Exam 3: The Corporate Takeover Market:

Which of the following government agencies can discipline firms with inappropriate governance practices?

All of the following are common takeover defenses except for

TYCO Rescues AMP from Allied Signal In late November 1998, Tyco International Ltd., a diversified manufacturing and service company, agreed to acquire AMP Inc., an electrical components supplier, for $11.3 billion. In doing so, AMP successfully fended off a protracted takeover attempt by AlliedSignal Inc. As part of the merger agreement with Tyco, AMP rescinded its $165 million share buyback offer and its plan to issue an additional 25 million shares to fund its defense efforts. Tyco, the world’s largest electronics connector company, saw the combination with AMP as a means of becoming the lowest cost producer in the industry. Lawrence Bossidy, CEO of AlliedSignal, telephoned an AMP director in mid-1998 to inquire about AMP’s interest in a possible combination of their two companies. The inquiry was referred to the finance committee of the AMP board, which expressed no interest in merging with AlliedSignal. By early August, AlliedSignal announced its intention to initiate an unsolicited tender offer to acquire all of the outstanding shares of AMP common stock for $44.50 per share to be paid in cash. The following week AlliedSignal initiated such an offer and sent a letter to William J. Hudson, then CEO of AMP, requesting a meeting to discuss a possible business combination. Bossidy also advised AMP of AlliedSignal’s intention to file materials shortly with the SEC as required by federal law to solicit consents from AMP’s shareholders. The consent solicitation materials included proposals to increase the size of AMP’s board from 11 to 28 members and to add 17 AlliedSignal nominees, all of whom were directors or executive officers of AlliedSignal. Within a few days, the AMP board announced its intentions to continue to aggressively pursue its current strategic initiatives, because the AlliedSignal offer did not fully reflect the values inherent in AMP businesses. In addition, the AMP board also replaced Hudson with Robert Ripp as chair and CEO of AMP. The AMP board also authorized an amendment to the AMP rights agreement dated October 25, 1989. The amendment provided that the rights could not be redeemed if there were a change in the composition of the AMP board following the announcement of an unsolicited acquisition proposal such that the current directors no longer comprised a majority of the board. A transaction not approved by AMP’s board and involving the acquisition by a person or entity of 20% or more of AMP’s common stock was defined as an unsolicited acquisition proposal. By early September, AlliedSignal amended its tender offer to reduce the number of shares of AMP common stock it was seeking to purchase to 40 million shares. AlliedSignal also stated that it would undertake another offer to acquire the remaining shares of AMP common stock at a price of $44.50 in cash following consummation of its offer to purchase up to 40 million shares. In concert with its tender offer, AlliedSignal also announced its intention to solicit consents for a proposal to amend AMP’s bylaws. The proposed amendment would strip the AMP board of all authority over the AMP rights agreement and any similar agreements and to vest such authority in three individuals selected by AlliedSignal. In response, the AMP board unanimously determined that the amended offer from AlliedSignal was not in the best interests of AMP shareholders. The AMP board also approved another amendment to the AMP rights agreement, lowering the threshold that would make the rights redeemable from 20% to 10% of AMP’s shares outstanding. AlliedSignal immediately modified its tender offer by reducing the number of shares it wanted to purchase from 40 million to 20 million shares at $44.50 per share. AMP announced a self-tender offer to purchase up to 30 million shares of AMP common stock at $55 per share. The AMP self-tender offer was intended to provide AMP shareholders with an opportunity to sell a portion of their shares of common stock at a price in excess of AlliedSignal’s $44.50 per share offer. Also, on September 28, 1998, AMP stated its intention to create a new ESOP that would hold 25 million shares of AMP common stock. Allied Signal indicated that if the self-tender were consummated, it would reduce the consideration to be paid in any further Allied Signal offers to $42.62 per share . Credit Suisse, AMP’s investment banker, approached a number of firms, including Tyco, concerning their possible interest in acquiring AMP. In early November, Tyco stepped forward as a possible white knight. Based on limited information, L. Dennis Kozlowski, Tyco’s CEO, set the preliminary valuation of AMP at $50.00 per share. This value assumed a transaction in which AMP shares would be exchanged for Tyco shares and was subject to the completion of appropriate due diligence. In mid-November, Ripp and Bossidy met at Bossidy’s request. Bossidy indicated that AlliedSignal would be prepared to increase its proposed acquisition price for AMP by a modest amount and to include stock for a limited portion of the total purchase price. The revised offer also would include a minimum share exchange ratio for the equity portion of the purchase price along with an opportunity for AMP shareholders to participate in any increase in AlliedSignal’s stock before the closing. The purpose of including equity as a portion of the purchase price was to address the needs of certain AMP shareholders, who had a low tax basis in the stock and who wanted a tax-free exchange. Ripp indicated that the AMP board expected a valuation of more than $50.00 per share. Tyco indicated a willingness to increase its offer to at least $51.00 worth of Tyco common shares for each share of AMP common stock. The offer also would include protections similar to those offered in AlliedSignal’s most recent proposal. On November 20, 1998, the AMP board voted unanimously to approve the merger agreement and to recommend approval of the merger to AMP’s shareholders. They also voted to terminate the AMP self-tender offer, the ESOP, and AMP’s share repurchase plan and to amend the AMP rights agreement so that it would not apply to the merger with Tyco. In early August, AlliedSignal filed a complaint against AMP in the United States District Court against the provisions of the AMP rights agreement. The complaint also questioned the constitutionality of certain anti-takeover provisions of Pennsylvania state statutes. Concurrently, AMP shareholders filed four shareholder class-action lawsuits against AMP and its board of directors. The suits alleged that AMP and its directors improperly refused to consider the original AlliedSignal offer and wrongfully relied on the provisions of the AMP rights agreement and Pennsylvania law to block the original AlliedSignal offer. In late August, AMP filed a complaint in the United States District court against AlliedSignal, seeking an injunction to prevent AlliedSignal from attempting to pack the AMP board of directors with AlliedSignal executive officers and directors. The complaint also alleged that the Schedule 14D-1 SEC filing by Allied-Signal was false and misleading. The complaint alleged that the filing failed to disclose that some of AlliedSignal’s proposed directors had conflicts of interest and that the packing of the board would prevent current board members from executing their fiduciary responsibilities to AMP shareholders. In early October, the court agreed with AMP and enjoined AlliedSignal’s board-packing consent proposals until it stated unequivocally that its director nominees have a fiduciary duty solely to AMP under Pennsylvania law. The court also denied AlliedSignal’s request to deactivate anti-takeover provisions in the AMP rights agreement. The court further held that shareholders might not sue the board for rejecting the AlliedSignal proposal. AlliedSignal immediately filed in the United States Court of Appeals for the Third Circuit. The court ordered that although AlliedSignal could proceed with the consent solicitation, its representatives could not assume positions on the AMP board until the court of appeals completed its deliberations. The district court ruled that the shares of AMP common stock acquired by AlliedSignal are “control shares” under Pennsylvania law. As a result, the court enjoined AlliedSignal from voting its AMP shares unless AlliedSignal’s voting rights are restored under Pennsylvania law. AlliedSignal was able to overturn the lower court ruling on appeal. -What types of takeover tactics did AlliedSignal employ?

In a one-tier offer, the acquirer announces the same offer to all target shareholders.

A standstill agreement is one in which the target firm agrees not to solicit bids from other potential buyers while it is negotiating with the first bidder.

Anheuser-Busch (AB) rejected InBev's all-cash offer price of $6 per share on June 30, 2008 saying it undervalued the company, despite the offer representing a 35 percent premium to AB's pre-announcement share price. InBev refused to raise its offer repeating its strong preference for a friendly takeover. Speculate as to why InBev refused to raise its initial offer. Why do you believe that InBev continued to prefer a friendly takeover? What would you recommend InBev do to raise pressure on the AB board to accept the offer?

Inbev Acquires an American Icon For many Americans, Budweiser is synonymous with American beer and American beer is synonymous with Anheuser-Busch (AB). Ownership of the American icon changed hands on July 14, 2008, when beer giant Anheuser Busch agreed to be acquired by Belgian brewer InBev for $52 billion in an all-cash deal. The combined firms would have annual revenue of about $36 billion and control about 25 percent of the global beer market and 40 percent of the U.S. market. The purchase is the most recent in a wave of consolidation in the global beer industry. The consolidation reflected an attempt to offset rising commodity costs by achieving greater scale and purchasing power. While likely to generate cost savings of about $1.5 billion annually by 2011, InBev stated publicly that the transaction is more about the two firms being complementary rather than overlapping. The announcement marked a reversal from AB's position the previous week when it said publicly that the InBev offer undervalued the firm and subsequently sued InBev for "misleading statements" it had allegedly made about the strength of its financing. To court public support, AB publicized its history as a major benefactor in its hometown area (St. Louis, Missouri). The firm also argued that its own long-term business plan would create more shareholder value than the proposed deal. AB also investigated the possibility of acquiring the half of Grupo Modelo, the Mexican brewer of Corona beer, which it did not already own to make the transaction too expensive for InBev. While it publicly professed to want a friendly transaction, InBev wasted no time in turning up the heat. The firm launched a campaign to remove Anheuser's board and replace it with its own slate of candidates, including a Busch family member. However, AB was under substantial pressure from major investors, including Warren Buffet, to agree to the deal since the firm's stock had been lackluster during the preceding several years. In an effort to gain additional shareholder support, InBev raised its initial $65 bid to $70. To eliminate concerns over its ability to finance the deal, InBev agreed to fully document its credit sources rather than rely on the more traditional but less certain credit commitment letters. In an effort to placate AB's board, management, and the myriad politicians who railed against the proposed transaction, InBev agreed to name the new firm Anheuser-Busch InBev and keep Budweiser as the new firm's flagship brand and St. Louis as its North American headquarters. In addition, AB would be given two seats on the board, including August A. Busch IV, AB's CEO and patriarch of the firm's founding family. InBev also announced that AB's 12 U.S. breweries would remain open. -InBev launched a proxy contest to take control of the Anheuser-Busch Board and includes a Busch family member on its slate of candidates. The firm also raised its bid from $65 to $40 and agreed to fully document its loan commitments. Explain how each of these actions helped complete the transaction?

Poison pills are a commonly used takeover tactic to remove the management and board of the target firm.

The following takeover defenses are generally put in place by a firm after a takeover attempt is underway.

A target firm is unlikely to reject a bid without getting a "fairness" opinion from an investment banker stating that the offer is inadequate.

A hostile tender offer is a takeover tactic in which the acquirer bypasses the target's board and management and goes directly to the target's shareholders with an offer to purchase their shares.

Verizon Acquires MCI—The Anatomy of Alternative Bidding Strategies While many parties were interested in acquiring MCI, the major players included Verizon and Qwest. U.S.-based Qwest is an integrated communications company that provides data, multimedia, and Internet-based communication services on a national and global basis. The acquisition would ease the firm's huge debt burden of $17.3 billion because the debt would be supported by the combined company with a much larger revenue base and give it access to new business customers and opportunities to cut costs. Verizon Communications, created through the merger of Bell Atlantic and GTE in 2000, is the largest telecommunications provider in the United States. The company provides local exchange, long distance, Internet, and other services to residential, business, and government customers. In addition, the company provides wireless services to over 42 million customers in the United States through its 55 percent–owned joint venture with Vodafone Group PLC. Verizon stated that the merger would enable it to more efficiently provide a broader range of services, give the firm access to MCI's business customer base, accelerate new product development using MCI's fiber-optic network infrastructure, and create substantial cost savings. By mid-2004, MCI had received several expressions of interest from Verizon and Qwest regarding potential strategic relationships. By July, Qwest and MCI entered into a confidentiality agreement and proceeded to perform more detailed due diligence. Ivan Seidenberg, Verizon's chairman and CEO, inquired about a potential takeover and was rebuffed by MCI's board, which was evaluating its strategic options. These included Qwest's proposal regarding a share-for-share merger, following a one-time cash dividend to MCI shareholders from MCI's cash in excess of its required operating balances. In view of Verizon's interest, MCI's board of directors directed management to advise Richard Notebaert, the chairman and CEO of Qwest, that MCI was not prepared to move forward with a potential transaction. The stage was set for what would become Qwest's laboriously long and ultimately unsuccessful pursuit of MCI, in which the firm would improve its original offer four times, only to be rejected by MCI in each instance even though the Qwest bids exceeded Verizon’s. After assessing its strategic alternatives, including the option to remain a stand-alone company, MCI's board of directors concluded that the merger with Verizon was in the best interests of the MCI stockholders. MCI's board of directors noted that Verizon's bid of $26 in cash and stock for each MCI share represented a 41.5 percent premium over the closing price of MCI's common stock on January 26, 2005. Furthermore, the stock portion of the offer included "price protection" in the form of a collar (i.e., the portion of the purchase price consisting of stock would be fixed within a narrow range if Verizon’s share price changed between the signing and closing of the transaction). The merger agreement also provided for the MCI board to declare a special dividend of $5.60 once the firm's shareholders approved the deal. MCI's board of directors also considered the additional value that its stockholders would realize, since the merger would be a tax-free reorganization in which MCI shareholders would be able to defer the payment of taxes until they sold their stock. Only the cash portion of the purchase price would be taxable immediately. MCI's board of directors also noted that a large number of MCI's most important business customers had indicated that they preferred a transaction between MCI and Verizon rather than a transaction between MCI and Qwest. While it is clearly impossible to know for sure, the sequence of events reveals a great deal about Verizon's possible bidding strategy. Any bidding strategy must begin with a series of management assumptions about how to approach the target firm. It was certainly in Verizon's best interests to attempt a friendly rather than a hostile takeover of MCI, due to the challenges of integrating these two complex businesses. Verizon also employed an increasingly popular technique in which the merger agreement includes a special dividend payable by the target firm to its shareholders contingent upon their approval of the transaction. This special dividend is an inducement to gain shareholder approval. Given the modest 3 percent premium over the first Qwest bid, Verizon's initial bidding strategy appears to have been based on the low end of the purchase price range it was willing to offer MCI. Verizon was initially prepared to share relatively little of the potential synergy with MCI shareholders, believing that a bidding war for MCI would be unlikely in view of the recent spate of mergers in the telecommunications industry and the weak financial position of other competitors. SBC and Nextel were busy integrating AT&T and Sprint, respectively. Moreover, Qwest appeared to be unable to finance a substantial all-cash offer due to its current excessive debt burden, and its stock appeared to have little appreciation potential because of ongoing operating losses. Perhaps stunned by the persistence with which Qwest pursued MCI, Verizon believed that its combination of cash and stock would ultimately be more attractive to MCI investors than Qwest's primarily all-cash offer, due to the partial tax-free nature of the bid. Throughout the bidding process, many hedge funds criticized MCI's board publicly for accepting the initial Verizon bid. Since its emergence from Chapter 11, hedge funds had acquired significant positions in MCI's stock, with the expectation that MCI constituted an attractive merger candidate. In particular, Carlos Slim Helu, the Mexican telecommunications magnate and largest MCI shareholder, complained publicly about the failure of MCI's board to get full value for the firm's shares. Pressure from hedge funds and other dissident MCI shareholders triggered a shareholder lawsuit to void the February 14, 2005, signed merger agreement with Verizon. In preparation for a possible proxy fight, Verizon entered into negotiations with Carlos Slim Helu to acquire his shares. Verizon acquired Mr. Slim's 13.7 percent stake in MCI in April 2005. Despite this purchase, Verizon's total stake in MCI remained below the 15 percent ownership level that would trigger the MCI rights plan. About 70 percent (i.e., $1.4 billion) of the cash portion of Verizon's proposed purchase price consisted of a special MCI dividend payable by MCI when the firm's shareholders approved the merger agreement. Verizon's management argued that the deal would cost their shareholders only $7.05 billion (i.e., the $8.45 billion purchase price consisting of cash and stock, less the MCI special dividend). The $1.4 billion special dividend reduced MCI's cash in excess of what was required to meet its normal operating cash requirements. Qwest consistently attempted to outmaneuver Verizon by establishing a significant premium between its bid and Verizon's, often as much as 25 percent. Qwest realized that its current level of indebtedness would preclude it from significantly increasing the cash portion of the bid. Consequently, it had to rely on the premium to attract enough investor interest, particularly among hedge funds, to pressure the MCI board to accept the higher bid. However, Qwest was unable to convince enough investors that its stock would not simply lose value once more shares were issued to consummate the stock and cash transaction. Qwest could have initiated a tender or exchange offer directly to MCI shareholders, proposing to purchase or exchange their shares without going through the merger process. The tender process requires lengthy regulatory approval. However, if Qwest initiated a tender offer, it could trigger MCI's poison pill. Alternatively, a proxy contest might have been preferable because Qwest already had a bid on the table, and the contest would enable Qwest to lobby MCI shareholders to vote against the Verizon bid. This strategy would have avoided triggering the poison pill. Ultimately, Qwest was forced to capitulate simply because it did not have the financial wherewithal to increase the $9.9 billion bid. It could not borrow anymore because of its excessive leverage. Additional stock would have contributed to earnings dilution and caused the firm's share price to fall. It is unusual for a board to turn down a higher bid, especially when the competing bid was 17 percent higher. In accepting the Verizon bid, MCI stated that a number of its large business customers had expressed a preference for the company to be bought by Verizon rather than Qwest. MCI noted that these customer concerns posed a significant risk in being acquired by Qwest. The MCI board's acceptance of the lower Verizon bid could serve as a test case of how well MCI directors are conducting their fiduciary responsibilities. The central issue is how far boards can go in rejecting a higher offer in favor of one they believe offers more long-term stability for the firm's stakeholders. Ron Perlman, the 1980s takeover mogul, saw his higher all-cash bid rejected by the board of directors of Revlon Corporation, which accepted a lower offer from another bidder. In a subsequent lawsuit, a court overruled the decision by the Revlon board in favor of the Perlman bid. Consequently, from a governance perspective, legal precedent compels boards to accept higher bids from bona fide bidders where the value of the bid is unambiguous, as in the case of an all-cash offer. However, for transactions in which the purchase price is composed largely of acquirer stock, the value is less certain. Consequently, the target's board may rule that the lower bidder's shares have higher appreciation potential or at least are less likely to decline than those shares of other bidders. MCI's president and CEO Michael Capellas and other executives could collect $107 million in severance, payouts of restricted stock, and monies to compensate them for taxes owed on the payouts. In particular, Capellas stood to receive $39.2 million if his job is terminated "without cause" or if he leaves the company “for good reason." -In your opinion, did the MCI board act in the best interests of their shareholders? Of all their stakeholders? Be specific.

Which of the following factors often affects hostile takeover bids?

Alcoa Easily Overwhelms Reynolds’ Takeover Defenses Alcoa reacted quickly to a three-way intercontinental combination of aluminum companies aimed at challenging its dominance of the Western World aluminum market by disclosing an unsolicited takeover bid for Reynolds Metals in early August 1999. The offer consisted of $4.3 billion, or $66.44 a share, plus the assumption of $1.5 billion in Reynolds’ outstanding debt. Reynolds, a perennial marginally profitable competitor in the aluminum industry, appeared to be particularly vulnerable, since other logical suitors or potential white knights such as Canada’s Alcan Aluminum, France’s Pechiney SA, and Switzerland’s Alusuisse Lonza Group AG were already involved in a three-way merger. Alcoa’s letter from its chief executive indicated that it wanted to pursue a friendly deal but suggested that it may pursue a full-blown hostile bid if the two sides could not begin discussions within a week. Reynolds appeared to be highly vulnerable because of its poor financial performance amid falling aluminum prices worldwide and because of its weak takeover defenses. It appeared that a hostile bidder could initiate a mail-in solicitation for shareholder consent at any time. Moreover, major Reynolds’ shareholders began to pressure the board. Its largest single shareholder, Highfields Capital Management, a holder of more than four million shares, demanded that the Board create a special committee of independent directors with its own counsel and instruct Merrill Lynch to open an auction for Reynolds. Despite pressure, the Reynolds’ board rejected Alcoa’s bid as inadequate. Alcoa’s response was to say that it would initiate an all cash tender offer for all of Reynolds’ stock and simultaneously solicit shareholder support through a proxy contest for replacing the Reynolds’ board and dismantling Reynolds’ takeover defenses. Notwithstanding the public posturing by both sides, Reynolds capitulated on August 19, slightly more than two weeks from receipt of the initial solicitation, and agreed to be acquired by Alcoa. The agreement contained a thirty-day window during which Reynolds could entertain other bids. However, if Reynolds should choose to go with another offer, it would have to pay Alcoa a $100 million break-up fee. Under the agreement, which was approved by both boards, each share of Reynolds was exchanged for 1.06 shares of Alcoa stock. When announced, the transaction was worth $4.46 billion and valued each Reynolds share at $70.88, based on an Alcoa closing price of $66.875 on August 19, 1999. The $70.88 price per share of Reynolds suggested a puny 3.9 percent premium to Reynolds’ closing price of $68.25 as of the close of August 19. The combined annual revenues of the two companies totaled $20.5 billion and accounted for about 21.5 percent of the Western World market for aluminum. To receive antitrust approval, the combined companies were required divest selected operations. -Why do you believe Reynolds' management rejected Alcoa's initial bid as inadequate?

The shareholder interests theory suggests that shareholders gain when management resists takeover attempts.

Hewlett-Packard Family Members Oppose Proposal to Acquire Compaq On September 4, 2001, Hewlett-Packard (“HP”) announced its proposal to acquire Compaq Computer Corporation for $25 billion in stock. Almost immediately, investors began to doubt the wisdom of the proposal. The new company would face the mind-numbing task of integrating overlapping product lines and 150,000 employees in 160 countries. Reflecting these concerns, the value of the proposed merger had sunk to $16.9 million within 30 days following the announcement, in line with the decline in the value of HP’s stock. In November 2001, Walter Hewlett and David Packard, sons of the co-founders, and both the Hewlett and Packard family foundations, came out against the transaction. These individuals and entities controlled about 18% of HP’s total shares outstanding. Both Carly Fiorina, HP’s CEO, and Michael Capellas, Compaq’s CEO, moved aggressively to counter this opposition by taking their case directly to the remaining HP shareholders. HP management’s efforts included a 49-page report written by HP’s advisor Goldman Sachs to rebut one presented by Walter Hewlett’s advisors. HP also began advertising in national newspapers and magazines, trying to convey the idea that this deal is not about PCs but about giving corporate customers everything from storage and services to printing and imaging. After winning a hotly contested 8-month long proxy fight by a narrow 2.8 percentage point margin, HP finally was able to purchase Compaq on May 7, 2002, for approximately $19 billion. However, the contentious proxy fight had lingering effects. The delay in integrating the two firms resulted in the defection of key employees, the loss of customers and suppliers, the expenditure of millions of dollars, and widespread angst among shareholder. -In view of the dramatic decline in HP's stock following the announcement, why do you believe Compaq shareholders would still vote to approve the merger?

Inbev Acquires an American Icon For many Americans, Budweiser is synonymous with American beer and American beer is synonymous with Anheuser-Busch (AB). Ownership of the American icon changed hands on July 14, 2008, when beer giant Anheuser Busch agreed to be acquired by Belgian brewer InBev for $52 billion in an all-cash deal. The combined firms would have annual revenue of about $36 billion and control about 25 percent of the global beer market and 40 percent of the U.S. market. The purchase is the most recent in a wave of consolidation in the global beer industry. The consolidation reflected an attempt to offset rising commodity costs by achieving greater scale and purchasing power. While likely to generate cost savings of about $1.5 billion annually by 2011, InBev stated publicly that the transaction is more about the two firms being complementary rather than overlapping. The announcement marked a reversal from AB's position the previous week when it said publicly that the InBev offer undervalued the firm and subsequently sued InBev for "misleading statements" it had allegedly made about the strength of its financing. To court public support, AB publicized its history as a major benefactor in its hometown area (St. Louis, Missouri). The firm also argued that its own long-term business plan would create more shareholder value than the proposed deal. AB also investigated the possibility of acquiring the half of Grupo Modelo, the Mexican brewer of Corona beer, which it did not already own to make the transaction too expensive for InBev. While it publicly professed to want a friendly transaction, InBev wasted no time in turning up the heat. The firm launched a campaign to remove Anheuser's board and replace it with its own slate of candidates, including a Busch family member. However, AB was under substantial pressure from major investors, including Warren Buffet, to agree to the deal since the firm's stock had been lackluster during the preceding several years. In an effort to gain additional shareholder support, InBev raised its initial $65 bid to $70. To eliminate concerns over its ability to finance the deal, InBev agreed to fully document its credit sources rather than rely on the more traditional but less certain credit commitment letters. In an effort to placate AB's board, management, and the myriad politicians who railed against the proposed transaction, InBev agreed to name the new firm Anheuser-Busch InBev and keep Budweiser as the new firm's flagship brand and St. Louis as its North American headquarters. In addition, AB would be given two seats on the board, including August A. Busch IV, AB's CEO and patriarch of the firm's founding family. InBev also announced that AB's 12 U.S. breweries would remain open. -Why would the annual cost savings not be realized until the end of the third year?

What are the primary advantages and disadvantages of commonly used takeover defenses?

Xon Enterprises is attempting to take over Rayon Group. Rayon's shareholders have the right to buy additional shares at below market price if Xon (considered by Rayon's board to be a hostile bidder) buys more than 15 percent of Rayon's outstanding shares. What term applies to this antitakeover measure?

Public announcements of a proposed takeover are often designed to put pressure on the board of the target firm.