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approach in these two deals illustrates the difference in SC bargaining power described in Part

3.1. CEI’s initial press release stated that: ““CEI expects the Board of Directors of CCI to form a

special committee of independent directors to consider the proposal with the assistance of

outside financial and legal advisors and to negotiate the proposal with CEI. Directors of CCI

affiliated with CEI will not participate in the evaluation of the proposal, which requires the

approval of the special committee.” (emphasis added) In contrast, Rupert Murdoch took a

tougher bargaining approach in his initial letter to the Fox Entertainment board, stating in part:

“While Delaware law does not require that News Corporation negotiate with the Fox board or

reach any agreement with the Fox board concerning the offer, News Corporation would,

nonetheless, be happy to meet with the special committee to answer any questions it might

have.” In effect, CEI explicitly granted the CCI SC veto power over the deal, while Murdoch

made clear that the Fox SC would not have the ability to hold up the deal.

The theory and evidence presented in this paper suggest that the differences in SC veto

power and judicial standards of review were reflected in the outcomes of the two deals. CEI

initially offered $32 cash per share, representing a 16% premium over the pre-announcement

trading price of CCI. After hard bargaining with the SC and plaintiffs’ counsel, CEI agreed to

pay $34.75 per share, or a 26% premium over the pre-announcement trading price. News

initially offered 1.9 News shares for each Fox Entertainment share, representing a 7% premium

over the pre-announcement trading price of Fox. After brief negotiations, the Fox SC agreed to

2.04 News shares, or a 18% premium. These premium differences are economically significant:

I estimate that if CEI had achieved the same 18% premium as News (rather than its actual 26%

premium), it would have paid approximately $650 million less to the CCI minority shareholders.


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