Shareholder approval is often one of the biggest hurdles in merger and acquisition (M&A) transactions. State law as well as the target company's charter and bylaws generally govern the exact percentage of shares that must sign off on any proposed deal. For instance, in Delaware, where many large companies are incorporated, a merger must be approved by a majority of the outstanding stock entitled to vote.
In this case, a majority of Knight shares must approve the merger, according to documents filed with the SEC. Several large shareholders, including TD Ameritrade and the Jeffries Group, have already voiced support for the proposed cash and stock deal valued at $1.4 billion. However, lawsuits may still hinder the deal's approval.
Lawsuits challenging M&A deals have increased dramatically in recent years, particularly for high-value deals. Here, at least one lawsuit seeking class-action status has been filed in Delaware. It alleges that the proposed deal undervalues Knight stock and seeks to block the merger in its current form. The price is "unfair and grossly inadequate," and will deny investors "their right to share proportionately and equitably in the true value of the company's valuable and profitable business, and future growth," according to the pleading.
If you have any questions about the proposed deal or would like to discuss other legal issues related to mergers and acquisitions, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.