Argovate Hostile Takeover Case Study

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Argo Vate/Hostil Takeover

ArgoVate/Hostile Takeover

Is this a hostile takeover?

A hostile takeover is described commonly as "acquiring a firm despite the disapproval of, or open resistance from, its board of directors. The acquirer ('raider') usually takes the takeover offer direct to the target firm's stockholders (shareholders) or seeks their approval to remove the obstructing board members." (Business Dictionary, 2013) In this case the takeover is definitely hostile because the AgroVate management does not think that the merger will result in overall betterment but that the employees and shareholders may be affected. On the other hand the purchasing company Bijoux wants to dismantle the current board and sell off AgroVate's widget finishing and the main business being service uniforms; there is no match or significant business advantage in the merger, which prima facie appears to be a hostile takeover.

Can the AgroVate board legally adopt defensive measures against Bijoux?

It is legal for a victim company of a takeover bid to defend itself. It is allowed under the Williams Act amendments to the Securities and Exchange Act of 1934. 2 That regulation is made to protect the share holders. Other than that, the victim company can devalue its shares and make the availability less to the hostile party -- called the poison pill. Lastly the board of directors have been empowered to resist hostile takeovers, including approaching courts.

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3) Two types of mergers are mentioned here. Define each type.

Firstly this is a purchase merger because Biijoux wants to buy the company outright and wipe it out. Secondly they are in unrelated business and hence it is also an attempt at making conglomeration. (MBDA, 2013) These two types have been displayed in the scenario. It is also a vertical merger in so far as some of the products of the company align with the production line of the taking over company, though widgets are not.

Part 2 Scenario II

1) What are the specific facts and circumstances which AgroVate's board must take into consideration in deciding how to respond to Bijoux's bid?

Primarily they must consider if it is beneficial to the company to allow competition in the takeover. Because the 'poison pill' can have negative effects in the long run, and there will not be an enthusiastic participation from existing shareholders, considering the fact that the company is slowly declining, there would be a takeover sometime in future if not immediately. It….....

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