Mergers - Equity Derivatives Provision
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2002 ISDA Equity Derivatives Definitions A Jolly Contrarian owner’s manual™
12.1(b) in all its glory
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Overview
Section 12.1. General Provisions Relating to Extraordinary Events
- 12.1(a). “Extraordinary Event”
- 12.1(b). “Merger Event”
- 12.1(c). “Merger Date”
- 12.1(d). “Tender Offer”
- 12.1(e). “Tender Offer Date”
- 12.1(f). “Share-for-Share”
- 12.1(g). “Share-for-Other”
- 12.1(h). “Share-for-Combined”
- 12.1(i). “New Shares”
- 12.1(j). “Other Consideration”
- 12.1(k). “Combined Consideration”
- 12.1(l). “Announcement Date”
- 12.1(m). “Implied Volatility”
- 12.1(n). “Affected Shares”
An important place to also go, as it name suggests, it is a place of consequence, is “Consequences of Merger Events”, in Section 12.2.
Summary
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.
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- The JC’s famous Nutshell™ summary of this clause
- A comparison of “Merger Event” in the Equity Derivatives world, and “Successor” in the Credit Derivatives world.