In Olson v. EV3, Inc., the Delaware Chancery Court provides guidance for M&A practitioners in crafting top-up options. As set out in Vice Chancellor Laster’s recent opinion, the terms of a top-up option must first comply with the procedural requirements of the Delaware General Corporation Law for the issuance of shares of stock. This means the value of the consideration to be paid in exchange for the top-up shares on exercise of the option must be readily ascertainable, must be greater than or equal to the aggregate par value of the top-up shares, and must be approved by the issuing corporation’s board. Second, the merger agreement governing the second-step merger should make clear that in any appraisal proceeding to determine the value of a share of target corporation stock, neither the shares issued upon exercise of the top-up option nor the consideration provided in exchange for those shares will be considered.
A top-up option is an option designed to increase the grantee’s ownership in a corporation to at least 90%, allowing the grantee to acquire the granting corporation through a short-form merger under Section 251 of the DGCL. A short form-merger is attractive because it can be completed without the approval of the target’s stockholders and because the target’s stockholders’ sole recourse in the transaction is the appraisal of their shares under Delaware’s appraisal statute. Typically, top-up options are granted to an acquirer in connection with the acquirer’s launch of a tender offer. Once the acquirer obtains at least a majority of the target’s shares in the tender offer, the top-up option is triggered, and the target corporation issues the acquirer a number of shares sufficient to bring the acquirer’s ownership in the corporation to at least 90%. The acquirer then completes the acquisition via short-form merger, and those target stockholders that did not tender are entitled to receive in the merger the same consideration per share paid in the tender offer or to seek appraisal of their shares.
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Carl Icahn announced on Friday an extension of his tender offer to acquire outstanding common stock of Lions Gate Entertainment Corp. for $7.00 cash per share. According to his press release, the offer will now expire on June 1, 2010, unless extended or withdrawn.
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Investor Carl Icahn scored a temporary victory in his hostile bid to take over Lions Gate Entertainment, when the British Columbia Securities Commission (“BCSC”) granted an application to invalidate the Lions Gate poison pill. On April 27, 2010, the BCSC ordered a “cease trading” with respect to the poison pill adopted by Lions Gate’s board on March 11, 2010, just 10 days after the Icahn Group launched its $7 per share tender offer.
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This advisory discusses the Securities and Exchange Commission’s (SEC) unanimous approval today of amendments to certain rules and forms in an effort to modernize its disclosure requirements for foreign companies.
The advisory is provided in PDF on the Alston & Bird web site: http://www.alston.com/securities_alert_new_rules_private_issuers
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This advisory discusses the full text of proposed amendments to the cross-border tender offer rules under the Securities Exchange Act of 1934, as amended, recently released by the Securities and Exchange Commission. These are the first proposed changes to the rules since they were initially adopted in 1999. The proposed rules generally provide for an expansion of the exemptions for Tier I and Tier II cross-border transactions, including changes in how U.S. securities ownership is calculated and the codification of certain interpretive positions and exemptions frequently granted by the SEC in cross-border transactions due to conflicts with foreign regulatory regimes.
The advisory is provided in PDF on the Alston & Bird web site: http://www.alston.com/securities_advisory_crossborder
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