Cash free Debt Free LBO of public company
Listed firm, no debt, cash is equal to half of equity value … how does financing work? Do lib shareholders get the cash as dividends or can a sponsor use the cash to buy the company?
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Think this can work both ways (at least from a desktop structuring perspective). You can either use cash on hand to fund the equity purchase price and thereby reduce funding need or sellers cut cash out as dividends and market cap decreases by same amount (at least in theory), so while total amount to be funded (total Uses) changes, Equity check and leverage stay the same
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Right, not sure how it acrually works in practice tbh. Bridges are usually taken out by issuing a HY or sth (so effectively refinanced), but it might be the case that you can use target's cash at closing? Common sense says you can't do anything with the target's cash until closing, so this may just be a desktop analysis issue.
It all happens simultaneously so I don’t really see the issue
Can you explain that a bit more? What happens simultaneously?
And if a sponsor can use the company’s cash to buy it, won’t the company do something like buy back to prevent this ?
Buying a company is an ‘event’. The buyers and sellers agree what is going to happen and when the transaction is complete. You line all docs up, everyone agrees which money is being used for what and what its sources are, and then you execute
Thank you, appreciate the response
All right just to close this out, here’s the legal language used
“To the extent requested by Parent, the Company shall, and shall cause the Company Group to, use reasonable best efforts to sell the securities set forth on Section 6.22 of the Company Disclosure Letter and any similar securities then owned by the Company Group reasonably proximate to the Closing Date so as to permit the net proceeds of such sale to be used by or at the direction of the Buyer Parties as a potential partial source for the payments contemplated by this Agreement, including the payment of expenses in connection with the transactions contemplated by this Agreement”
Further I found that the payments are usually made to first settle options, RSU and PSU claims
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