Re: Roche-DNA / mechanics of the merger
Thanks for posting the write-up from the NYT dealbook blog. The terms of Roche’s tender offer are as mandated by Delaware law with the notable exception of the provision from the 1999 agreement between the companies that allows DNA’s independent directors to appoint two investment banks to set the buyout price.
However, what the NYT blogger doesn’t mention is that it’s highly unlikely for the contingency involving the two IB’s to come into play. Why is this contingency unlikely? Because it requires two things to happen that are inherently contradictory:
• 1. Roche obtains a majority of the minority shareholders (i.e. >22% of the total DNA shares) in the tender offer but less then the 90% needed for a short form merger; and
• 2. A majority of the minority shareholders votes against the Roche deal.
Why would any shareholders tender their shares to Roche and then vote against the deal? It makes little sense, but this is what would have to occur for the provision involving the two IB’s to come into play.
The only way the above could realistically happen is if institutional holders owning a >5% share of DNA tendered their shares and this was the only reason Roche obtained the 22% equity threshold in the tender offer. According to the 1999 contract between Roche and DNA, the votes of these >5% holders do not count in determining whether a majority of the minority shareholders have voted in favor of Roche’s deal.
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