June Edition 2023

54 company will always be Israeli law. In this article, we will outline the main Israeli corporate law implications of a going private transaction. There are two primary alternatives for effecting a going private transaction of an Israeli company. The most common method is a reverse triangular merger, in which the acquiring company forms a new Israeli entity (NewCo) that merges with the target company (Target), with the Target surviving the merger. Another option, though less common, is a full tender offer, in which the purchaser acquires all of the shares of the Target. Both methods result in the same outcome. According to annual summaries published by the TASE, in the five-year period between 2018-2022, 45 companies were delisted from the TASE through a transaction – 26 of them have done so through a merger and 19 through a full tender offer (not all where “going private” transaction per se, as some of them were with another public company). The data from 2021 and 2022 presents a trend of preference to the merger alternative: of the 14 companies that were delisted during that period, only three have done so through a tender offer and 11 of the delisting transactions were effected through a merger. REVERSE TRIANGULAR MERGER Structure: Under this structure, the purchaser establishes NewCo, a wholly owned company, which then enters into a merger agreement with the Target. NewCo then merges with and into the Target, resulting in the Target surviving the merger. After the merger, the Target’s shareholders receive the agreed-upon per-share merger consideration (usually cash), and the purchaser, previously the sole shareholder of NewCo, becomes the sole shareholder of the Target. Corporate approvals: The merger requires approval from the board of directors and shareholders of both merging entities. The Target’s board of directors must ensure that the merger will not jeopardize the Target’s ability to meet its obligations to creditors. In fulfilling their fiduciary duties, the Target’s board members should conduct a thorough review of the transaction, consider alternative options to maximize value for public shareholders, and engage a reputable accounting firm to conduct a valuation analysis of the Target. A fairness opinion may also be sought to confirm the adequacy of the offered per-share merger consideration. In a merger of two unrelated companies, the approval by a majority of the shareholders (50.01%) in each of the merging entities will suffice.