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Although the traditional route of acquiring a target company by tender offer and compulsory squeeze-out (following 90% acceptances) is available in Bermuda, it has become common, where the target board is in favour of the transaction, for the transaction to be structured in a manner requiring lower approval thresholds.
Our US clients Riverstone Capital Partners, a private equity firm with approximately $17 billion under management and the world’s largest renewable energy fund, agreed to acquire Seajacks International, a Bermuda company listed on the Oslo Axess Exchange.
Instead of being structured as a takeover offer, the transaction proceeded by way of an amalgamation of the Seajacks holding company with a newly established Bermuda subsidiary of Riverstone. In an amalgamation, the two Bermuda companies combine and continue as one company and the amalgamated company assumes the assets and liabilities of the constituent companies. Under the terms of the amalgamation, Riverstone received shares in the resulting amalgamated company and former shareholders of Seajacks received cash, leaving Riverstone as the sole shareholder of the amalgamated entity. This was the first time a company listed in Oslo had been acquired using the amalgamation structure. In other deals, target shareholders have received shares in the (non-Bermuda) purchaser company, with the purchaser joining in the amalgamation agreement to agree to deliver the amalgamation consideration.
One major attraction of an amalgamation is the level of shareholder approval required. Absent anything to the contrary in the target company’s bye-laws (which may impose, or may be amended to impose, a lower or higher threshold), a resolution to approve an amalgamation must be approved by a majority vote of three-fourths of those voting. Given that the quorum requirement (again subject to contrary provision in the bye-laws) is one-third of the issued shares, in theory the affirmative vote of the holders of 25% of the issued shares could be enough to pass the resolution. In the Seajacks case, as in many other cases, the bye-laws of the target required only a simple majority of those voting to approve the amalgamation and the quorum requirement for the meeting was only two shareholders present in person or by proxy so achieving the necessary threshold was much more straightforward than using a tender offer.
With a lower acceptance threshold than traditional statutory squeeze-outs, it is little wonder that amalgamation has become the structure of choice for agreed takeovers of Bermuda companies.
Anthony Smith of our London office advised Riverstone, with Akin Gump, Washington providing US advice and Thommessen, Oslo advising on Norwegian law.