When the wolf is literally at your door and an unwelcome offer to buy your company arrives, what is the role of in-house counsel?<\/p>\n
That situation is playing out in real time on CNBC, trade journals and newspapers as Canadian Pacific Rail and its legendary CEO, Hunter Harrison, along with activist investor Bill Ackman of Pershing Square have made an unsolicited offer to buy the eastern railroad behemoth, Norfolk Southern Corporation.<\/p>\n
Perhaps sensing opportunity with a new management team in Norfolk (the new CEO is a former in-house lawyer for NS) and economic headwinds ahead, Harrison, the charismatic and the former\u202f exceedingly successful CEO at three other railroads, including the Illinois Central, Canadian National and now CP, has made a series of offers to combine with NS to create the first true transcontinental railroad.<\/p>\n
This is where legal strategy and in-house efforts become interesting.\u202fRailroads are among the most highly regulated industries in the United States. Merger authority is vested with the Surface Transportation Board (formerly the ICC). The STB is charged with promoting not only competition in reviewing mergers, but considering a host of other public interest criteria.\u202fThe process is both highly legalistic but also political. In its effort to fend off this deal, NS has retained two former STB Commissioners to write \u201cwhite\u201d papers on why the STB will turn down the transaction.<\/p>\n
Another tactic being employed by CP is to go directly after the shareholders since NS\u2019 management and Board have evinced little interest in the transaction. Through a series of different offers — part cash, part stock, and part investment vehicle — CP continues to raise the ante.\u202f One of its key tactics is to offer a Voting Trust to hedge the risks for shareholders when they are asked to vote on the proposed transaction.\u202f Essentially, the stock of NS would be put into the Trust (which would have to be approved by the STB) at the time the financial consideration is paid.\u202fThus, shareholders would get their money even if the STB ultimately turns the merger down.\u202f The Trust prevents legal control from being asserted before regulatory approval.\u202f CP is proposing to put Mr. Harrison in charge of NS during the pendency of the regulatory proceeding. NS has countered by asserting that the Voting Trust would not be approved by the STB, and daring CP to file a petition for declaratory judgment in advance to ask the STB to declare the Trust lawful. CP has yet to be drawn into the tactic, asserting that Trusts have been approved on numerous times in the past and the proposed structure is no different.<\/p>\n
The final quiver in the bow regarding influencing public perception is on the political end. Letters have already been solicited by prominent officials to oppose the transaction. This drama will play out over the next several weeks.\u202f In-house lawyers will have to be at the top of their game in the high-stakes gambit. Balancing their obligation to vigorously and zealously represent the interests of their clients, while, at the same time, recognizing their legal and fiduciary duties to their Board and to shareholders will require careful attention.<\/p>\n","protected":false},"excerpt":{"rendered":"
When the wolf is literally at your door and an unwelcome offer to buy your company arrives, what is the role of in-house counsel? That situation is playing out in real time on CNBC, trade journals and newspapers as Canadian Pacific Rail and its legendary CEO, Hunter Harrison, along with activist investor Bill Ackman of<\/p>\n","protected":false},"author":5,"featured_media":739,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,13,38],"tags":[133],"coauthors":[63],"class_list":["post-744","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-alumni-authored","category-business-law-practice","category-regulated-industries","tag-in-house-counsel","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\n