Daily Archives: Thursday, August 5, 2010

Extraterritoriality After Dodd-Frank

Posted by George T. Conway III, Wachtell, Lipton, Rosen & Katz, on
Thursday, August 5, 2010
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George Conway is partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Conway. Other posts relating to the Dodd-Frank Act are available here.

As our memo of June 24 reported (available on the Forum here), the Supreme Court in Morrison v. National Australia Bank Ltd., No. 08-1191 (U.S. June 24, 2010), held that Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 do not apply to securities transactions that take place outside the United States. The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama today, contains two provisions, Sections 929P(b) and 929Y, that concern the territorial scope of the federal securities laws. But neither provision overturns National Australia Bank, and neither should extend the substantive reach of the securities laws extraterritorially at all.

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Shaping Up Your Top-Up Option

Posted by David Fox, Kirkland & Ellis LLP, on
Thursday, August 5, 2010
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David Fox is a partner at Kirkland & Ellis LLP, focusing on complex mergers and acquisitions as a member of that firm’s Corporate Group. This post is based on a Kirkland & Ellis M&A Update by Mr. Fox, R. Scott Falk and Daniel Wolf.

As we noted in an M&A Update last year (available on Forum here), tender offers are an increasingly common feature of the M&A landscape. In conjunction with this uptick in tender offer activity, the use of “top-up” options has become nearly universal. Under a top-up option, the target company grants the buyer an option (sometimes mandatorily exercisable) to purchase at the deal price, upon successful completion of the tender offer at or above the minimum condition level (usually 50%), a number of newly issued shares of the target (assuming sufficient shares are authorized and unissued) such that in aggregate the buyer will own at least 90% of the target’s shares. Crossing the 90% threshold (in Delaware) allows the buyer to complete the back-end squeeze-out as a simple short-form merger. Top-up options have been justified as merely representing an acceleration of a foregone conclusion as the buyer, having acquired more than 50% of the target’s shares, is already assured of the ability to effect the back-end squeeze-out (if necessary, via a long-form merger). The accelerated short-form merger timetable benefits both the buyer and the target’s remaining shareholders by hastening the now inevitable exchange of 100% control for cash.

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