Delaware Court Provides Guidance for Structuring Top-Up Options

By Keith Higgins, Paul Kinsella, Julie Jones, Jonathan Grandon

Tender offers are becoming increasingly common in leveraged transactions, due in part to the recent acceptance of top-up options by the Delaware Supreme Court.¹ A top-up option is an option to acquire newly issued shares in a target upon the consummation of a tender offer. Top-up options are used to ensure that once the minimum tender condition is met, the bidder is able to acquire a sufficient number of the target's outstanding shares to allow for a short-form merger to be closed on the same day as the consummation of the tender offer. Top-up options are now nearly universally granted to buyers in negotiated tender offers.