As Diego Della Valle builds his stake in Saks Inc., speculation continues to swirl that the department store chain could at some stage become the target of a takeover bid — if not from Della Valle, then from another suitor.
Not so fast.
Anyone wanting to engineer a takeover of Saks will find the retailer with a few anti-takeover defenses up its sleeve, but a suitor still could win over Saks’ board if the offer is high enough, legal experts agree.
Saks, formerly Saks Holdings Inc., is incorporated in Tennessee, a holdover from its September 1998 merger with Proffitt’s Inc. Tennessee anti-takeover statutes put the burden on the acquiring investor to disclose intention to the targeted company. Those statutes require either a filing of a statement regarding ownership of shares and offer intent or, in what is known as a freeze-out provision, mandate that an investor can’t do anything for five years after acquiring the shares.
That suggests that investors such as Della Valle and Carlos Slim Helú would face an uphill battle in a Saks takeover bid. In October, Della Valle, chairman and chief executive officer of Tod’s SpA, upped his stake in Saks to 19.1 percent, overtaking Mexican business magnate and financier Slim, who owns 16.1 percent of its stock. Neither has expressed an interest in acquiring the company.
Robert D. Tuke, a Tennessee attorney at Trauger & Tuke, points to Tyson Foods and Holly Farms, a case in which a federal district court determined that Holly Farms couldn’t enforce the Tennessee provisions to bar a takeover because the Tennessee statutes “violate the Commerce Clause of the U.S. Constitution” when applied to target corporations incorporated in states other than Tennessee. The decision was affirmed by a federal appellate court. Both Tyson and Holly were Delaware corporations.
The Commerce Clause gives Congress the right to regulate commerce with foreign nations and between states.
That suggests that Saks would have the upper hand in any legal battle.
However, Tuke said that despite a number of contested cases in federal court in which the targeted Tennessee corporation raised the anti-takeover defense, there’s never been a final decision on the merits. Federal courts typically grant an injunction, ruling that the statutes “inhibit commerce across the state for no purpose,” but then the parties agree to the merger or acquisition and the dispute goes away, he explained.
He believes a foreign entity could have a chance of winning a takeover battle for a Tennessee corporation. Tuke concluded, “At the end of the day, the [federal] courts will apply the Commerce Clause,” particularly if the foreign entity also does business in the U.S.
The statutes were enacted to give Tennessee corporations leverage within the state. In practice, that leverage usually results in the acquirer boosting the size of its offer, he said.
A banker familiar with Saks’ bank loan agreement also said there’s a change in the control provision that would require the immediate payment of the loan once a certain threshold is reached. A Saks regulatory filing of its quarterly report in September said it has a $500 million revolving credit facility that matures in November 2013, and as of the end of the reporting period on July 31, there were no “direct outstanding borrowings.”
James Decker, a banker at Morgan Joseph, didn’t think that would bar a takeover. “It’s a common provision in many bank loan agreements,” he said. “Most lenders, if they like the deal, are going to amend or waive that covenant.”
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews