Following a story MHProNews has posted recently regarding Cavco Industries, Inc.’s attempt to acquire competitor Elkhart, Indiana-based Skyline Corporation, Indiana’s Control Shares Acquisition Statute makes a hostile takeover difficult. However, if the raider can persuade a majority of non-interested shareholders (meaning everyone besides management, and the raider) to give it voting power because it will boost the financials of the target company, and therefore its stock price, the takeover can be accomplished. The 28 year-old statute protected CTS Corp., also of Elkhart, from a hostile takeover by Dynamics Corp. of America in 1987, and the U. S. Supreme Court upheld the law in that case. According to elkharttruth.com, manufactured and modular housing producer Skyline has reported annual losses for seven straight years, losing $122 million in that time, leading an independent auditor to state the company could not likely continue to operate.
While Skyline has signed a letter of interest to sell its RV division to Evergreen Recreational Vehicles of nearby Middlebury, Indiana, it has not responded to Cavco’s offer of a 29-percent- to-66 percent premium above the $2.71 share closing price of Sept. 24, other than saying Cavco’s offer is undervalued and it will examine it further. Indiana was the first to enact a control shares statute, but 26 other states have since passed similar laws, according to Tim Anderson of New York-based Bernstein Research. He says the law is designed to protect the state’s interests over those of shareholders. Corporate law professor Julian Velasco of Note Dame says control share statutes benefit target companies more than shareholders or acquirers. ##
