The Delaware State Bar Association has recently proposed an amendment to the Delaware General Corporation Law (the “DCGL”) that would significantly modify the way acquisitions of Delaware public companies are effected by eliminating the need to obtain stockholder approval for a second-step merger in a two-step transaction (i.e., an acquisition structured as a tender offer followed by a back-end merger). While commentators have focused primarily on how the proposed amendment would change how friendly acquirers, and in particular private equity sponsors, use tender offers to acquire public companies in negotiated transactions, the proposed DGCL amendment would also provide similar timing and cost benefits to transactions that commence with an unsolicited tender offer, but end with a negotiated merger agreement.

The newly proposed Section 251(h) of the DGCL, which would apply only to targets with shares that are listed on a national securities exchange or held of record by more than 2,000 holders immediately prior to the execution of the merger agreement, provides that certain conditions must be satisfied for a stockholder vote not to be required in connection with a second-step merger following consummation of a tender or exchange offer, including...