USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters LLP
• apply to the entire tender offer. 6.6 Deal Documentation See 6.3 Transaction Structures . 6.7 Minimum Acceptance Conditions Generally, tender offers are conditioned on the target company’s shareholders tendering a certain minimum number of shares, usually a number of shares sufficient to approve the sub- sequent merger to squeeze out the remaining shareholders; see 6.8 Squeeze-Out Mecha- nisms . The specific percentage required is based on state law and the target’s governing documents, but it is usually at least 50% of the In Delaware, a squeeze-out in the form of an intermediate form merger can be effected without obtaining stockholder approval following suc- cessful completion of a tender offer for at least a majority of the outstanding shares, provided the merger meets certain procedural conditions pursuant to Section 251(h) of the General Cor- poration Law of the State of Delaware (DGCL). Otherwise, 90% is the most typical threshold for short-form mergers and is the threshold set by New York and for squeeze-outs in Delaware, except following a tender offer as described in the foregoing sentence. In a friendly transac- tion, 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. shares plus one additional share. 6.8 Squeeze-Out Mechanisms If, upon completion of the tender offer, the acqui- ror owns less than the minimum amount of the target company’s shares necessary to complete a short-form merger or otherwise does not meet the requirements of DGCL Section 251(h) as
mentioned above, a long-form merger follow- ing the tender offer would be subject to share- holder approval. Since the acquiror should own the requisite number of the target company’s shares, such approval should be assured; see 6.7 Minimum Acceptance Conditions . However, the acquiror would still need to comply with state law procedures relating to the calling of a share- holders’ meeting and SEC requirements relating to proxy statements. 6.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer Historically, certain transactions in the USA had a financing condition precedent (CP) – ie, if the acquiror is unable to raise financing between signing and closing, it will not be required to close the transaction. However, such standalone financing CPs are now rare. To mitigate financ- ing risk, parties now typically negotiate respec- tive covenants in terms of consummating the financing and provide for termination rights and/ or reverse termination fees payable by the buyer upon a financing failure. A target can also expect to receive evidence of committed debt financ- ing for the buyer at signing, and have the ability to seek specific performance or other equita- ble remedy to enforce the buyer’s obligation to close the transaction if debt financing has been funded and other CPs have been satisfied. 6.10 Types of Deal Protection Measures In the USA, the parties to the transaction may agree to a variety of “deal protection” terms. While the target and acquiror need to negoti- ate such terms on a case-by-case basis, some common terms in the US market are discussed below. • “No-shop” clauses: restrict the target compa- ny’s management and board of directors from soliciting any other bids or from providing
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