In 2014, the Maryland General Corporation Law (“MGCL”) was amended to provide a more simplified process for public company mergers via a two-step tender offer. With the addition of a new Section 3-106.1, buyers are permitted to effect a short form merger (without the need for a top-up option) instead of a longer form merger if the buyer acquires at least the percentage of shares of the corporation in the tender offer that would be required to approve the merger at a meeting of stockholders. Click here for further information regarding the enactment of Section 3-106.1:

The company to be acquired must either be a Maryland corporation or a real estate investment trust to be eligible to use this mechanism and the merger agreement must expressly provide that the merger shall be subject to Section 3-106.1. Thus far only one company has filed documentation with the Securities and Exchange Commission opting into Section 3-106.1 and it did not close on the transaction.

Effective October 1, 2015, Section 3-106.1 shall be amended, primarily to provide further clarification to the parties choosing to use this mechanism. The amendment includes the following changes:

• Section 3-106.1 currently requires that the merger agreement must expressly state that it “shall be governed” by Section 3-106.1. The amendment provides that Section 3-106.1 will instead be applicable to any merger agreement that “allows or requires” the merger to be effected under Section 3-106.1, which permits the parties the option to proceed with the merger under a different mechanism. 
• The amendment clarifies the timing of the delivery of shares, providing that shares tendered into an offer are not counted toward the acquirer’s ownership of shares until any certificated shares have been physically received by the depository and any uncertificated shares have been transferred into the depository’s account.
• The amendment includes language to more accurately reflect the terms of tender offers by permitting the tender offer to exclude shares owned by the acquiring entity, a person that owns, directly or indirectly, all of the outstanding equity interest in the acquiring entity or a direct or indirect wholly owned subsidiary of either of the foregoing.

It remains to be seen whether more companies will utilize Section 3-106.1 once those amendments take effect.

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