Scenario I
According to the business judgment rule the takeover is not hostile. It is legal since the AgroVate’s board has turned down the offer of Bijoux on grounds that the organization was still on good hand to improve its widget finishing division. The business judgment rule supports the idea that the director and the board have made the final decision of turning down Bijoux offer. The business judgment rule states that any informed decision that has been reached by the AgroVate’s board and shall not be overturned by any means not unless it does not support or stands for the business rational organization purpose. The attempt by the president of Bijoux (Pearson) to buy shares of AgroVate’s from shareholders was a good offer. The shareholders and the board of directors owe the organizations the duty of care. It thus implies that any breach of the rule or act of self interest would be against the business judgment rule. This misconduct by any shareholder of AgroVate’s would be settled in the court. It falls in the category of negligence of duty or operating the organization business without observing the beneficiary’s duty-good faith.
Agrovate board can legally adopt defensive measures against Bijoux based on the fact that it means the set policies of the business judgment rule. The organization has the legal right to adopt the defensive the measures against the attempt of Pearson on behalf of Bijoux since he pose the threat of replacing the entire board. It means that the Pearson would transfer all the ownership rights to himself hence eliminating the Maxxo brothers in the business. The intention of replacing the entire management structure of Agrovate would mean that the organization would cease to be a family business. Bijoux pose danger of selling off the widget finishing division which would drastically affect the company competitiveness.
There exist different types of merges between the involved parties. Horizontal merge is the merging that was intended to take place between Stopper, Inc and AgroVate whereby the Jack Spratter had the intention of investing a good amount of money to acquire the company in order to expand AgroVate’s widget and finishing division. On the other hand, the president of Bijoux wanted to establish a Conglomerate Merge. He wants to buy the company and replace the entire management structure hence entitling himself full author over the decision making process. The major aim of buying AgroVate is to be able to sell off the widget finishing division to improve its financial position.
Scenario II
AgroVate’s board must take into consideration the fact Pearson would make all effort to purchase the company. This is evident in his attempt to offer to buy the company and after being turned down he went ahead to initiate a tender in the newspaper and send a direct mail to the company. The board should therefore come up with heavy and strict term that would be able to shun Bijoux’s bid. This should include giving stopper opportunities to take over the control thus limiting the chance of Bijoux. The board requires emphasis or should strongly support the idea of allowing the stopper to make a takeover bid so as to tighten the competition hence discouraging Bijoux. Another fundamental factor that the board needs to take into consideration in decision making is the way to improve the current state of widget finishing division. That is, the company should sell off a widget finishing division to stopper Inc since it is the major factor dragging the organization down in terms of competition. The board has to do a thorough evaluation of the company’s stock before making any decision toward merging with any of the two organizations. It should also consider looking for a better alternative rather that merging bearing in mind the fact that it’s a family company.
Maxxo brother should challenge the poison pill plan or shareholder rights plan by coming up with a plan that would constitute self-dealing. That is, the shareholder would participate in the selling of shares and the Maxxo brother would be involved by issue additional share to the Bijoux for the shares they have in possessions or own. The Maxxo brother should enhance the measure and adequate strategy in the company and to ensure that the poison pill plan would constitute self-dealing on their part. As a member of the board may fist consideration is striking deal with stopper Inc. The Stopper Inc would buy the widget finishing division to assist the organization to improve its financial position. It is very important to initiate a sensitization program or advice my colleagues not to fall sell the shares to Pearson but instead should stand still. Shareholders should adhere to the business judgment rule therefore as a member, it would be very fundamental to operate out good faith care. To ensure the company gets the solution to its challenges all contributions should be treated as relevant and useful to the decision making process.
Reference
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