cb

"The company was a likely target for a Desmarais takeover on several major counts: it was underperforming, which fact was reflected in low share prices; but it had a large asset base, cash flow, and the potential for improvement and growth if given a strong management team. The only drawback was that cb stock was widely held among a number of active investors, and none, save Desmarais, appeared as the key man with a large block of stock. The positive factors outweighed the absence of the key man in this instance, and Desmarais made a calculated gamble based on the fear and greed of shareholders. He gambled that existing cb shareholders would be willing to dump their cb shares for whatever they could get, rather than suffer deeper losses. So, Desmarais made an offer for control of cb in spring 1970, even though Power was still painfully cash-poor. Desmarais played his only chip, Power stock, cb shareholders were offered a trade of 2.5 Power shares for each cb share up to 51 percent of cb common (voting) stock. As cb was trading for about $21 and the Power shares were about $10.75, the trade was worth $27 per cb share, roughly a one-third premium."

"Power was the largest single shareholder of cb, with 16.2 percent of the shares. Though investment theory holds that the single largest shareholder in a widely held company usually commands effective control of it, Power didn’t control cb, because most of the other 83.8 percent of votes were controlled by active investors who wouldn’t necessarily support Power control of cb or side with policy directions simply because Power recommended them."

"Also, Power needed control of cb, because cb needed more than just money. It needed one authoritative individual on the board who could give a cohesive and coherent vision to the company, clear incisive direction to management — and the pink slip when necessary, if CB were to survive."