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.”