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A 28-year-old Indiana law could shield Elkhart, Ind.-based based Skyline Corp. from competitor Cavco Industries Inc.’s takeover attempt.

As reported by the Elkhart Truth, the state’s Control Shares Acquisition Statute, enacted in 1986, prohibits a company that acquires 20%, 33 1/3% or 50% of a target corporation’s stock from obtaining voting rights in the company’s affairs unless a majority of non-interested shareholders – meaning everyone other than management and the raider – vote to grant those rights. Another Elkhart-based company,CTS Corp., invoked the law in 1987 to block a takeover bid by Dynamics Corp. of America, and the U.S. Supreme Court upheld Indiana’s law, reversing decisions by a federal District Court and U.S. Court of Appeals that found the law unconstitutionally impeded interstate commerce.

Of the 110 hostile takeovers that have occurred since 1988, none have happened to Indiana-headquartered companies, according to New York-based Bernstein Research.

“It makes it difficult, but not impossible,” said Julian Velasco, associate professor of law at the University of Notre Dame. “Probably the acquirer believes they can convince the other shareholders to give them voting power.”

Velasco, a corporate law expert who teaches and researches mergers and acquisition law, said a raider targeting an Indiana-based corporation can still pull off a hostile takeover if it can persuade a majority of non-interested shareholders to give it voting power because it will improve the target’s financial situation, and therefore boost its stock price.

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