USA Law and Practice Contributed by: Nicholas A Dorsey, Ryan J Patrone, Kelly M Smercina and Margaret R M Rallings, Cravath, Swaine & Moore LLP
9. Takeover Finance 9.1 Regulated Targets
• certain transactions involving real estate in the USA located within a specified distance of ports or sensitive US government facilities. Historically, submitting a transaction for CFIUS review was almost always at the discretion of the parties. Following the passage of legislation in 2018, however, certain transactions involving a TID US business must now be submitted to CFIUS at least 30 days prior to closing. If a man- datory CFIUS filing is required, or if the parties choose to submit for CFIUS review voluntarily, the borrower and its financing sources should consider the expected timeline for obtaining CFIUS approval. This timeline will depend on the type of filing submitted and other factors, but may be lengthy, particularly if CFIUS identi- fies a national security concern arising from the When a public company is involved in a merger or other business combination, one must con- sider the relevant laws of its state of incorpora- tion, including board of director and shareholder approval requirements. State law also prescribes the fiduciary duties owed by directors to the corporation, including in connection with the board’s review of a change of control transac- tion. In the USA, many public companies are incor- porated in the state of Delaware. In general, in order for a Delaware corporation to consummate a merger, the merger must be approved by the corporation’s board of directors and then sub- mitted to, and approved by, the shareholders representing a simple majority of the outstand- ing shares. proposed transaction. 9.2 Listed Targets Shareholder approval for a listed target will be solicited through a proxy statement, which must
Several industries in the USA are subject to state and/or federal regulation, including aerospace, insurance, banking, communications, defence and energy. When the target company oper- ates in a regulated industry, a change of control transaction will often require the approval of the applicable regulator. When significant or lengthy regulatory approvals are required, the borrower and its financing sources should consider fac- tors such as: • how the uncertainty or lengthy timing related to regulatory approvals might impact the timeline to syndicate or market the financing; and • how long the borrower will need the commit- ments set forth in the commitment letter to remain outstanding (and, from the financing sources’ perspective, whether or not such length will impact pricing, market flex or other terms). Any restrictions on granting security over the target company’s assets should also be consid- ered. CFIUS The Committee on Foreign Investment in the United States (CFIUS) was established in 1975 to review certain foreign investments in the USA, and has the authority to review: • any transaction that could result in a foreign person controlling a US business; • certain non-controlling investments by foreign persons in US businesses that deal with critical technologies, critical infrastructure or sensitive personal data ( “TID US businesses” ) and
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