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Task 3 - Model Answer

Virat has prepared a proposed response to Rachel's question about the sale process. The response summarizes that while Rajdanto is not prohibited from launching a takeover bid of Denove under Delaware law, there would be additional hurdles if Rajdanto partners with private equity firm Amiko. Specifically, if Amiko is deemed an "owner" of Rajdanto's stock, it could become an interested stockholder within 3 years, requiring the bid to be approved by Denove's board in advance or by a supermajority vote. The response recommends coordinating with Rajdanto to avoid issues under these rules.

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121 views

Task 3 - Model Answer

Virat has prepared a proposed response to Rachel's question about the sale process. The response summarizes that while Rajdanto is not prohibited from launching a takeover bid of Denove under Delaware law, there would be additional hurdles if Rajdanto partners with private equity firm Amiko. Specifically, if Amiko is deemed an "owner" of Rajdanto's stock, it could become an interested stockholder within 3 years, requiring the bid to be approved by Denove's board in advance or by a supermajority vote. The response recommends coordinating with Rajdanto to avoid issues under these rules.

Uploaded by

Shaurya
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Hi Madison,

I have prepared a proposed response to Rachel’s question below – please let me know if I can assist
further.
Best,
Virat
-----------------------------

Hi Rachel,
Thank you for your email – it’s great to hear there has been further interest in the sale process.
In short, Rajdanto is not prohibited outright from launching a takeover bid of Denove under Delaware
law, however, there will be additional hurdles to be aware of for Rajdanto to participate in the sale
process if Rajdanto is looking to partner up with another private equity firm.
Rajdanto is an ‘interested stockholder’ for the purposes of § 203 of Delaware General Corporations
Law (DGCL) which generally prevents Rajdanto from making this type of takeover bid for a period of
3 years (from the date it acquired more than 15% of its voting stock. While Rajdanto acquired its stock
more than 3 years ago, there is a concern that, if it teams up with Amiko, Amiko may be deemed to
become an “owner” of Rajdanto’s stock by virtue of its arrangements with Rajdanto, and thus itself
become an interested stockholder, who has not yet held the stock for three years. If that is the case,
the bid could still proceed, but it gets more complicated. Under § 203, Denove would have two
options:
(1) Have the Denove board approve, in advance, that arrangement (or the potential transaction
involving Amiko and Rajdanto) that would cause Amiko to become an “interested stockholder”; or
(2) The acquisition by Rajdanto/Amiko would need to be approved by both the Denove board, and 66
2/3% of the outstanding stock not owned by Rajdanto/Amiko.
The first option would be preferable to the second, since the heightened voting threshold would
potentially create some real deal risk (i.e., it would mean you need two-thirds of the 75% not owned
by Rajdanto to get the transaction approved, instead of a simple majority). However, doing so will
take some work and consideration (and education for the Denove board), so we should make sure
that Rajdanto is thinking about this risk, too, if they are really considering to pair up with Amiko, and
stay coordinated with them so that they do not accidentally create a foot-fault under these rules.
I would be more than happy to chat further on the phone about this – let me know if you think this
would be helpful. Also, please keep us updated as we learn more.
Best regards,
Madison

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