Anyone have any experience with Reserve Morris Trust mergers? It's a tax-free way to transfer unwanted assets/subsidiaries into a new entity called SpinCo. How does the merger function if the Buyer (50% economic interest) is private and the Seller (>50% economic interest) is public? Shareholders of the publicly traded Seller now have ownership in two distinct entities - 1) the Seller without the unwanted assets and 2) the Spinco. Would SpinCo be publicly traded? Would it have to go through a distinct IPO process? The specific mechanics between a private buyer and public seller isn't clear to me.
Consider that the private Buyer is currently considering going public regardless of the merger between buyer and seller...would the RMT structure result in lower fees relative to a traditional IPO process?
Anyone care to explain?
More info: https://www.macabacus.com/restructuring/morris-trusts
In an RMT, the SpinCo isn't actually publicly traded so it doesn't need to go through an IPO process. It is spun off from a structuring standpoint and then immediately acquired by the Buyer.
With regards to your question of if the buyer is private, I'm not 100% sure, but I don't think this is allowed (I cant think of any precedents). A condition for an RMT is that the historic ParentCo shareholders must own 50%+ of pro forma combined entity (BuyerCo + SpinCo)...so if the buyer is private, this is not possible.
I would have to guess that the ParentCo shareholders would be pissed that they now hold ownership in a private company with limited/no liquidity. This situation seems like it could turn into a huge regulatory and legal mess...
I would have to guess that the ParentCo shareholders would be pissed that they now hold ownership in a private company with limited/no liquidity. This situation seems like it could turn into a huge regulatory and legal mess...
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