offer by only 3% (from $10.00 to $10.30) in order to gain SC approval.44

44 The end-game is particularly interesting: “On November 4, 2002, the Majority Stockholder authorized his legal advisors to indicate his potential willingness to increase the per share merger consideration to $10.30 per share

[from $10.25]. In a minority stockholders representative that .

meeting on that day, the special committee discussed the fairness of the proposal to ISP’s

and ..

agreed to it would

reject the consider

proposal of $10.30 per share, but to inform the recommending the proposal at $10.35 per




The Majority


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