State Takeover Statutes Revisited

I have a confession to make. The title of my article that appeared recently in this review, The Promise of State Takeover Statutes, was deliberately chosen for its shock value. Since few if any reflective works have supported state takeover statutes, it occurred to me that a title suggesting there was something positive in them might get someone’s attention. Clearly it did. In a recent piece entitled Missing the Point About State Takeover Statutes, Professors Lyman Johnson and David Millon take issue with my title. I say that they take issue with my title because it does not appear that they read the article itself.

Johnson and Millon have two complaints. First, they point out that partial and two-tier tender offers are far less common today than are tender offers for all of a target company’s outstanding common shares. The suggestion is that my analysis of state takeover statutes in general and control share acquisition statutes in particular is irrelevant. They neglect to note that I acknowledged the decline of coercive offers.

Second, Johnson and Millon complain that my analysis proceeds from the assumption that shareholder welfare ought to be the standard by which we judge the wisdom of corporation laws. They neglect to note that I acknowledged the broader issue of whether other constituencies such as employees, suppliers, customers, or bondholders are harmed by takeovers and explained that, even if they are, the question remains whether the mechanisms by which takeover bidders buy control is fair to shareholders.