We previously covered the proposed DGCL amendments, which would make changes to the appraisal statute with respect to intermediate-form mergers, and clarify requirements for disclosure with respect to the number of shares not voting for a merger.

If adopted, the appraisal amendments would become effective August 1, 2018.

Coverage of these proposed amendments has intensified; here are some highlights:

It is exceedingly uncommon for stock-for-stock transactions to be effected as a two-step tender offer/merger under§251(h). One of the possible reasons for this [ ] is the insulation from appraisal claims that a long form merger offers (and that a two-step transaction does not). By eliminating this discrepancy, the proposed amendments to the DGCL potentially increase the utility of the§251(h) two-step merger structure. That said, in a stock-for-stock transaction, the acquiror will be required to register its shares on Form S-4 (or Form F-4), and often will not commence the exchange offer until after its registration statement has cleared SEC comments.

Effectively, the current statute permits appraisal rights for intermediate-form mergers even if the market out exception would apply to the analogous “long-form” merger, which requires shareholder approval.  The proposed amendment would eliminate this illogical result and provide the same exception to appraisal rights for mergers under 251(h) as are provided for long-form mergers.

The amendments to Section 262(e) would modify the information to be included in the statement that must be furnished to dissenting stockholders upon their request in connection with Section 251(h) mergers. In recognition of the fact that no shares are “voted” for the adoption of the merger agreement in a Section 251(h) transaction, the amendments would clarify that the surviving corporation must provide stockholders, upon their request, with the number of shares not purchased in the tender or exchange offer, rather than the number of shares not voted for the merger.”

Further coverage here, and here.

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Photo of Larry Rolnick Larry Rolnick

Larry is a partner of Rolnick Kramer Sadighi LLP. Larry has over 30 years of experience representing investors to recover their losses, defend their rights as stakeholders, and pursue value-generating litigation strategies across the spectrum of investment approaches.  Larry has been instrumental in…

Larry is a partner of Rolnick Kramer Sadighi LLP. Larry has over 30 years of experience representing investors to recover their losses, defend their rights as stakeholders, and pursue value-generating litigation strategies across the spectrum of investment approaches.  Larry has been instrumental in recovering over $1 billion for professional investors and their clients.   While Larry’s primary focus is the recovery of losses arising from securities fraud via direct action, he has extensive experience in every aspect of investor litigation.  He has represented clients as both plaintiffs and defendants in direct securities claims, class actions, opt out actions, indenture and credit agreement-related actions, appraisal proceedings, bondholder litigations, activist actions and litigation involving structured finance among other areas.

Photo of Rich Bodnar Rich Bodnar

Rich is an experienced securities litigator focusing on value-generating legal strategy.  Rich brings to each matter a deep knowledge of the quantitative methods side of securities litigation, especially damages computation, event studies, econometrics/economics and the theories, tools, and strategies involved in the preservation…

Rich is an experienced securities litigator focusing on value-generating legal strategy.  Rich brings to each matter a deep knowledge of the quantitative methods side of securities litigation, especially damages computation, event studies, econometrics/economics and the theories, tools, and strategies involved in the preservation and maximization of the value of client’s securities claims.