USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters LLP
threshold of voting power) the other target com- pany shareholders may make a demand on the acquiror to purchase their shares at a fair price. 6.3 Transaction Structures The most common means of acquiring a US public company are mergers and tender offers. One-Step Merger A merger is a combination of two entities by operation of law in accordance with the statutory corporate law of the states of the constituent entities. The shares of the target are converted into the merger consideration (which may be cash, securities or other property) pursuant to a merger agreement that sets forth the terms and conditions of the acquisition; this is approved by the target’s board of directors and subsequently adopted by the target shareholders (generally by the holders of a majority of the outstanding shares) at a shareholders’ meeting. Assuming shareholder approval, the acquiror can then complete the merger rather quickly. Typically, such transactions close on the day that the shareholders approve the transaction or on the following day. Two-Step Merger (With Tender Offer) A tender offer is a direct offer to the shareholders of the target company to purchase their shares. It is highly likely that not all the shareholders of the target will tender their shares into the tender offer. Therefore, for a bidder to acquire all the shares of the target, a tender offer is inevitably a multi-step transaction, whereby, following the initial purchase of shares in the tender offer meeting a requisite threshold, the remaining shareholders of the target have to be “squeezed out” through a second-step statutory merger.
Because a tender offer is an offer made direct- ly to the shareholders, no board of directors’ approval from the target company is technically required, although most friendly tender offers are made pursuant to a board-approved merger agreement. Most hostile transactions involve a tender offer because the acquiror can bypass the target’s board of directors and management. In any event, the board of directors of the target company will be required, under other rules of the SEC, to state its position with respect to the tender offer. 6.4 Consideration and Minimum Price See 4.3 Liquidity Event: Form of Consideration . 6.5 Common Conditions for a Takeover Offer/Tender Offer Generally, tender offers will be conditioned upon: • the tender of a certain minimum number of target company shares; • 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. In addition to the foregoing, a hostile tender offer will often require: • removal of any anti-takeover defences; • receipt of financing needed to effect the transaction; and • absence of a competing third-party tender offer. However, the conditions must: • be based on objective criteria and not be subject to the sole control of the bidder; and
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