Clifford Chance
Amendments to Delaware General Corporation Law Should Make Two-Step Acquisitions of Publicly Traded Companies More Attractive
30 July 2013
With effect from August 1, 2013, a new provision of the Delaware General Corporation Law (DGCL), Section 251(h), should make all-cash two-step acquisitions of publicly traded corporations more attractive to acquirers for whom prompt completion of the second stage is important. Section 251(h) generally will be available for any negotiated acquisition in which the acquirer is not a 15%-or-greater stockholder when it enters into a merger agreement with the target and all stockholders are to receive the same consideration per share.
When Section 251(h) is available, the acquirer will be assured of being able to quickly complete its second-step merger (eliminating non-tendered shares, and leading to 100% ownership by the acquirer) if following the tender offer the acquirer owns the number of shares required to vote through a merger (a simple majority of shares outstanding, unless the target's certificate of incorporation requires more). Previously, speedy completion of a second-step merger was possible only if the acquirer reached the 90% ownership threshold necessary to qualify for the "short form" merger procedure provided for in the DGCL. The short form merger procedure will continue to be available, including for transactions for which the new Section 251(h) procedure is not available.
