CA Goldfields Inc (fka CAGI)

[geeps20]

S-4 Info

http://tinyurl.com/23trhg




Registration Using Form S-4

Whether to use a Form S-4 registration will largely depend on whether the U.S. buyer is required to obtain approval from its shareholders for the transaction, as well as the number of target shareholders involved. In addition to registering securities, the Form S-4 is frequently used as a proxy statement for the U.S. buyer to solicit proxies from its shareholders to approve the transaction. Utilizing a Form S-4 to register the acquisition consideration, however, can be more expensive and time consuming than other alternatives simply because of the amount of information required for disclosure.

Under this Form S-4 registration process, the parties would execute an acquisition agreement and the closing of the transaction would not occur until the Form S-4 was declared effective by the SEC. Target shareholders would not receive any of their consideration until the closing (once the SEC approves the registration), at which time they would receive registered shares of the buyer’s stock that they could freely sell in the U.S. public market.

Given the amount of information required to be included in the Form S-4, it could require 4 months from the time a stock purchase agreement is signed to the eventual closing of the transaction. The Form S-4 could not be filed until approximately 45-60 days after the execution of the stock purchase agreement. Preparing the Form S-4 is a time-consuming and expensive process because the Form S-4 is a complex document that requires a detailed description of both the buyer and the target, the details of the proposed transaction, financial statements of both parties, and consents from the parties’ auditor and legal counsel. If a foreign target’s financial statements were not prepared using U.S. accounting principles (GAAP), it is very likely that those financial statements would have to be converted to these GAAP principles, a process which can consume two months.

Once the Form S-4 is filed with the SEC, the SEC typically takes two weeks to determine whether it will review the document. If the SEC determines not to review the filing, the registration statement may be declared effective within 48 hours and would then be mailed to the buyer’s shareholders for approval of the transaction. However, if the SEC reviews the registration statement, it might require 30 days to receive the first set of comments and then several weeks to respond to the SEC’s comments. Given the complexity of and the amount of information in a typical Form S-4, it is normal to expect resolving and responding to SEC comments to consume approximately 60 days. This review process could cost the buyer as much as $300,000, which, in many cases, would cause a buyer to consider an “adjustment” to the transaction price to compensate for this extraordinary expense and delay. In summary, the process of utilizing a Form S-4, even if not reviewed by the SEC, can significantly delay the closing of an acquisition and introduces additional costs, complexity and deal risk to the transaction.

Registration Using Form S-3

Compared to pursuing the Form S-4 registration process, both buyers and targets find that utilizing a registration statement on Form S-3 is typically fast and inexpensive, and entails less risk for a failed closing. However, it is often difficult to convince shareholders of foreign targets to accept “restricted securities,” which are not immediately tradable, as closing consideration.

Under the Form S-3 process, the parties typically execute a stock purchase agreement and close on the same day, with the target shareholders receiving all transaction consideration at the closing. The buyer’s shares issued in the transaction are not registered with the SEC, meaning that target shareholders cannot freely sell these shares in the U.S. public market until the Form S-3 is filed and declared effective by the SEC. Accomplished as a “private placement,” the parties also often execute a Registration Rights Agreement requiring the buyer to file a Form S-3 and to use its best efforts to obtain SEC approval of the registration.

Registering shares on a Form S-3 can take as few as four weeks and, in the case of an SEC review of the filing, might take approximately eight to ten weeks from the closing of the acquisition.



Conclusion

In summary, for most acquisitions of non-U.S. companies that do not require the approval of the buyer’s shareholders, the Form S-3 approach is preferable to the Form S-4 process for rapidly registering the shares in an acquisition. Certainly for WKSIs, utilizing an immediately effective Form S-3 can provide registered shares within days of a closing. For non-WKSI buyers, although target shareholders must wait several weeks to have their shares registered, utilizing a “short-form” Form S-3 registration process is more efficient, less expensive and less time consuming than adopting a Form S-4 process.