Published Date: 2021-09-08 | Source: INCE|Community | Author: The Finance Ghost
The potential buyout of Tower by RDC Properties has been on the cards for some time now.
RDC is contemplating a transaction which would consist of a scheme of arrangement and a standby offer. This is a commonly-used tool in corporate finance, useful when a company would ideally like to own 100% of another business but would settle for a controlling stake if it can't get enough support for the full buyout.
A scheme of arrangement is an expropriation mechanism. If 75% of shareholders vote it through, 100% of shareholders sell their shares. This may sound unfair, but you can imagine how corporate activity would simply shut down if there was no way of forcing an outcome provided enough people agree to a deal.
The standby offer kicks in if the scheme fails to achieve 75% support. For example, if 60% support it, then the scheme would fail but those shareholders could accept the offer from RDC, which would give RDC control of Tower.
If fewer than 50% plus one vote's worth of shareholders accept the standby offer, then the entire thing lapses as RDC doesn't want to put in more money only to end up with a non-controlling stake.
Either way, RDC would hope to delist Tower, provided enough shareholders vote in favour of a delisting.
Hopefully, this helps you see how complicated these deals get. 58% of Tower shareholders have already give irrevocable undertakings, which means they have promised RDC that they will agree to vote in favour of the deal. This is encouraging in terms of RDC's requirement to at the very least obtain control of Tower via a general offer.
The good news is that Tower and RDC have concluded an "offer and implementation agreement" which sets out pre-conditions to a firm offer. The bad news is that this still isn't a firm offer. RDC first needs to secure the funding needed to launch the offer, which one would hope at this stage is a near-certainty.
The company hopes that a firm intention to make an offer will be submitted by 8th October 2021. At that point, the Takeover Law timelines and requirements kick in.
Until then, the potential RDC transaction is technically just a piece of paper with non-binding thoughts.