USA Law and Practice Contributed by: Elena Rubinov, George Casey, Heiko Schiwek, Vinita Sithapathy, Pierre-Emmanuel Perais and Clara Pang, Linklaters LLP
• receipt of applicable regulatory approvals and expiry of applicable waiting periods; • there being no injunction, government order or law prohibiting the transaction; and • there being no material adverse change with respect to the target company. Additionally, hostile tender offers often require: • removal of anti-takeover defences; • receipt of financing needed to effect the transac- tion; and • absence of a competing third-party tender offer. However, the conditions must be based on objective criteria and not subject to the sole control of the bid- der, and must apply to the entire tender offer. 4.6 Deal Documentation See 4.3 Transaction Structures and 4.10 Types of Deal Protection Measures . In transactions involving publicly traded companies, representations and warranties by the target company are typically included and, along with typical business representations, often involve compliance with federal securities laws, including making required filings with the SEC and, on occasion, the preparation of finan- cial statements in accordance with generally accepted accounting principles (GAAP). Usually, such represen- tations and warranties do not survive past closing as the selling entity often ceases to exist after the trans- action, and the logistics of obtaining indemnification from potentially thousands of different shareholders are not feasible. 4.7 Minimum Acceptance Conditions Tender offers are generally conditioned on the target company’s shareholders tendering a minimum num- ber of shares, usually sufficient to squeeze out the remaining shareholders; see 4.8 Squeeze-Out Mech- anisms . The percentage required is based on state law and the target’s governing documents; usually at least 50% of the shares plus one additional share. 4.8 Squeeze-Out Mechanisms In Delaware, a squeeze-out can be effected without shareholder approval following successful completion
of a tender offer for at least a majority of the outstand- ing shares, provided the merger meets procedural conditions pursuant to Section 251 (h) of the DGCL. The typical threshold for short-form mergers is 90% and this is the threshold set by New York and for non- DGCL Section 251 (h) squeeze-outs in Delaware. In friendly transactions outside of Delaware, a “top-up” stock option may be granted by the target company, pursuant to which the target company would issue up to 19.9% of its outstanding shares to help the acquiror reach the short-form squeeze-out threshold. If, after the tender offer, the acquiror owns less than the minimum number of shares necessary to complete a short-form merger or does not meet the require- ments of DGCL Section 251 (h) as mentioned above, a long-form merger would be subject to shareholder approval. Since the acquiror should own the requisite number of the target company’s shares, such approval should be assured; see 4.7 Minimum Acceptance Conditions . However, the acquiror would need to comply with state law procedures regarding a share- holders’ meeting and SEC requirements regarding proxy statements. 4.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer Historically, certain transactions in the US featured financing condition precedents (CPs). However, stan- dalone financing CPs are now rare. Parties typically negotiate respective covenants for consummating the financing and provide for termination rights and/ or reverse termination fees payable by the buyer upon a financing failure. A target can receive evidence of committed debt financing for the buyer at signing and may seek specific performance or another equitable remedy enforcing the buyer’s obligation to close the transaction, if debt financing has been funded and other CPs have been satisfied. 4.10 Types of Deal Protection Measures In the US, parties to a transaction may agree to vari- ous “deal protection” terms, including the following. • “No-shop” clauses: these restrict the target com- pany’s management and board of directors from soliciting other bids or providing confidential infor- mation to third-party bidders subject to directors’
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