Template:Eqd 12.1 summ
Corporate Event
JC uses his own personal label, Corporate Event, to refer to any kind of Merger, Tender Offer or corporate event leading to the combination or separation of Issuers.
All hail the Determining Party
Note that where an Extraordinary Event occurs, the Determining Party, rather than the Calculation Agent, may be the person called on to calculate a Cancellation Amount. (This is relevant especially where the Calculation Agent is not the Hedging Party, as the Hedging Party will have definite ideas about how to value cancellation vis a vis its own hedge).
Definitions
Extraordinary Event
Template:Extraordinary events capsule
Merger Event
In summary, this breaks down into:
- Transfer: an irrevocable commitment to transfer all the Shares to another entity;
- Merger: merger or binding share exchange of the Issuer with or into another entity where the other entity survives;
- 100% Takeover offer: takeover or tender offer for 100% of outstanding Shares by any entity;
- Reverse Merger: merger binding share exchange of the Issuer with or into another entity where the Issuer survives but represents less than 50% of the resulting entity;
Where the Merger Date is before the final settlement date.
Note that, by contrast, the “Tender Offer” Extraordinary Event is triggered by greater than 10% but less than 100% of the outstanding voting shares of the Issuer. So the two do not in fact overlap.
Merger Date
Relevant for the valuation of your Cancellation Amount: the date determined under local law that the merger takes place or, if for some reason that isn’t clear, by the Calculation Agent. Strong work from ISDA’s crack drafting squad™ here.
Tender Offer and Tender Offer Date
If you’re like the JC you will be wondering how a single holder could acquire more than 100 per cent of the extant Shares of an Issuer. But, to an ISDA ninja, that is to rather miss the point. We are not talking about the practical, but the conceptually possible. Perhaps in a parallel universe, where normal rules of Euclidean geometry don’t apply. Or down a gravity well or something.
Sleep assured that, however conceptually difficult — logically difficult — such a feat might be, if someone does manage it then ISDA’s crack drafting squad™ has your — or her — back.
Actually, come to think of it, they don’t, because an acquisition of more than 100% would not count as a Tender Offer at all.
Eheu. I suppose we had all better hope and that normal rules of Euclidean geometry continue to apply for the time being.
Also, is not clear what is meant to happen if the Tender Offer relates to exactly 100 per cent of the outstanding Shares.
Here we find the mechanical ways of describing the different ways a shareholder can be persuaded to part with its existing Shares and thereby agree to a Merger or accept a Tender Offer.
Our friends in the M&A advisory business — they are better paid and more impressively heeled than we — have no shortage of imaginative ways for investors to stump up the necessary to acquire new companies, or parts of old ones the current owner no longer wants, but basically they boil down to (i) being given New Shares (usually in the acquiror, or a “newco” it has established for the purpose), (ii) being paid cash (or given something else that isn’t New Shares, or (iii) a combination of the two.
Announcement Date
The date that one of the Additional Disruption Events becomes a thing, such that the parties to the Transaction have to do something about it.
This is something of an analogue to the “Notice of Publicly Available Information” concept in the credit derivatives world: the point at which an event, whether or not it eventually happens, becomes public knowledge is the event horizon from a help-the-credit-department-is-running-around-with-its-hair-on-fire perspective, hence all that slightly cute talk of “a firm intention to engage in a transaction (whether or not subsequently amended) that leads to ...” and so on. That, and ISDA’s crack drafting squad™’s congenital inability to write plain, elegant sentences that say what they mean, of course.
Applies only to Merger Events and Tender Offers and is, you won’t be surprised to hear, the Shares that are affected by one of them.