Replies to post #19049 on GTC Biotherapeutics (fka GTCB)

[DewDiligence]

Addendum re timing of an LFB tender offer:

If LFB does want to acquire all of GTC, LFB can launch a cash tender offer at any time because there is no standstill agreement between LFB and GTC to preclude such an offer. From a tactical standpoint, however, LFB’s best opportunity will come after the latest financing transaction closes because the latest financing will boost LFB’s equity stake in GTC to almost 70%. Clearly, the higher LFB’s equity stake is when a tender offer is launched, the smaller the percentage of non-LFB shares that LFB would need to acquire in the tender in order to reach the 90% threshold for a short-form merger.

[cleith]

Note, that I have edited the below pasted content a bit to eliminate some extra procedural content and to shorten the read. The source link is below.

http://www.dealmaven.com/community/blogs/maven/archive/2007/08/27/mergers-vs-tender-offers.aspx


Mergers vs. Tender Offers

…. there are two primary acquisition methods: the merger, and the tender offer. (There is a third method to control a company—though not acquire it—which is to gain control of its board of directors through a proxy contest.)

People are often confused about the differences between a merger and a tender offer, and why a company might choose one method over the other when negotiating an agreement.

Merger

A merger is the most traditional way to acquire a company and involves the legal combination of two corporations. Mergers are governed by state statute and, for approval, require an affirmative vote of either a majority or a supermajority of Target’s shareholders at a shareholders’ meeting.

Whether a merger requires a majority (>50%) or supermajority (often >66 2/3% or 75%) varies from company to company and is generally set forth either in the company’s charter (articles of incorporation) or in its bylaws..….

Since both Acquirer and Target must sign a merger agreement, in effect mergers are always friendly transactions, with “friendly” defined as a transaction that has the support of Target’s management and board (though some transactions which begin as hostile transactions ultimately result in a “friendly” merger agreement).

Since a merger requires an affirmative shareholder vote, and since this consent must be informed, Target issues a disclosure statement to Target shareholders prior to the shareholder meeting at which shareholders will vote on the proposed sale of the company (the disclosure document is similar to the proxy that a company would send to its shareholders prior to its annual meeting, the difference being that, in this case, the purpose of the document is to describe the proposed merger).

This disclosure document is called a merger proxy if Acquirer offers only cash to Target shareholders, and is called a merger prospectus if Acquirer offers all stock or cash-and-stock to Target shareholders. The disclosure document describes the terms of, reasons for, risks of, and conditions to the proposed merger.

In the merger proxy or prospectus, Target’s management and board will state that they believe the proposed merger is in shareholders’ best interests and that they recommend shareholders vote in favor of the transaction (presumably if they did not hold this view, they would not have signed the merger agreement).

In addition, management and the board will describe the background of the merger and their reasons for recommending it, which could include analyses performed by the company’s investment bankers to the extent a fairness opinion was provided (which is often the case for publicly traded companies). The actual fairness opinion would also be provided as an exhibit for the merger proxy or prospectus. After taking time to review this disclosure statement, Target shareholders vote on the proposed transaction at a shareholder meeting. This vote can take place at Target’s annual shareholder meeting or at a special shareholder meeting called for the sole purpose of conducting the vote.

If the proposed transaction is a sale of Target, as described above, Target shareholders must vote on the deal…..

Overall, mergers require a fair amount of time due to

(i) the work involved in preparing the disclosure document (the merger proxy or prospectus),
(ii) the notice requirement, which is the time period between when a shareholder meeting is announced and the earliest time at which it can be held, and
(iii) the time and logistics involved in arranging a shareholder vote.
(iv) In total, a typical merger can take anywhere between 12 and 20 weeks to complete from announcement to closing (or much longer in certain circumstances), depending on the scheduled date of the shareholder vote and any required regulatory approvals.

A major benefit of the merger process, as compared to the potentially shorter tender offer process (described below), is that the merger process is “all or nothing.”

• If the company receives a majority vote in favor of the deal (or a supermajority if such is required by the company’s bylaws or applicable state statute), the transaction is approved and can close (assuming all regulatory approvals are received; the transaction cannot close until all required regulatory approvals have been received).

• Thus, for a company with a simple majority requirement, a >50% vote in favor of a sale of the company would result in 100% of the company being sold, in spite of the fact that 49% of the shareholders may have voted against the transaction.

Because there is a single shareholder vote which determines whether Target shareholders approve or do not approve the proposed transaction, this merger structure is often called a “one-step” merger or a “traditional” merger.

Tender Offer

Unlike a merger, which is negotiated with Target’s management and board and is an offer to purchase 100% of a company, a tender offer is an offer made directly to Target shareholders to purchase some specified number of Target shares at the offer price (usually an offer for 100% in an acquisition context).

In essence, shareholders “vote” by choosing to tender or not tender their shares. If less than 100% of the shares are tendered by shareholders (which is almost always the case) then a second step, a merger, is required in order to gain control of those non-tendered shares.

Thus in contrast to the one-step merger described above, a tender offer is a two-step process of

(i) the tender offer followed by
(ii) a close-out merger (either short-form or long-form). Whether the second step is a “short-form merger” or a “long-form merger” depends on how many shares were tendered while the tender offer was open. Because tender offers are made directly to shareholders, they can be either friendly or hostile (i.e., with or without Target management and board approval).

While mergers have been more common than tender offers for the last 10 years (due to recently resolved issues with respect to tender offer law), under certain circumstances tender offers are preferable due to their potential speed.

From start to finish, a tender offer can take as few as 4 weeks, making it an attractive method if speed to closing is a goal for the parties, particularly since this is much faster than a one-step merger (12–20 weeks).

However, while a tender or exchange offer may be faster than a traditional one-step merger, it is not necessarily faster (it depends on the results of the tender or exchange offer, described as Step 1 below).

Step 1—tender offer: The first step of a tender offer is the offer by Acquirer directly to Target shareholders to purchase their Target shares for the specified offer price. Upon commencing a tender offer, Acquirer must file a Schedule TO (tender offer) with the SEC.

Within 10 business days after Acquirer has filed the Schedule TO, Target must file a Schedule 14D-9 with the SEC pursuant to which Target is required to state whether it

(i) recommends the offer to shareholders,
(ii) does not recommend the offer to shareholders
(iii) makes no recommendation to shareholders.

In the Schedule TO, Acquirer will state the minimum percentage of shares that must be tendered in order for the tender to close. The minimum threshold chosen in the tender offer is almost always equal to or greater than the voting requirement in a traditional one-step merger.

In this way, should a subsequent shareholder vote be required, approval of the transaction would be guaranteed. If the minimum threshold of tendered shares is met, the transaction will move to Step 2 (described below). If the minimum threshold is not met, Acquirer has the option

(i) to withdraw the tender offer or
(ii) to extend it. If the offer is withdrawn, no shareholders will receive the consideration offered (as if the offer never occurred).

For example, assume Target has a simple majority requirement for approval of a sale of the company. If Step 1 of the tender results in greater than 50% of Target shares being tendered (offered for sale by Target shareholders), then the tender offer proceeds to Step 2 below and Acquirer is contractually required to purchase the tendered shares. If, on the other hand, the initial 20-day tender period does not result in a majority of Target shares being tendered, Acquirer can either extend the offer period (the subsequent offer period) or withdraw the tender entirely.

Step 2a.—Short-form merger: If 90% (or more) of Target shares are tendered, Acquirer can effect a short-form merger under applicable state law to “squeeze out” the remaining 10% (or less) of shares not tendered in the tender offer process. In a short-form merger, there is no shareholder vote—all remaining shares must be sold. Upon filing of the short-form merger certificate with the Secretary of State, the minority shareholders no longer have any rights to the shares, other than the right to receive the same consideration paid to the other shareholders in connection with the tender offer.

Step 2b.—Long-form merger: If Acquirer obtains more than the minimum threshold but less than 90%, the tender still closes but Acquirer must proceed down the traditional merger path in which:

(i) disclosures are sent to shareholders, and
(ii) Shareholders must vote in favor of the transaction in order for the transaction to close.

This is generally referred to as a long-form merger. This long-form merger (also called a one-step merger) is exactly the same process described above in the section entitled Merger. Since the tender offer in Step 1 closed (and Acquirer therefore already owns a certain number of Target shares), Acquirer will vote those newly acquired shares in favor of the transaction at the shareholder vote. Assuming that the minimum threshold chosen in the tender offer is equal to or greater than the percentage required for approval in a traditional merger (>50% in our example above), Acquirers already owns enough shares to guarantee a winning shareholder vote.

(1) The percentage requirement for a short-form merger (90% in the example above) is set by the state in which Target is incorporated. While 90% is a common setting for this percentage requirement the required approval level for a short-form merger may differ in other states.

[Bioventure]

When would LFB most likely initiate a tender offering?

[DewDiligence]

The coup de grâce has finally arrived:

http://sec.gov/Archives/edgar/data/904973/000110465910048874/a10-15187_2ex11.htm