getting hostile

Recent regulatory decisions have left a ‘serious vacuum’ surrounding takeovers and poison pills.

Toronto • The inventor of the “poison pill” corporate takeover defence says there is a “dramatic difference” between canada and the United States when it comes to company buyouts, with the U.S. leaning toward quicker takeovers with less resistance.

“There’s no one in his right mind who’s advising a board in the U.S. who would say, ‘Just say no’ [to a

If you want to make a bona fide offer for a company, it’s never been easier

takeover bid],” Martin Lipton said Tuesday in Toronto during a panel session led by Ontario Securities commission chair howard Wetston.

Mr. Lipton, one of the founding partners of U.S. law firm Wachtell, Lipton, rosen and Katz and the lawyer who came up with the idea for shareholder rights plans known as poison pills to fend off hostile bids in the early 1980s, was referring to the option of refusing a bid that is deemed not to be in the best interest of a company.

canadian regulators are considering giving boards more power to fend off unwanted takeovers by giving the poison pill defence a longer lifespan so long as shareholders give their approval.

The umbrella group for the country’s provincial securities regulators is reviewing more than 70 comment letters received on the issue, and the province of Quebec is considering its own overhaul of policy governing defensive tactics.

Large takeover premiums that leave sellers “happier than hugh hefner” are among the drivers of acquisition activity in the United States, according to Leo Strine Jr., chancellor of delaware’s court of chancery, who also participated in the panel discussion.

Shareholder activism, including the ability to replace directors if they aren’t performing in a manner that is pleasing to investors, is also playing a role, the panelists said.

“The U.S. is a very good place to be an acquirer right now. Only a fool would go hostile — you don’t have to,” said Mr. Strine.

“If you want to make a bona fide offer for a company, it’s never been easier.”

Investors should take some satisfaction from takeovers that can be handled without the cost of protracted litigation, Mr. Strine said, adding that the courts should only be used when necessary.

Stephen halperin, a partner at Toronto-based law firm Goodmans LLP who specializes in mergers and acquisitions, said a premium on the share price alone should not be enough to drive a takeover. boards of directors in canada should use the power they have been given to determine whether a bid for a company should go forward, he said.

“Where is it written that shareholders have the right to force a company to sell itself ?” Mr. halperin said.

recent regulatory and court decisions involving Magna International Inc. have left a “serious vacuum” in the rules surrounding takeovers in canada, said Mr. halperin, particularly pertaining to whether boards of directors must obtain and opine on fairness opinions from outside advisors.

Jim Turner, vice-chair of the Ontario Securities commission, suggested that a board of directors could opt to take such steps if the terms of the proposed takeover warranted it, even if the directors weren’t compelled to do so by regulation or laws. “In those cases, hold your feet to the fire and make a recommendation,” said Mr. Turner, who also participated in the panel discussion.