Acquisitions often employ a two-step structure in which the acquiror first launches a tender or exchange offer for any and all outstanding shares. Upon the close of the tender or exchange offer, the acquiror then acquires any shares not tendered in the offer by way of a second-step merger to complete the acquisition.
Under Delaware law, a “short-form” merger pursuant to DGCL Section 253 does not require stockholder approval of the second-step merger, but can be used only if the acquiror owns at least 90 percent of the target’s outstanding voting stock after the first-step tender or exchange offer.
If the tender or exchange offer results in the acquiror owning less than 90 percent of the outstanding voting stock of the target, a “long-form” merger must be utilized, requiring the mailing of a proxy statement to target stockholders and holding a stockholder meeting to approve the merger.
This article, in the latest issue of Transaction Advisers, looks at Section 251(h) of the Delaware General Corporation Law, which now allows consummation of second-step mergers without stockholder approval following a tender or exchange offer in many circumstances.
Click here to see the Advisory.