In a recent column, Robert Willens, president of Robert Willens LLC and longtime contributor to The Deal, raised questions on the $1.18 million Inverness Medical Innovations Inc.-Matria Healthcare Inc. deal, pointing out that the two conditions for the transaction to qualify as a tax-free reorganization structured as a reverse triangular merger would, based on the press release, likely be met in one case and not in the other.
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The first requirement, that the surviving corporation must retain "substantially all" of its properties in addition to a "similar quantum" of the merged entity, should easily be met, Willens noted. The second requires that former shareholders of the surviving entity must exchange for voting stock in the controlling corporation an amount of stock of the surviving corporation, which constitutes control -- within the meaning of Sec. 368(c) -- of such surviving corporation.
But the stock to be issued in the Inverness Medical-Matria case, as indicated in the press release announcing the deal, is not voting stock. He noted:
Accordingly, if the goal of structuring a "tax-deferred transaction" is to be realized, it would appear that IMA will be constrained to afford present voting rights to the holders of the preferred stock.
But, there's more to the story. - Carolyn Murphy
See Soapbox: "Inverness-Matria: Merger agreement provides new information"
Read the full column
See TheDeal.com story on Inverness-Matria
