Antitrust Standing Rules for Hostile Takeover Targets
In hostile tender offers, the target company may assert that its acquisition by an unwanted suitor would violate Section 7 of the Clayton Act and seek protection from a federal district court in the form of a preliminary and permanent injunction blocking the suitor from continuing with its offer. The putative antitrust violation may arise from a long-standing relationship in the marketplace of the suitor and the target, or the target may attempt to create an antitrust problem where none before existed by quickly acquiring new lines of business or new business locations that would be problematic for the offeror to acquire.
Serious antitrust problems that cannot be cured by divestiture or other means, while relatively rare, can end a hostile takeover. But the prospect of being successful is not the only reason to commence an antitrust challenge. Even a target that has little hope of prevailing may have a strong incentive to bring an antitrust action against it suitor, since the prosecution of a merger antitrust action can provide the target with considerable time to pursue its other takeover defenses or to find a "white knight."
Courts have addressed these questions under the rubric of antitrust standing. The full note provides some background and summarizes the results by circuit, a mixed lot at best.
For the full pdf version of the full note, click here.
Categories: US Mergers
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