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CHESAPEAKE-SHOREWOOD:
OPPORTUNITY FOR VALUE ENHANCEMENT
NYSSA Corporate Governance
Forum
The New York
Society of Security Analysts' Committee for Corporate Governance is
organizing its third Forum in a program started in 1999 to demonstrate the
applications of professional analytical methods to corporate governance
issues. Selected to consider value enhancement opportunities in a takeover
situation, the new Forum will examine investment decisions concerning
shareholders of two companies, each of which has bid for the other:
Chesapeake Corporation (NYSE: CSK) and Shorewood Packaging Corporation
(NYSE: SWD).
A combination of
the companies was first suggested by Shorewood in an October 1999 proposal
to acquire Chesapeake, to which Chesapeake responded with a rejection and
counterproposal to acquire Shorewood, triggering a display of
state-of-the-art takeover defenses by both sides. In the resulting contest
of obstructive tactics each side may effectively reduce its own shareholder
value by limiting the marketability of its securities, distracting
management from profitable activities, destabilizing commercial and employee
relationships, and incurring relatively substantial costs for professional
services to support the process. More importantly, the current contest of
obstruction may be incompatible with both companies' statements that their
advisers and boards believe a combination would benefit shareholders.
To change the
focus from obstructive tactics to value enhancement, the Forum will consider
alternative proposals for optimizing the business efficiencies and financial
structure of the desired Chesapeake-Shorewood combination. NYSSA is in a
unique position to provide a fair and open forum for these and other issues
which may be considered by shareholders, and has invited both companies to
participate in the definition of written "Conditions" for the presentation
of all views. Applying the skill resources of NYSSA's members, proposals
will be reviewed in public meetings for the relevant criteria of investment
decisions:
·
Use of
Shareholder Assets:
Will the use of assets in the combined entity optimize benefits to
shareholders?
·
Terms of Offers:
Do the terms offered to shareholders of both existing corporations provide
reasonable and fair choices to sell or participate in the combined entity?
·
Board
Qualifications: Can
the combined entity's board, including specific members, be relied upon to
establish strategic goals and monitor the performance of executive officers?
·
Shareholder
Rights: Do the
incorporation and by-law provisions of the combined entity establish
effective means for shareholders to exercise their rights?
As a
not-for-profit educational organization established by and for Wall Street's
professional securities analysts, the NYSSA provides a wide range of
programs of interest to investment decision-makers. The NYSSA's recently
reactivated Committee for Corporate Governance under its new Chairman, Peter
F. Brennan, is directly responsible for the Forum. Gary Lutin, the
investment banker who was the co-sponsor and adviser to the NYSSA
Committee's 1999 forums concerning National Presto Industries and The Dun &
Bradstreet Corporation, has also agreed to co-sponsor the
Chesapeake-Shorewood Forum and to serve as its adviser.
January 10, 2000
Peter F. Brennan, Chairman, NYSSA
Committee for Corporate Governance
(c/o MidCap
Investors LLC, 50 Broad Street, New York, NY 10004; 212/668-3033)
Gary Lutin, Forum adviser and
co-sponsor
(c/o Lutin &
Company, 575 Madison Avenue, New York, NY 10022; 212/605-0335)
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