In order to learn more about takeovers complete the following text with the words from the box.

controlling interest	approval	purchase / purchases	bid
make a decision	target company	to purchase the shares	acquisition
hostile takeover	expertise	acquiring company	cash
strengthen	acquirers	traded shares for shares	shareholders
Alliance of equals	to acquire	board of directors
Target	survive

Takeovers are never an 1) ………… as a stronger company uses all its 2) …….. to acquire a weaker company.

A 3) ………. occurs when a company attempts 4) ……….. another whether the management of the 5) ……………. likes it or not. The 6) ……………. usually avoids the target 7) …………. decision and 8) ……….. shares from other sources.

An 9) …………… of a target’s 10) …………usually starts with a tender offer - a takeover 11) ………. made by acquiring company in order 12) ………….. of a target company at a set price. Target stock may be either 13) ……………… or bought for

14) ………. The deadline for shareholders 15) ……… is also set. By putting a defined time limit on the offer, it forces the shareholders to 16) ………… quickly. But the 17) …………. make all efforts to 18) ……….. and use different tactics to 19) …….. their position.

Hostile takeovers look like real battles, and this is reflected through a very colourful vocabulary. For example, 20) ………. are called “raiders” or “predators” who can use “greenmail” as a method of pressure. Measures which a 21) ……………. company can take in order to avoid a buyout are “poison pill”, “shark repellent” or “golden parachute”. A friendly company that may help the target and 22) ………… its shares instead of the raider is a “White Knight”.

Exercise 11

If you want to know what the takeover terms mean, match each term with its translation and definition.

Term	Translation	Definition
Raider	1. “золотой парашют”; контракт менеджеров с компанией о выплате большого вознаграждения в случае увольнения при поглощении	a) contract giving top executives benefits like a large sum of money that must be paid by the acquirer if they are removed after a takeover
Predator	2. участник налета; скупщик акций	b) a friendly takeover offer to a target company that is facing a hostile takeover from another party
Greenmail	3. “белый рыцарь”; дружественная компания	c) ) individual or corporation who purchases a controlling interest in a company's stock
Poison Pill	4. “зеленый шантаж”; угроза захвата компании, вынуждающая её выкупать собственные акции с надбавкой	d) a person or legal entity who aggressively is acquiring a company
Shark Repellent	5. хищник; грабитель	e) an act of buying a corporation's stock, threatening to take control, and then making target shareholders purchase these share back at a higher price in exchange for a promise not to proceed with the takeover.
Golden Parachute	6. “ядовитая пилюля”; мера по предотвращению нежелательного поглощения	f) a plan to make the acquiring company pay more for the target company or changes of the voting structure.
White Knight	7. “отпугиватель акул”; меры по предотвращению нежелательного поглощения, перебивающие нежелательное поглощение	g) any number of measures taken by a corporation to discourage an unwanted takeover attempt.

Exercise 12

Read the following news headlines and explain what’s happening using the definitions from the above exercise.

1. Morons Inc. reject any negotiations with raiders.

2. The Ervil company CEO claims predators use illegal acts

3. The NVI Board start “opening” Golden Parachute

4. ARROWS decide on Poison Pill against hostile takeover

5. No Shark Repellent helped MGI to survive a takeover

6. Garnett Constructions are waiting for a White Knight

7. BOOGS use Greenmail to acquire TOOBS

Reading

Exercise 13

Read the following article to find out how severe a takeover battle can be.

What measures are taken by both companies (in terms of abovesaid tactics) in order to win the game?

Timeline of Mittal's courting of Arcelor

(Mittal Steel was one of the largest steel producers. Arcelor was a steel producer)

Jan. 27 Mittal Steel unveils unsolicited $22.7 billion bid for Luxembourg-based Arcelor.

Jan. 29 Arcelor rejects that bid, saying the two companies don't share strategic vision.

Feb 16 Arcelor unveils an 85% dividend rise to keep from Mittal bid.

Feb 27 Arcelor presents strategic targets for next three years, promises any acquisitions would have a return on capital of at least 15% and that it'll continue its progressive dividend policy.

April 4 Arcelor unveils more takeover defenses, including a special payment of more than $6 billion to shareholders and the isolation of recently acquired Canada steelmaker Dofasco into an independent Dutch foundation with control over the unit. The move is meant to discourage Mittal, which has no interest in Dofasco and wanted to sell it.

April 28 Arcelor shareholders re-elect the board, confirming support of management.

May 9 Mittal promise to raise the bid for Arcelor if their board recommends the offer.

May 18 Mittal launches a tender offer in this hostile takeover for Arcelor, putting an end to months of verbal communication and giving Arcelor shareholders a chance to set the future.

May 19 Mittal increases Arcelor offer by 34%. The new bid values it at $32.9 billion.

May 21 Arcelor agrees to study the sweetened offer.

May 26 Arcelor agrees to combine with Severstal, Russia's second-largest steelmaker. The deal leaves the fate of Arcelor to its shareholders, who can still opt for Mittal Steel's bid if they choose, at a meeting scheduled for June 28.

June 7 Arcelor agrees to meet with Mittal management face to face for the first time to discuss its takeover offer.

June 12 Arcelor declines Mittal again, saying the revised offer still undervalues the company and urges shareholders to support the Severstal merger instead, but mandates its board to explore possible improvements to the Mittal offer at a later date.

June 13 Mittal continues lobbying Arcelor shareholders, saying it expects core earnings to rise by more than $4 billion in the next three years. Mittal also reveals to Arcelor shareholders the business plan previously seen by management only.

June 20 Mittal urges Arcelor investors to veto Severstal deal by taking ads in financial newspapers. The letter published in the Financial Times of London argues that the proposed tie-up with Severstal would give owner Alexei Mordashov control over the combined company.

June 21 Severstal improves the terms of its offer for Arcelor and agrees to take fewer shares of the European steelmaker.

June 25 Arcelor shareholders rejects Severstal offer..

June 30 Arcelor shareholders approve Mittal’s final offer.

Exercise 14. Internet Research

Merger Control

Mergers and Acquisitions are under strict governance of appropriate bodies. They are:

USA - DOJ – Department of Justice (министерство юстиции) and FTC – Federal Trade Commission (федеральная торговая комиссия)

The UK – OFT - Office of Fair Trading ( управление свободной торговли – антимонопольное управление)

EU - European Commission.

Canada – Competition Bureau - http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/home (link to the left Reviwing Mergers).

Choose a country you would like to speak about. Visit the site and prepare information on merger control policy provided by these organizations.

Final control

Answer the following questions:

1. How can you characterize a merger? What kind of alliance is it?

2. Does it all go that smoothly? How a merger is declared?

3. I know that more often a larger company initiates a merger, doesn’t it?

4. What about the mutual benefit?

5. How does the competition affect the tendency to merge?

6. What aims do the companies pursue in performing a merger?

7. What is the difference between a merger and acquisition?

8. What are the reasons for acquisitions?

9. How is an acquisition as a financial transaction performed?

10. What do companies create a joint venture for?

Part II. Antitrust Laws