September 04, 2008

The Icahn Speaketh

Carl Icahn, while a largely self-important douche, has been a tremendous advocate for shareholders vs. management especially on the subject of takeovers and management's attempts to avoid/enrich themselves from them. This entry on his blog is really very good...

Marty Lipton, the prominent Wachtell Lipton lawyer whom I have sparred with on numerous occasions, is no stranger to hyperbole about the "sanctity" of the corporate boardroom, but his latest comment about Anheuser-Busch is way over-the-top.

In a July 24 memo to clients (Corporate Governance Ratings Debunked), Lipton pointed out that the giant beermaker recently changed its bylaws to allow for yearly elections of directors, rather than every three years. As a result of this, the company was subjected to a hostile takeover by Belgian beermaker InBev, which was poised to run a proxy battle to get new directors elected to the board, asserts Lipton.

"Anheuser Busch is the latest US company to fall prey to a hostile takeover shortly after repealing its classified board in the name of adherence to best practices in corporate governance," Lipton said in the memo.

Unfortunately, Lipton has it all wrong in this classic anti-shareholder view. His opinion suggests that it is a good thing that the maker of Budweiser should be protected from takeovers to maintain the cozy "status quo" of its boardroom.

Fortunately, the directors of Anheuser Busch didn’t listen to Wachtell Lipton, but responded to shareholders who saw the InBev takeover as a positive thing – at the right price.

I've never agreed with Lipton's constant defense of management teams at the expense of shareholders and employees. Icahn is also not someone with whom I consistently agree, mostly because he traps himself in short term thinking and a desire to make large, instant profits. I'm more of a long term value guy. However, if my choice is Icahn vs. Lipton, I'll take Icahn every time.

And the InBev purchase of Anheuser Busch was a very good thing.

Posted by mcblogger at September 4, 2008 01:31 PM

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