While not necessarily "breaking news" at this point, as of August 1, 2013, the Delaware General Corporation Law was amended to make two-step mergers—tender offers with back-end mergers—easier to complete. Pursuant to new § 251(h), third-party acquirors and targets may enter into merger agreements that specifically opt in to this statute and will allow the acquiror to complete the second-stage merger without a shareholder vote if the acquiror obtains a sufficient number of shares in the opening tender offer (usually more than 50%) that its vote alone would be sufficient to approve the merger.
Prior to the enactment of this statute, parties to two-step merger transactions were often forced to either obtain 90% of the shares in the tender offer (in order to use the "short-form" statute) or use a "top-up" option to avoid the more cumbersome—and expensive—long-form merger on the back end of the transaction.
Three points are important to remember: (1) this statute may only be used in transactions between a non-affiliated or non-interested, third-party stockholders and a target with shares listed on a national exchange or held by more than 2000 stockholders; (2) this is an "opt in" statute, so the merger agreement must cite its applicability; and (3) no matter what the type of consideration (cash, shares of a publicly-traded company, etc.), the merger is subject to appraisal rights.
Tender offers seem to have fallen off in popularity in recent years, but with this amendment to the DGCL, we would expect to see acquirors using them with more frequency.
This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.
Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.
