Mergers - Equity Derivatives Provision

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2002 ISDA Equity Derivatives Definitions

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12.1(b) in a Nutshell™

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12.1(b) in all its glory

12.1(b) “Merger Event” means, in respect of any relevant Shares, any
(i) reclassification or change of such Shares that results in a transfer of or an irrevocable commitment to transfer all of such Shares outstanding to another entity or person,
(ii) consolidation, amalgamation, merger or binding share exchange of the Issuer with or into another entity or person (other than a consolidation, amalgamation, merger or binding share exchange in which such Issuer is the continuing entity and which does not result in a reclassification or change of all of such Shares outstanding),
(iii) takeover offer, tender offer, exchange offer, solicitation, proposal or other event by any entity or person to purchase or otherwise obtain 100% of the outstanding Shares of the Issuer that results in a transfer of or an irrevocable commitment to transfer all such Shares (other than such Shares owned or controlled by such other entity or person), or
(iv) consolidation, amalgamation, merger or binding share exchange of the Issuer or its subsidiaries with or into another entity in which the Issuer is the continuing entity and which does not result in a reclassification or change of all such Shares outstanding but results in the outstanding Shares (other than Shares owned or controlled by such other entity) immediately prior to such event collectively representing less than 50% of the outstanding Shares immediately following such event (a “Reverse Merger”),
in each case if the Merger Date is on or before,
(A) in the case of a Physically-settled Option Transaction the later to occur of the Expiration Date or the final Settlement Date,
(B) in the case of a Physically-settled Forward Transaction or a Physically-settled Equity Swap Transaction, the relevant Settlement Date or,
(C) in any other case, the final Valuation Date.

Resources and Navigation

Overview

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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

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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.
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See also

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References

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