October 20, 2008
Formula Pricing in the Exchange Offer Context
Recently, the Corp Fin Staff acted on a no-action letter to Procter & Gamble. It builds upon the prior letters in the area of formula pricing in the exchange offer context. Prior letters such as McDonald’s, Weyerhaeuser, TXU and Lazard set the groundwork for this letter. In the P&G situation, they have three companies involved, but they are using the common stock trading price of one (ie. Smucker) to determine the consideration offered.
I don’t think this is moving the needle much as it’s the same basic philosophy on formula pricing, where there is an objective formula that everyone can follow, understand and is objectively applied. Still it’s worth noting each incremental step because that’s what us lawyers do…