M&A WATCHING (WEEK 16/09 – 20/09/2024): Typical case study of a stock swap merger – bhs merging into SBT

In 2017, marking a milestone in completing an important operational structure, the TTC Group (Thành Thành Công) of tycoon Đặng Văn Thành completed the merger of Bien Hoa Sugar Joint Stock Company (Stock Code: BHS) into Thanh Thanh Cong Tay Ninh Sugar Joint Stock Company (Stock Code: SBT), then renamed it Thanh Thanh Cong – Bien Hoa Joint Stock Company (TTC AgriS), while BHS was renamed TTC Bien Hoa – Dong Nai Sugar One Member Limited Liability Company (a subsidiary wholly owned by SBT). This operation helped TTC Group complete the model of a General Corporation, centralizing the management of all TTC sugar business units. At the time of the merger plan, both SBT and BHS were still listed and traded on the stock exchange.

The BHS merger into SBT is a type of consensual and horizontal merger. In this deal, the acquiring party (SBT) will EXCHANGE SHARES of its own for the shares of the merged party (BHS) at the ratio of 1 BHS share receiving 1.02 SBT shares after the merger. Specifically, SBT will issue 304 million new SBT shares to exchange for approximately 298 million outstanding BHS shares. BHS shareholders will become shareholders of the new company after the merger, which is SBT, with a leading position and market share in the sugar industry.

With the stock swap method, SBT will not have to prepare financial resources or pay cash to achieve the merger goal of owning 100% of BHS’s shares. Determining an appropriate transaction structure helps increase the success chance of the deal; this is a very important aspect during the Negotiation phase of the M&A process.

So what exactly is this stock swap transaction and how is it carried out? Are there other types of transaction structures besides stock swap transactions?

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