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Exchange Reorganizations Versus Share Exchange Tender Offers

The last several posts have been devoted to exploring the differences between an "exchange reorganization" and a "share exchange tender offer" under the California General Corporation Law.  Below is a chart that summarizes the differences between these two types of transactions:

 

Exchange Reorganization

Share Exchange Tender Offer

Definition

Corp. Code § 181(b)

Corp. Code § 183.5l

Acquiring entity

Domestic corporation (Corp. Code § 167), foreign corporation (Corp. Code § 171), or other business entity (Corp. Code § 174.5)

Corporation (Corp. Code § 162)

What acquiring entity exchanges

Its equity securities (Corp. Code § 168) or the equity securities of a domestic corporation, a foreign corporation, or other business entity that is control of the acquiring entity

Its equity securities (Corp. Code § 168) or the equity securities of a corporation that is control of the acquiring corporation

Acquired entity

Domestic corporation, foreign corporation or other business entity

Corporation

What is the acquiring entity acquires

Equity securities

Shares

Effect of exchange

Acquiring entity immediately after the acquisition has control of the other entity

Acquiring entity immediately after the acquisition does not have control

Understanding these differences requires a thorough understanding of the various defined terms.  For example, a "domestic corporation" is not necessarily a "corporation" under the GCL.  Some of these differences are inexplicable to me.  Why for example can an exchange reorganization involve the acquisition of the acquired entity's "equity securities" but a share exchange tender offer is limited to an acquisition of the "shares" of the acquired entity?

Perhaps even more baffling is the fact that a share exchange tender offer does not necessarily involve a "tender offer" as understood under the Williams Act.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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