H-D International Holdings Group (HDIH)

[Don Beasley]

Let's Adjust the Lens a bit

if the capital structure of a Public Shell is not adequate to accomplish the merger, the capital structure will have to be altered by effecting either an increase in the authorized number of shares or a reverse split of the outstanding shares

typically a majority of these shares are held by affiliates of the Public Shell and are therefore, as will be described below under (c), not freely tradeable either. Consequently, typically not more than 10% of the surviving entity’s outstanding shares are freely tradeable. Therefore, it will be impossible to accomplish a large public float of the shares issued to the Private Company shareholders in a short time period.

The shareholders of the Private Company, under the merger agreement, will usually receive 80-85% of the stock to be issued in the merger by the Public Shell in consideration for giving up their shares in the Private Company. The merger agreement also typically provides that within a specified time frame post-merger, the Sub (now the legal successor of the Private Company) will have to be merged into the Public Shell (“Upstream Merger”).

Carter Ledyard & Milburn LLP Publications