Proxy fight
Barron's Finance & Investment Dictionary:
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Proxy fight
technique used by an acquiring company to attempt to gain control of a takeover target. The acquirer tries to persuade the shareholders of the target company that the present management of the firm should be ousted in favor of a slate of directors favorable to the acquirer. If the shareholders, through their proxy votes, agree, the acquiring company can gain control of the company without paying a Premium price for the firm.
| Proxy, Provisional Rating | |
| Proxy Statement, Prudent-Man Rule |
Investopedia Financial Dictionary:
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Proxy Fight
When a group of shareholders are persuaded to join forces and gather enough shareholder proxies to win a corporate vote. This is referred to also as a proxy battle.
Investopedia Says:
This term is used mainly in the context of takeovers. The acquirer will persuade existing shareholders to vote out company management so that the company will be easier to takeover.
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Wikipedia on Answers.com:
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Proxy fight
A proxy fight or proxy battle is an event that may occur when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes (i.e. votes by one individual or institution as the authorized representative of another) to install new management for any of a variety of reasons. Shareholders of a public corporation may appoint an agent to attend shareholder meetings and vote on their behalf. That agent is the shareholder's proxy.[1]
In a proxy fight, incumbent directors and management have the odds stacked in their favor over those trying to force the corporate change. These incumbents use various corporate governance tactics to stay in power including: staggering the boards (i.e. having different election years for different directors), controlling access to the corporation's money, and creating restrictive requirements in the bylaws. As a result, most proxy fights are unsuccessful. However, it has been recently noted that proxy fights waged by hedge funds are successful more than 60% of the time.[2]
Examples
An acquiring company, frustrated by the takeover defenses of the management, may initiate a proxy fight to install a more compliant management of the target.
Stockholder dissidents opposed to an impending takeover in the view that it will dilute value may also use a proxy fight to stop it. An example of a proxy fight took place within Hewlett-Packard, when the management of that company sought to take over Compaq. Opponents of the Compaq takeover lost the fight. The management, under Carly Fiorina, remained in place, and the merger went ahead.[3]
In the absence of any looming takeover, proxy fights can come about because dissidents are unhappy with management, as with Carl Icahn's effort in 2005-2006 to oust a majority of the board of Time Warner.[4]
An early history of proxy fighting, detailing such 1950s battles as the fight for control of some of America's largest corporations, including the Bank of America and the New York Central Railroad, can be found in David Karr's 1956 volume, Fight for Control.
References
- ^ Klein, Ramseyer, and Bainbridge. Business Associations: Cases and Materials on Agency, Partnerships, and Corporations. (7th Ed.) Foundation Press.
- ^ Klein, April and Zur, Emanuel. 2009. Entrepreneurial shareholder activism: Hedge funds and other private investors. Journal of Finance 64(1): 187-229.
- ^ HP declares proxy win
- ^ Frank Biondi Joins Carl Icahn in Time Warner Proxy Fight
External links
- Proxy fights heat up as markets tank
- Capital markets are proxy-fight friendly: Part II
- Icahn launches Yahoo proxy fight, may boost stake by $2.5 billion
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