Alexandria Minerals Corp ALXDF

More elaboration: Take-over bids vs Plans of arrangement

[Goodbadandugly]

Take-Over Bids

Advantages

• If it is a friendly transaction supported by the target company’s board, the transaction can be completed is as few as 35 days (i.e. the target board can approve a shorter 35 day minimum bid period rather than the mandated 105 day minimum bid period for hostile bids).
• There is no court approval process and therefore there is no formal venue for disgruntled shareholders or other parties to intervene.

Disadvantages

• If the acquiring company wants to acquire 100% of the target company’s shares, a second step transaction is required to acquire any shares not tendered to the original bid.
• The long 105 day minimum bid period (unless target board approves a shorter time of not less than 35 days) increases the risk of completing bids.

Plans of Arrangement

Advantages

• Plans of arrangement are more flexible and can allow the parties to achieve multiple goals (including tax efficiency) in a single transaction.
• Complicated, multi-step reorganization transactions can be completed quickly and efficiently under plans of arrangement (usually in the same day).
• Plans of arrangement allow for the termination of options and other convertible securities (provided the holders of such securities are treated fairly).
• Plans of arrangement have a lower approval threshold in that the transaction only requires the approval of two-thirds of the target company shares that actually vote on the transaction.
• If the requisite shareholder approval is received, the acquiring company can acquire 100% of the target company shares (including from both those that voted in favour and those that voted against the transaction) in a single step transaction.
• The issuance of shares of the acquiring company in exchange for the target company shares pursuant to a court approved plan of arrangement fit within a registration exemption under US securities laws.

Disadvantages

• The shareholder approval process takes longer (typically 60+ days) than the 35 day minimum bid period under a friendly take-over bid.
• The court approval process provides a venue for disgruntled shareholders, and other interested parties, to intervene.
• Courts typically require dissent rights to be given to the target company shareholders (i.e. the right to be paid out the fair value of their shares in cash).

[mikenooks]

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