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In previous article, with the help of insights from the M&A Science podcast, we put together a comprehensive guide to hostile takeovers.
Here, we'll focus on examples of companies that completed or at least attempted a hostile takeover of another firms and explain the reasons why.
Hostile takeovers happen because investors believe that companies are significantly undervalued, and that the current management lack the competence to address what they perceive as a misvaluation. Hence, they by step the management team, instead approaching the company’s shareholders about a takeover. The investors give the shareholders something to ponder: Are their shares undervalued, and if so, does the hostile takeover offer reflect the shares’ true value?
Below, we look at 5 examples of hostile takeovers over the years, and how the deals played out.
$52 billion
July 14, 2008
InBev was already the world’s largest brewer when it made an unexpected offer for Anheuser-Busch in June 2008. InBev had a portfolio of beverages that included Stella Artois and Beck’s, and the notion that it was now going to add Budweiser to the list appeared to greatly appeal to industry investors: The shares of both companies rose on the news that InBev had made its approach.
Despite offering a 30% premium over the share price, InBev’s offer was knocked back by the Anheuser-Busch directors.Ostensibly, this was because the price didn’t value their firm sufficiently. In reality, they were probably protecting their own interests. Undeterred, InBev upped the stakes by making a direct approach to Anheuser-Busch’s shareholders, asking them to submit a motion to the company that would fire its board members and replace them with an alternative board.
In the end, there was no need: When InBev increased its offer to $70 a share, the Anheuser-Busch board - under pressure from no less than Warren Buffett, then an investor in the company - rescinded. In the end, maybe only Anheuser-Busch’s shareholders were the only ones to benefit.While they gained a 40% premium over the share price, AmBev - the company formed by the takeover - has never thrived. At the time of writing over a decade later, its shares are priced lower than the time of the deal.
$10.3 billion
December 13, 2004
PeopleSoft shares had been in free fall for nearly two years when Oracle first expressed an interest in an acquisition.From a high of $56, the shares were trading at around $15 in 2003. When PeopleSoft made a bid to acquire a rival software firm, JD Edwards, for $1.7billion, Oracle CEO sensed the time was right to make his move. Before the JD Edwards deal was confirmed, Oracle had made an offer of $16 per share - a premium of just 6%.
The PeopleSoft board squirmed. Probably still clinging to the notion that their company was worth closer to the original $52per share, they resisted the offer. And continued to do so for the following 18months. In fact, over that time, Oracle made ten separate offers, each one improving on the offer that preceded it. With 60% of shareholders already willing to sell out to Oracle, the PeopleSoft board finally gave in at $26.50 a share in December 2014.
For Oracle, the deal was an undoubted success:PeopleSoft probably was underpriced, even at the price that it eventually struck with shareholders. In addition to make it the global number two in the business application software market behind German rival SAP, PeopleSoft’s annual fees from clients for maintenance and updates was even higher than it had initially thought. As one analyst said at the time: “You can only compete with size,” and Oracle managed that. Â
$20.1 billion
February 15 2011
The deal between Sanofi-Aventis and Genzyme Corpis regularly stated by textbooks as an example of a hostile takeover - possibly because a timeline of the deal leaves little doubt that a hostile takeover was the intention of Genzyme Corp from the outset. Just one month after having an initial approach of $18.5 billion turned down by Genzyme’s board of directors, Sanofi-Aventis returned with the exact same offer. A case of “this is your last chance.”
On the Genzyme side, its CEO Henri Termeer informed Sanofi CEO Chris Viehbacher in a letter that the deal “drastically undervalued the company.” No sooner had he done so than Vehbacher said that the offer might be taken direct to Genzyme’s shareholders. Shareholders initially backed Termeer, saying that they would only accept a bid for $75 per share(Sanofi’s opening gambit was $69 per share).
Eventually, five months after much back and forth between the two sides, Genzyme’s shareholders accepted a bid of $74 per share plus contingencies based on the company’s post-acquisition performance.When the deal closed, it gave Sanofi access to Genzyme’s patents for rare disease medicines, just as most of its own patent portfolio was expiring. To this day, the deal is the second biggest hostile merger in the biotech sector in history.
$97 billion
10 October 2007
The 2007 takeover of Dutch bank ABN Amro by a consortium led by RBS could just as easily be listed under “disastrous acquisitions” and “be careful what you wish for” as hostile takeovers. A key detail in the deal is one that its price may have been inflated by the fact thatBarclays was also trying to acquire ABN Amro at the same time. The fact thatRBS “succeeded” where Barclays failed is already being seen as a historical turning point for the two British banks.
In 2007, with the global banking industry already looking to be in the mid set of a bubble, RBS led a consortium that also included Belgian bank Fotis and Spanish bank Santander to acquire ABN Amro. Perhaps riled by ABN Amro publicly stating that it preferred a deal withBarclays, it launched a hostile takeover bid. At a transaction price of $97billion, it was the biggest M&A transaction in the banking industry in history. Such honors rarely bode well.
In Q2 2008, the global financial crisis began and the rest is history. An inquest by the British government into the deal found that the RBS dealmakers relied on “two folders and a CD” for the deal’s due diligence. The debt pile brought as a result of the deal severely damagedRBS and it has never truly recovered. It now operates under the Natwest umbrella. In 2008, it topped out at 5,900 points on the London Stock Exchange. In 2022, it hovers close to 250.
$45billion
Date: Deal never closed
The fifth deal on our list is a deal that never was: Microsoft’s $45 billion acquisition of Yahoo! in 2008. When Microsoft went public with its first offer in February 2008, it had already been in informal discussions with Yahoo for the previous two years. Yahoo! was seen as something of a basket case at the time, continuously shedding workers, issuing profit warnings, and generally showing an inability to offer any answer to Google’s domination of internet search.
Over the next two months, the publicity generated by Microsoft’s offer brought others on board, including Google, AOL, and NewsInternational. Yahoo! flirted with all four, only one of which (Microsoft)retained any interest. Apart from… shareholder activists. In May, Carl Icahnand T Boone Pickens acquired a combined $1.25 billion in Yahoo! stock in an attempt to force the board to sell to Microsoft.
It was all to no avail. Yahoo!’s management instead entered a partnership agreement with Microsoft around internet advertising, which largely went nowhere. The company was subsequently sued by its shareholders (led by Carl Icahn) who were able to prove that the board of directors had planned to reject Microsoft’s offer well in advance of it arriving, thus neglecting their fiduciary responsibility to shareholders.
For the inside track on deals like these and others, as well as value creating tips and insights into modern dealmaking, take a closer look at our partner site M&A Science.
In addition to several articles on hostile takeovers by industry experts, M&A Science conducts deep dives into areas of M&A practice, covering everything from good due diligence and deal origination to strategy development and accurate valuation.
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In previous article, with the help of insights from the M&A Science podcast, we put together a comprehensive guide to hostile takeovers.
Here, we'll focus on examples of companies that completed or at least attempted a hostile takeover of another firms and explain the reasons why.
Hostile takeovers happen because investors believe that companies are significantly undervalued, and that the current management lack the competence to address what they perceive as a misvaluation. Hence, they by step the management team, instead approaching the company’s shareholders about a takeover. The investors give the shareholders something to ponder: Are their shares undervalued, and if so, does the hostile takeover offer reflect the shares’ true value?
Below, we look at 5 examples of hostile takeovers over the years, and how the deals played out.
$52 billion
July 14, 2008
InBev was already the world’s largest brewer when it made an unexpected offer for Anheuser-Busch in June 2008. InBev had a portfolio of beverages that included Stella Artois and Beck’s, and the notion that it was now going to add Budweiser to the list appeared to greatly appeal to industry investors: The shares of both companies rose on the news that InBev had made its approach.
Despite offering a 30% premium over the share price, InBev’s offer was knocked back by the Anheuser-Busch directors.Ostensibly, this was because the price didn’t value their firm sufficiently. In reality, they were probably protecting their own interests. Undeterred, InBev upped the stakes by making a direct approach to Anheuser-Busch’s shareholders, asking them to submit a motion to the company that would fire its board members and replace them with an alternative board.
In the end, there was no need: When InBev increased its offer to $70 a share, the Anheuser-Busch board - under pressure from no less than Warren Buffett, then an investor in the company - rescinded. In the end, maybe only Anheuser-Busch’s shareholders were the only ones to benefit.While they gained a 40% premium over the share price, AmBev - the company formed by the takeover - has never thrived. At the time of writing over a decade later, its shares are priced lower than the time of the deal.
$10.3 billion
December 13, 2004
PeopleSoft shares had been in free fall for nearly two years when Oracle first expressed an interest in an acquisition.From a high of $56, the shares were trading at around $15 in 2003. When PeopleSoft made a bid to acquire a rival software firm, JD Edwards, for $1.7billion, Oracle CEO sensed the time was right to make his move. Before the JD Edwards deal was confirmed, Oracle had made an offer of $16 per share - a premium of just 6%.
The PeopleSoft board squirmed. Probably still clinging to the notion that their company was worth closer to the original $52per share, they resisted the offer. And continued to do so for the following 18months. In fact, over that time, Oracle made ten separate offers, each one improving on the offer that preceded it. With 60% of shareholders already willing to sell out to Oracle, the PeopleSoft board finally gave in at $26.50 a share in December 2014.
For Oracle, the deal was an undoubted success:PeopleSoft probably was underpriced, even at the price that it eventually struck with shareholders. In addition to make it the global number two in the business application software market behind German rival SAP, PeopleSoft’s annual fees from clients for maintenance and updates was even higher than it had initially thought. As one analyst said at the time: “You can only compete with size,” and Oracle managed that. Â
$20.1 billion
February 15 2011
The deal between Sanofi-Aventis and Genzyme Corpis regularly stated by textbooks as an example of a hostile takeover - possibly because a timeline of the deal leaves little doubt that a hostile takeover was the intention of Genzyme Corp from the outset. Just one month after having an initial approach of $18.5 billion turned down by Genzyme’s board of directors, Sanofi-Aventis returned with the exact same offer. A case of “this is your last chance.”
On the Genzyme side, its CEO Henri Termeer informed Sanofi CEO Chris Viehbacher in a letter that the deal “drastically undervalued the company.” No sooner had he done so than Vehbacher said that the offer might be taken direct to Genzyme’s shareholders. Shareholders initially backed Termeer, saying that they would only accept a bid for $75 per share(Sanofi’s opening gambit was $69 per share).
Eventually, five months after much back and forth between the two sides, Genzyme’s shareholders accepted a bid of $74 per share plus contingencies based on the company’s post-acquisition performance.When the deal closed, it gave Sanofi access to Genzyme’s patents for rare disease medicines, just as most of its own patent portfolio was expiring. To this day, the deal is the second biggest hostile merger in the biotech sector in history.
$97 billion
10 October 2007
The 2007 takeover of Dutch bank ABN Amro by a consortium led by RBS could just as easily be listed under “disastrous acquisitions” and “be careful what you wish for” as hostile takeovers. A key detail in the deal is one that its price may have been inflated by the fact thatBarclays was also trying to acquire ABN Amro at the same time. The fact thatRBS “succeeded” where Barclays failed is already being seen as a historical turning point for the two British banks.
In 2007, with the global banking industry already looking to be in the mid set of a bubble, RBS led a consortium that also included Belgian bank Fotis and Spanish bank Santander to acquire ABN Amro. Perhaps riled by ABN Amro publicly stating that it preferred a deal withBarclays, it launched a hostile takeover bid. At a transaction price of $97billion, it was the biggest M&A transaction in the banking industry in history. Such honors rarely bode well.
In Q2 2008, the global financial crisis began and the rest is history. An inquest by the British government into the deal found that the RBS dealmakers relied on “two folders and a CD” for the deal’s due diligence. The debt pile brought as a result of the deal severely damagedRBS and it has never truly recovered. It now operates under the Natwest umbrella. In 2008, it topped out at 5,900 points on the London Stock Exchange. In 2022, it hovers close to 250.
$45billion
Date: Deal never closed
The fifth deal on our list is a deal that never was: Microsoft’s $45 billion acquisition of Yahoo! in 2008. When Microsoft went public with its first offer in February 2008, it had already been in informal discussions with Yahoo for the previous two years. Yahoo! was seen as something of a basket case at the time, continuously shedding workers, issuing profit warnings, and generally showing an inability to offer any answer to Google’s domination of internet search.
Over the next two months, the publicity generated by Microsoft’s offer brought others on board, including Google, AOL, and NewsInternational. Yahoo! flirted with all four, only one of which (Microsoft)retained any interest. Apart from… shareholder activists. In May, Carl Icahnand T Boone Pickens acquired a combined $1.25 billion in Yahoo! stock in an attempt to force the board to sell to Microsoft.
It was all to no avail. Yahoo!’s management instead entered a partnership agreement with Microsoft around internet advertising, which largely went nowhere. The company was subsequently sued by its shareholders (led by Carl Icahn) who were able to prove that the board of directors had planned to reject Microsoft’s offer well in advance of it arriving, thus neglecting their fiduciary responsibility to shareholders.
For the inside track on deals like these and others, as well as value creating tips and insights into modern dealmaking, take a closer look at our partner site M&A Science.
In addition to several articles on hostile takeovers by industry experts, M&A Science conducts deep dives into areas of M&A practice, covering everything from good due diligence and deal origination to strategy development and accurate valuation.
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