Mergers - Equity Derivatives Provision
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
Section 12.1(b) 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.
Section 12.1(c) Merger Date
For what its worth here is the definition of Merger Date, in Section 12.1(c) in all its glory ...
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...and in Nutshell™:
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Not really much to see here, we think you will agree.
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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.
See also
- Corporate action
- Calculation Agent Adjustment;
- Modified Calculation Agent Adjustment.
- Adjustments and Modifications
- Adjustments to Indices
- Adjustments to Share Transactions and Share Basket Transactions