Page 367 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

merger at the same price if it obtains more than 90 percent of the shares and (3) the lack
of retributive threats made by the controlling shareholder.

Structuring a cash-election process using a two-step acquisition structure is
challenging, but not impossible. In such a structure, target shareholders are offered the
opportunity to elect between cash and stock consideration in an exchange offer context.
The election mechanism in the exchange offer is very similar to that provided for in a
typical cash-election merger, and in the back-end merger shareholders received a pro rata
mix of the remaining consideration.

By reducing the time between signing and the election deadline, an exchange offer
structure can reduce the concern regarding the possible divergence in value between the
cash and stock components of a deal. There is some risk, however, that shareholders that
do not tender (and whose shares are thus converted in the back-end merger) may
complain that they are receiving less value than was paid in the first-step tender offer,
particularly if the relative mix of consideration paid in the first and second step are not
the same (which could be the case if one form of consideration was more heavily
subscribed than the other in the first-step offer). The legal risk should be mitigated by
the fact that all shareholders will presumably have had an equal opportunity to
participate in the first-step offer.

It is not necessarily beneficial to parties negotiating a part-cash, part-stock deal to
open up a Pandora’s box of complex options and alternatives. Simple structures work
well when business principals are trying to first get comfortable with the very notion of
combining their two institutions and wish to remain focused on the compatibility of the
two franchises and their management teams. That said, once the main deal is struck, it
may be useful to revisit some of the issues raised above to make sure that all possible
post-signing scenarios are contemplated and that the acquisition agreement has
appropriate provisions for protecting the various constituencies in each such
circumstance. If there is a potential for the value of the stock and cash consideration to
diverge, then the parties should make sure that the mechanisms governing how
shareholders will be treated in such a circumstance are clear, and that disclosures to
shareholders fully and clearly inform them about the choices they will need to make and
the consequences of making any specific elections or of failing to take any requisite
actions.

While the courts have not as yet settled on a precise rule as to how large a portion
of the consideration can be cash without triggering the restrictions of the Revlon doctrine,
part-cash, part-stock transactions can, if properly structured, remain subject to normal
business judgment principles. These standards permit a board to "protect" an agreed-
upon transaction with such provisions as no-shop clauses, breakup fees and stock options

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