An Activist Approach: Confidential Role Assignment for Castle Rock Management

Guhan   Subramanian; Kait  Szydlowski

Exercise | July 2015

An Activist Approach: Confidential Role Assignment for Castle Rock Management

by Guhan Subramanian and Kait Szydlowski

Abstract

A three party, multiple-issue negotiation exercise dealing with a potential merger between two leading department stores, called for by an activist investor hedge fund in a letter to both companies. Company management will now attempt to navigate next moves, which are complicated by weak takeover defenses of their corporate boards, hedge fund ownership stake within both companies, and potential anti-trust risk. Meanwhile, the third party, the activist hedge fund, is turning up the heat in planning their next move.

Keywords: negotiation; corporate governance; Activist Investors; takeover defense; Negotiation Types; Mergers and Acquisitions; Corporate Governance; Investment Activism; Retail Industry;

Language: English

Format: Print

2 pages

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Subramanian, Guhan, and Kait Szydlowski. "An Activist Approach: Confidential Role Assignment for Castle Rock Management." Harvard Business School Exercise 916-012, July 2015.

Case | HBS Case Collection | February 2019 (Revised January 2020)

Pierre Foods Acquisition of Advance Foods (A)

Guhan Subramanian and Mike Harmon

This case (A), and its related cases (B-E), establish a setting to discuss an M&A transaction and some of the key legal contracts that are associated with it. In 2010, private equity backed food manufacturer Pierre Foods is contemplating the acquisition of a key competitor, Advance Foods. The acquisition would be debt financed, and would involve the “rollover” of an equity stake by the selling shareholders. There are five key documents to be negotiated: The Stock Purchase Agreement (Cases B-1, B-2), the Stockholders’ and Registration Rights Agreements (Cases C-1, C-2), the Credit Agreement (Cases D-1, D-2), and the Employment Agreement (Cases E-1, E-2). These agreements have been drafted, but each contain a handful of open business points which the parties need to resolve. The cases look at these open points from the perspective of each of the key parties involved, including Pierre’s majority shareholder, Oaktree Capital Management, the selling shareholders, the target’s management team, and the lenders to the acquisition facility. Overall, these cases can be used to understand the unique elements of a complex corporate transaction, how the key documents allocate risk and value, and how parties may make trade-offs to achieve outcomes that best match their priorities.

Keywords: Mergers and Acquisitions; Contracts; Agreements and Arrangements; Negotiation; Complexity;

Citation:

Subramanian, Guhan, and Mike Harmon. "Pierre Foods Acquisition of Advance Foods (A)." Harvard Business School Case 919-022, February 2019. (Revised January 2020.) View Details

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An Activist Approach: Confidential Role Assignment for Castle Rock Management

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