An obvious question then becomes why CEI choose a merger freeze-out structure. Indeed,
the Corporate Control Alert reported that some lawyers were “scratching their heads” over this
question.45 This paper provides some evidence that the controller’s outside counsel plays a role
in the choice of transactional form. CEI was advised by a Washington, D.C. law firm well-
known for its telecommunications practice, but not well-known for its M&A expertise. In
contrast, News Corp. was advised by Lou Kling, a partner at Skadden, Arps, Slate, Meagher &
Flom in New York City and one of the most well-respected M&A practitioners today.46
At the highest level, the evidence presented in this paper rejects the assumption in most
academic and practitioner commentary that many if not most post-Siliconix freeze-outs are
executed via tender offer.47 To the contrary, I find that more than two-thirds of freeze-outs in the
current doctrinal regime are still executed through the traditional merger route. This divide in
transactional form provides the basis for a comparison between the outcomes of tender offer and
merger freeze-outs in the post-Siliconix era. The findings provides new insights on both deal
outcomes and choice of deal form.
On outcomes, I find strong evidence that controlling shareholders pay less in tender offer
freeze-outs than in statutory merger freeze-outs.48
Interviews as well as informal conversations
45 See David Marcus, From Theory to Practice, CORPORATE CONTROL ALERT (Dec. 2004) at 10 (“The way Cox Enterprises Inc. effected its $8.3 billion buyout of the 38% public stake in Cox Communications Inc. brings an arcane distinction in Delaware corporate law to life. It also has some lawyers scratching their heads over how the parent is taking the country’s fourth-largest cable company private in one of the largest such deals ever done.”).
46 Among other reasons, Kling is the co-author of a leading M&A treatise entitled NEGOTIATED ACQUISITIONS OF COMPANIES, SUBSIDIARIES AND DIVISIONS.
47 See, e.g., Gilson & Gordon (2003) at 805 (“[W]hen rules governing one or another alternative get out of line, transaction planners are quick to adjust their strategies to compensate, such that the Delaware Chancery Court sees the implications of its previous decisions quickly and is promptly given the opportunity to adjust the rules and restore balance.”).
48 This finding is inconsistent with Bates, Lemmon & Linck (2004), which reports a higher likelihood of a bid increase for freeze-outs structured as tender offers. As noted above, see supra note 12, this finding is difficult to interpret because the Bates et al. study incorrectly classifies mergers executed as tender offers as “tender offers.” In