In an earlier post, I talked about how Rijkman Groenink, Chief Executive of ABN Amro bank in the Netherlands, has accepted the lower of two offers made for the bank. Now we hear that the chickens are coming home to roost for Groenink:
Separately, Rijkman Groenink, ABN chief executive, on Monday withdrew as a candidate for nomination to the supervisory board of Royal Dutch Shell.
Mr Groenink, who faces calls to resign from ABN, said he wanted to “fully dedicate” his attention to the bank. ABP, the giant European pension fund, indicated last week it was considering voting against his appointment to the Shell board at the energy giant's annual meeting on Tuesday.
Given two offers, one of which is substantially higher than the other, why would anyone in his right mind take the lower of the two? Clearly, the lower offer from Barclays has something in it for Groenink. Perhaps something we don't know about.
This is a problem in the USA as well as in Europe. Often the management of a company will make decisions in their own personal interest, rather than the best interest of the company. In such a situation, it is the right of the stockholders to throw out the management. The stockholders of Shell are wise to keep this self-serving jackass off their board.
2 comments:
You might take the 'lower' offer based on dollar value if it is ALL CASH versus a 'higher' offer that is part shares and part cash. The amount of debt held by each company may also be a quantitative factor. The likelihood of the deal closing versus opposition during the SEC review can be a subjective factor for larger, prominent deals.
In the US, there are disclosure rules to the SEC about the offer that should reveal how the deal is monetarily structure (cash, share price on date XX, etc), a planned divestiture of a sub-business to pass SEC review, et cetera.
That illustrates how a board can make an argument for a lower price. The motivation for making this argument may be because board members truly see these factors as resulting in the best long-term value for the shareholders. The motivation for making this argument may be just razzle dazzle because key board members or large shareholders (esp family dominated businesses) have other motivations. The motivations don't fit in disclosure rules or are so far into the details that the public shareholders will likely miss them or won't be able to effectively object.
Personally, I was EXTREMELY disappointed when KMI/KMP announced they had a buyout offer to go private; but I only owned a couple hundred shares. I would have preferred to just keep owning the stock and collecting my annual dividend, but the leadership did negotiate a fair price.
In another case, I owned some in a small Nasdaq stock that is family dominated. It had a new CEO and looked like a good turnaround play. But the family micro-managed the CEO and he quit, putting the son back in as CEO again. They are NOT being fair to the shareholders, but there does not appear to be much I can legally do about it except sell and take my losses.
Companies have a LOT of latitude with 'good business judgment'.
Anon:
In this case the lower offer is all stock and the higher offer is 70% cash and 30% RBS stock. Yet another reason to tke the higher offer.
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