Class 2 powerpoint Flashcards
M and A information in an 8K form
Description of the assets acquired or disposed of
Nature or amount of consideration given or received
Identity of the persons from whom the assets were acquired
Acquisitions only: the sources of funds used to finance the purchase
Financial statements of the business acquired
when do acquisitions have a signification amount of assets?
if the equity interests therein exceed 10% of the total book value
Form S-4
used if new stock will be issued to acquire a target
when must a firm receive approval from its shareholders when using outstanding shares to make the deal?
When a firm issues more than 20% of its outstanding shares to make the deal
In stock-for-stock transactions, how do the acquirer and target cooperate?
by filing a joint proxy statement/prospectus within the Form S-4
according to the S-4, if shareholders approve, when does the merger becomes valid?
immediately after the filing of a Certificate of Merger in the US state where the target is incorporated
The Williams Act Origin
The Securities Act of 1933
The Securities Exchange Act of 1934
The two acts above curtail some abuses observed in the Crash of 1929
The Securities Act of 1933
imposes the filing of a detailed disclosure statement when a firm goes public
The Securities Exchange Act of 1934
prohibits specific activities of the securities industry such as wash sales and the churning of costumer accounts
–> The Williams Act adds new subsections to the Securities Exchange Act of 1934
The Williams Act
Objectives
To regulate tender offers
To provide procedures and disclosure requirements for acquisitions
To provide shareholders with time to make informed decisions regarding tender offers
To increase confidence in securities markets
The Williams Act
Section 13(d)
requires that a buyer discloses her share holdings
The Williams Act
Schedule 13D
Name and address of the issuing firm and type of securities to be acquired
Detailed information on the background of the individual filing the information (e.g., criminal background checks)
Number of shares actually owned
Purpose of the transaction (i.e., investment or control of the firm)
Source of funds used to finance the acquisition of the firm’s shares (i.e., disclosure of capital structure, and by extension leverage if applicable)
The Williams Act
Section 13(d)(2)
imposes prompt filing, with the SEC and the exchanges by the issuer when a material change takes place (i.e., acquisition of +1% shares)
The Williams Act
Schedule 13G
can be filed by investors who acquire 5% or more of a company’s shares, but who did not have more than 2% in the previous 12 months, and have no intention to take control of the firm
requires less detailed information; yet if the investor’s context change, Schedule 13D must be used
The Williams Act
Minimum Offer Period
A tender offer must remain open for at least 20 business days (the minimum offer period)
–> the acquiring firm must accept all shares that are tendered
–> The acquirer may walk away from the deal if it does not receive the total number of shares it requested in the terms of the tender offer
Exchange Offer
a stock-for-stock offer, or a cash and stock combination for stock transaction
(no shares can be purchased until 20 days after the offer is filed with the SEC)
Definition of a Tender Offer
the Williams Act has no clear definition
the court concludes that open market purchases with no deadline and for which no premium was offered do not constitute a tender offer
the US District Court for the Second Circuit establishes the Eight Factor Test
oooor
the totally of the circumstances test (i.e., it focuses on whether offerees would be put at an informational disadvantage if official tender offer procedures were not followed)
a tender offer exists if:
–> (i) a bidder publicly announces its intention to acquire a substantial block of a target’s shares for the sake of firm control;
–> (ii) a substantial accumulation of the target’s stocks by the bidder via open-market or privately negotiated purchases takes place
The Eight Factor Test
- There is active and widespread solicitation of public shareholders for shares of an issuer
- Solicitation is made for a substantial percentage of an issuer’s stock
- Offer to purchase is made at a premium over the prevailing market price
- Terms of the offer are firm rather than negotiated
- Offer is contingent on the tender of a fixed number of shares and possibly specifying a maximum number of shares
- Offer is open for only a limited time period
- Offeree is subject to pressure to sell stock
- There exist public announcements of a purchasing program that precede or are coincident with rapid accumulation of shares
who handles Takeovers considered as threat to the US national security
the Committee on Foreign Investment to the United States (CFIUS)
(note: such deals can be halted by the US president)
To obtain quorum, firms solicit what and from whom?
who else can do that and why?
proxies from shareholders
Bidders trying to take over a firm may solicit proxies from shareholders as well
–> with Section 14(a) of the Securities Exchange Act
Section 14(a) of the Securities Exchange Act
regulates solicitations
In the UK, the City Code of Takeovers and Mergers preconizes
preconizes that in M&A all shareholders be treated equally and fairly
in the UK, Investors having de facto control (i.e., 30% or more of firm’s shares) must bid for the remaining shares which price?
at the highest price paid for the shares
Hostile bids are more likely to succeed in the UK or the US? why?
because shareholders have the right to oust board directors at any time
