Tender Offer - Equity Derivatives Provision

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2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual

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Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext)
Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent
TOC | 1 General Definitions | 2 Option Transactions | 3 Exercise of Options | 4 Forward Transactions | 5 Equity Swap Transactions | 6 Valuation | 7 Settlement | 8 Cash Settlement | 9 Physical Settlement | 10 Dividends | 11 Adjustments and Modifications | 12 Extraordinary Events · 12.8 Cancellation Amount · 12.9 Additional Disruption Events · 12.9 List of ADEs · 12.9(b) Consequences of ADEs | 13 Miscellaneous

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Section 12.1(d) in a Nutshell
Use at your own risk, campers!

12.1(d)Tender Offer” means the Calculation Agent determines there has been a takeover offer or other event that results in an entity obtaining or having the right to obtain more than 10% and less than 100% of the outstanding voting shares of the Issuer.

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Full text of Section 12.1(d)

12.1(d)Tender Offer” means a takeover offer, tender offer, exchange offer, solicitation, proposal or other event by any entity or person that results in such entity or person purchasing, or otherwise obtaining or having the right to obtain, by conversion or other means, greater than 10% and less than 100% of the outstanding voting shares of the Issuer, as determined by the Calculation Agent, based upon the making of filings with governmental or self-regulatory agencies or such other information as the Calculation Agent deems relevant.

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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

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Summary

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.

Mandatory GDR Conversion

Could you slip in a mandatory ADR or GDR conversion into this provision? you know, if a warring Eastern European govenment announced that local issuers of GDRs must forcibly exchange them for local Shares? We will have to hope so, because it is hard to see what other category of Extraordinary Event this would fit into.

Section 12.1(e) Tender Offer Date

For what its worth here is the definition of Tender Offer Date, in Section 12.1(e) in all its glory ...

12.1(e)Tender Offer Date” means, in respect of a Tender Offer, the date on which voting shares in the amount of the applicable percentage threshold are actually purchased or otherwise obtained (as determined by the Calculation Agent).

...and in Nutshell:

12.1(e)Tender Offer Date” means, for a Tender Offer, the date the Calculation Agent determines on which the applicable percentage threshold of voting shares are actually purchased.

Not really much to see here, we think you will agree.
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See also

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References