The last several posts have been devoted to exploring the differences between an "exchange reorganization" and a "share exchange tender offer" under the California General Corporation Law. Below is a chart that summarizes the differences between these two types of transactions:
|
Exchange Reorganization |
Share Exchange Tender Offer |
Definition |
Corp. Code § 181(b) |
Corp. Code § 183.5l |
Acquiring entity |
Domestic corporation (Corp. Code § 167), foreign corporation (Corp. Code § 171), or other business entity (Corp. Code § 174.5) |
Corporation (Corp. Code § 162) |
What acquiring entity exchanges |
Its equity securities (Corp. Code § 168) or the equity securities of a domestic corporation, a foreign corporation, or other business entity that is control of the acquiring entity |
Its equity securities (Corp. Code § 168) or the equity securities of a corporation that is control of the acquiring corporation |
Acquired entity |
Domestic corporation, foreign corporation or other business entity |
Corporation |
What is the acquiring entity acquires |
Equity securities |
Shares |
Effect of exchange |
Acquiring entity immediately after the acquisition has control of the other entity |
Acquiring entity immediately after the acquisition does not have control |
Understanding these differences requires a thorough understanding of the various defined terms. For example, a "domestic corporation" is not necessarily a "corporation" under the GCL. Some of these differences are inexplicable to me. Why for example can an exchange reorganization involve the acquisition of the acquired entity's "equity securities" but a share exchange tender offer is limited to an acquisition of the "shares" of the acquired entity?
Perhaps even more baffling is the fact that a share exchange tender offer does not necessarily involve a "tender offer" as understood under the Williams Act.