By Barbara Borden
On June 30, 2013, the Delaware General Assembly passed the proposed amendments to the Delaware General Corporation Law. Among the amendments are the addition of new Section 251(h), which will eliminate the need to include top-up options or a back-end stockholder vote in most public tender offers for Delaware corporations. The amendment becomes effective August 1, 2013. Under the new rule, if the target is listed on a national securities exchange or its shares are held of record by more than 2,000 holders immediately prior to the execution of the merger agreement, then the target will have the right to opt into using new Section 251(h). If the parties opt into Section 251(h) and a sufficient number of shares are accepted in the tender offer that are required to approve a merger (in most cases a majority of the outstanding shares), then the merger will be consummated without a vote of the target stockholders (and without having to get to 90% for a short form merger). To qualify for 251(h), the following requirements apply:
1) The merger agreement must provide that it is governed by Section 251(h)
(2) The purchaser must tender for all outstanding shares
(3) Following consummation of the tender, the purchaser must own the requisite number of shares to approve a merger if a meeting of stockholders had to be called
(4) At the time the merger agreement is approved by the board of target, no party to the merger may be an "interested stockholder" of the target as defined in DGCL Section 203
(5) The purchaser in the tender offer must merge with the target corporation
(6) The target shares that are not cancelled in the merger must be converted into the same amount and kind of consideration as the tender offer.