It doesnt look like something Tyler would say.
If I am reading the game right Charles, I believe we guess who we think it is.
Not who we think it isn't. Play right Chuck.
I'm going with A.
Tell us of your encounter with Mike whatever from the Jersey Shore. SRK brought it up, but I can't resist.
Step 1—tender offer: The first step of a tender offer is the offer by Acquiror directly to Target shareholders to purchase their Target shares for the specified offer price. Upon commencing a tender offer, Acquiror must file a Schedule TO (tender offer) with the SEC. If Acquiror offers stock as part of the transaction consideration (i.e., an exchange offer), Acquiror also must file a registration statement for the securities since any company issuing public stock in the U.S. must file a prospectus, whether it is “selling” the stock in an IPO or “issuing” the stock as consideration in a proposed acquisition.
Within 10 business days after Acquiror 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, or (iii) makes no recommendation to shareholders.
In the Schedule TO, Acquiror 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, Acquiror 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 If the offer is withdrawn, no shareholders will receive the consideration offered (as if the offer never occurred).
The tender offer must be “open” for at least 20 business days (4 weeks) and, during that time, shareholders can elect to tender or exchange their shares. Acquiror cannot “take up” or purchase any shares until this initial tender period has closed. After the initial 20-day tender period has run, Acquiror is allowed to purchase the shares tendered to date and to extend the offering period by between 3 and 20 business days (this is called a subsequent offer period). If a change is made to the offer, the tender offer must be kept open for additional time. The length of time that a tender offer must be extended if a change is made depends on the nature of the change.
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 Acquiror 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, Acquiror 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, Acquiror 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 Acquiror obtains more than the minimum threshold but less than 90%, the tender still closes but Acquiror 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 Acquiror therefore already owns a certain number of Target shares), Acquiror 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), Acquiror already owns enough shares to guarantee a winning shareholder vote.
Two other things to note: (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 (and is the Delaware requirement), the required approval level for a short-form merger may differ in other states. (2) While tender offers are usually done to try to purchase control of a company, their use is not restricted to this purpose. If Acquiror simply wanted to purchase 4.9% of Target, Acquiror could structure the tender offer accordingly. Similarly, if Acquiror simply wanted to effect a significant share repurchase of its own stock, it could do so through a tender offer (as opposed to the more common “open market” programs that many companies have in place).
Citigroup (NYSE: C) analyst Jason Bazinet upgraded Liberty Capital (NASDAQ: LCAPA) Friday, based on an updated “sum of the parts” valuation, and sees Liberty boosting their stake in Sirius XM Radio (NASDAQ: SIRI) likely, but not until 2012 . . . . . Bazinet sees three potential options for Liberty’s stake in Sirius XM
1.Liberty making a tender offer for 100% of Sirius XM between March 2011 – March 2012.
2.Newco Capital, the new tracking stock, increasing its 40% stake in Sirius XM to 80%.
3.Newco Capital spinning off its Sirius XM stake into a new company and then using a Reverse Morris Trust to merge with the publicly traded Sirius XM (SIRI)
In his report, Bazinet explores the many factors which will influence Liberty’s decision. In the investment agreement with Sirius XM, Liberty is restricted from acquiring more than a 49.9% stake in Sirius XM before March of 2011. Liberty is permitted to acquire more than a 49.9% stake after March 2011, as long as Liberty makes a cash tender offer for all of Sirius XM’s outstanding shares it does not already own at a price above the closing price. After March 2012, Liberty is allowed to acquire more than a 49.9% stake, and a controlling interest, without making a tender offer for all of the outstanding shares they do not own.
Sirius XM has approximately $8 billion in NOLs (Net Operating Loss Carry Forwards). Bazinet notes in his report that “Section 382 of the IRS code limits the amount of NOLs that can be utilized per year should a change in ownership of greater than 50% of a company’s stock occur over a three-year period.” In the event that Section 382 of the IRS code is triggered, Bazinet estimates that the annual NOL utilization limit ranges from around $200 million to $400 million, when factoring in a SIRI stock price of between $1.00 – $2.00 right before a change in ownership would occur.
Should Sirius stock trade at $1 per share at the time of the ownership change, we estimate there could be about $4.7 billion in NOLs that could go unused. Alternatively, if Sirius stock is trading at about $2 per share, we believe unused NOLs could total $1.8 billion.
– Jason Bazinet, Citigroup Media Analyst
Bazinet sees a potential for the accelerated use of Sirius XM’s NOL’s. When looking at Liberty’s decision not to initiate a hard spin for all three tracking stocks, LCAPA, LINTA and LSTZA, Bazinet sees one reason being the potential for a tax sharing agreement between Newco Starz and Newco Capital. In a scenario which assumes both Sirius XM and Starz utilizing the NOLs, he sees the potential for all of the NOLs to be consumed by 2019. Bazinet points to recent comments regarding Starz made by Greg Maffei during a recent conference on March 10th:
I mean we have an excess of cash and we have to figure out what is clever to do with that. And having an unshielded income stream over the long term, unshielded by debt, or other tax advantages, is probably not an attractive scenario.
– Greg Maffei, CEO of Libert Media Corp.
What would Liberty’s cost be to increase its stake in Sirius XM? While Bazinet admits that it’s “difficult to know where Sirius XM will trade in the next year, or the year after,” he points out that it’s dependent on Sirius XM’s equity value at the time combined with the level of Liberty’s target equity stake. He notes that a larger than 50% controlling stake is required to complete a Reverse Morris Trust transaction, and an 80% stake in Sirius XM is required to allow both Liberty and Sirius XM to use the NOLs. Importantly, Liberty needs to acquire an 80% stake within six months after it attains an over 50% ownership for Liberty and Sirius XM to both be allowed to utilize the NOLs.
A tender offer for 100% prior to March of 2011 seems highly unlikely, according to Bazinet. There are few incentives for Liberty to do this, as it would destroy Sirius XM’s NOLs. If Sirius XM’s stock price remains at “current levels” over the next couple of years, Bazinet “expects” Liberty Media to boost its stake in Sirius XM to 80% — after March of 2012. He notes many reasons for this, including the “significant” benefit from the sharing of the NOLs between Sirius XM and Starz. “The effective cost to Capital would be $1.6 billion when taking into account the value of accelerated NOL usage under a tax sharing agreement between Sirius and Starz,” explains Bazinet.
If Sirius XM’s stock were to rise “substantially” in value, Bazinet expects Liberty Media would enter into a Reverse Morris Trust with Sirius XM. While the accelerated utilization of the NOLs would be taken off the table with the RMT option, it could actually be substantially less expensive, because Liberty Media would gain control as a result of contributing its existing stake in Sirius XM and then merging it with the publicly traded Sirius XM.
A Reverse Morris Trust transaction allows for a parent corporation to spin-off a subsidiary tax free into an unrelated acquisition corporation, but the parent company’s shareholders must retain a controlling interest (over 50% of the value and voting rights) of the newly merged company. Recent Reverse Morris Trust transaction examples include Walt Disney’s (NYSE: DIS) $2.4 billion spin-off of ABC Radio into Citadel Broadcasting Corporation (NYSE: CDL) in 2006 and Verizon Communication’s (NYSE: VZ) $2.7 billion spin-off of its Northern New England wireline operations into FairPoint Communications (OTC: FRCMQ.PK) in 2008.
From Barrons article regarding HSN and IAC:
"Consider, for instance, the saga of Liberty's stake in HSN (ticker: HSNI), parent of the TV shopping channel once called the Home Shopping Network. HSN was one of four companies last year spun out from IAC/InterActive (IACI), the Internet and retailing conglomerate run by Barry Diller. Malone ended up with about a 30% stake in HSN; he placed the holding in Liberty Media Interactive (LINTA), a tracking stock that among other things includes HSN rival QVC.
For the first year after the deal, Liberty did nothing. But last week, Liberty lifted its stake in HSN to 32.8%, buying 1,872,210 HSN shares at an average price of $4.63. Apparently determined not to reveal Malone's interest in the stock too soon, Liberty bought the shares in what it described in its Securities and Exchange Commission filing as "a post-paid forward transaction," which basically means a brokerage firm piled up the shares on Liberty's behalf into a block Malone could buy and then disclose in one fell swoop. The move allowed Liberty to buy the extra shares at less than half the current price.