Back-dating scandal groups at risk
Back-dating scandal groups at risk
By Francesco Guerrera, Brooke Masters and Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: April 29 2007 22:11 | Last updated: April 29 2007 22:11
More than 40 US companies embroiled in the options back-dating scandal, including software makers McAfee and Novell, could be vulnerable to takeover by activist investors because of a side-effect of long-standing laws.
The new threat to some of the 140-plus companies involved in the options controversy comes at a time when cash-rich hedge funds and private equity groups are scouring the market for takeover targets.
An analysis by the Financial Times has found that 42 of the companies involved in the options scandal are at risk of being targeted by activists who could seek to remove their boards and gain control without launching a takeover bid.
The threat stems from a complex combination of state laws and financial regulations. Under laws in Delaware, the state where most US companies are registered, if a company does not hold a shareholder meeting for 13 months, investors can ask a court to call one.
At such meetings, a company can be banned from communicating with shareholders because the US Securities and Exchange Commission prohibits a group from issuing proxy documents if it has not produced up-to-date financial statements. As a result, activist investors could make proposals, such as removing directors, and the company would be unable fully to respond.
New York state has a similar provision, although it requires shareholders representing at least 10 per cent of a company’s stock to support the call for a special meeting.
Many companies involved in the options scandal have been unable to produce full results because of the options backdating scandal.
Comverse Technology, which has not held a shareholder meeting for more than 13 months because of probes into options backdating, is the first group to fall foul of the provisions.
It is under attack from Oliver Press Partners, a New York hedge fund, which wants seats on its board.
Comverse has asked the SEC to waive the ban on shareholder communications if OPP succeeds in calling a meeting.
“There can be no assurance that OPP or another dissident shareholder will not attempt to nominate additional directors or replace the entire board,” it said.
The SEC, which declined to comment, rarely grants such waivers.
By Francesco Guerrera, Brooke Masters and Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: April 29 2007 22:11 | Last updated: April 29 2007 22:11
More than 40 US companies embroiled in the options back-dating scandal, including software makers McAfee and Novell, could be vulnerable to takeover by activist investors because of a side-effect of long-standing laws.
The new threat to some of the 140-plus companies involved in the options controversy comes at a time when cash-rich hedge funds and private equity groups are scouring the market for takeover targets.
An analysis by the Financial Times has found that 42 of the companies involved in the options scandal are at risk of being targeted by activists who could seek to remove their boards and gain control without launching a takeover bid.
The threat stems from a complex combination of state laws and financial regulations. Under laws in Delaware, the state where most US companies are registered, if a company does not hold a shareholder meeting for 13 months, investors can ask a court to call one.
At such meetings, a company can be banned from communicating with shareholders because the US Securities and Exchange Commission prohibits a group from issuing proxy documents if it has not produced up-to-date financial statements. As a result, activist investors could make proposals, such as removing directors, and the company would be unable fully to respond.
New York state has a similar provision, although it requires shareholders representing at least 10 per cent of a company’s stock to support the call for a special meeting.
Many companies involved in the options scandal have been unable to produce full results because of the options backdating scandal.
Comverse Technology, which has not held a shareholder meeting for more than 13 months because of probes into options backdating, is the first group to fall foul of the provisions.
It is under attack from Oliver Press Partners, a New York hedge fund, which wants seats on its board.
Comverse has asked the SEC to waive the ban on shareholder communications if OPP succeeds in calling a meeting.
“There can be no assurance that OPP or another dissident shareholder will not attempt to nominate additional directors or replace the entire board,” it said.
The SEC, which declined to comment, rarely grants such waivers.
posted by Carlos T Mock at 1:40 PM
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