Last December Abercrombie filed a preliminary proxy statement announcing a plan to reincorporate from Delaware to Ohio. Steve Davidoff and I commented on the move. Steve noted that, while Abercrombie had highlighted various reasons for the move, the shareholders had to dig through the disclosures to learn that it was, as I said in December, “essentially a takeover defense.” I added that “[t]his situation illustrates how jurisdictional choice makes contractual what would otherwise seem to be mandatory takeover rules.”
With respect to the disclosure issue, I asked:
Does it matter if there were enough sophisticated or well-advised institutional shareholders to help ensure an informed vote?
In January, Davidoff commented on Abercrombie’s definitive proxy statement, which he said “was virtually unchanged from the preliminary one”:
This proxy may be technically correct in its disclosure, but a reader can easily fail to put it all together. Moreover, you are left wondering whether the proxy statement truly discloses Abercrombie’s real reason for the reincorporation. * * *The Abercrombie shareholder meeting will be Feb. 28. It will be interesting to see if shareholders have the same questions that I do.
On February 21 Abercrombie told its shareholders:
Although we believe that the definitive proxy statement fully explains the reasons why the reincorporation proposal is in the best interests of our stockholders, there have been a series of articles posted by a “Deal Professor” on The New York Times’ website that question the Company’s reasons for proposing the reincorporation, question the timing of the proposal and imply that the Company has some ulterior motive in proposing the reincorporation. In effect, the articles, which we believe contain a number of factual errors in addition to mischaracterizations of Ohio law and our motivations, appear to demonize not just us and our proposal but Ohio corporate law itself. As a public company, we do not have the same ability to wage a campaign of unsubstantiated words in the public media. However, we would welcome an opportunity to discuss our proposal with you and address the factual errors and mischaracterizations in the blogs. * * *
But yesterday DJ wrote that Abercrombie
facing resistance to its plan to reincorporate in its home state of Ohio, delayed a special meeting of shareholders it had scheduled for Monday, in order to drum up enough investor support for the move.
The teen retailer said in a proxy filing on Monday that it was “convinced” it had strong support for the move after “a succession of positive communications with a number of significant stockholders.” But, general counsel Ronald Robins said, it has “been unable to obtain a strong consensus in favor of reincorporation at this point.” * * *
The company has faced criticism for its plan including from former lawyer and current law professor Steven Davidoff, who writes for the New York Times’s Dealbook Web site under the moniker Deal Professor. He cites provisions in Ohio law that could either make it easier for management to buy the company or make it harder for suitors to acquire the company, both to the potential detriment of stockholders.
Proxy advisory firm ISS had similar criticisms of the move’s effect on shareholder rights. * * *
Robins said that, whether as a result of press criticism or other reasons, some holders that had once supported the reincorporation now oppose it, including one hedge fund he declined to name.
I’ll stick to my original assessment that the market for state corporate law, at least for widely traded public companies, is working efficiently in a rich information environment that includes SEC disclosures, proxy advisor firms and, last but not least, Steve Davidoff.