Information Agents: Everything You Need To Know… Except For The Really Important Stuff?

The OPTIMIZER editors - and other professional “Wall-Street-Watchers” too - are always avid watchers of the “tombstones” that describe the terms of newly proposed Mergers and Acquisitions - and especially those “Offers to Purchase for Cash” - in newspapers of record like the NY Times, Wall Street Journal and often both.

We always look to see who the Dealer Manager is, and which of the many contenders to be the Information Agents and Depositories have won the deal, and we bet that many of our readers do as well - or certainly should.

We also look to see how BIG the tombstones are…to get an idea of “Who’s Who” among the many vendors involved in vying for these intensely contested and highly lucrative deals…and to see who the big spenders are in buying those tombstones, which, mysteriously but quite often, bear no relationship at all to the size and dollar value of the deal - seeming rather to be evidence of the salesmanship skills of the Information Agent, who arranges for the ads and ad placements.

We also look with special care to see which Transfer Agents are winning deals as the Depositories - typically racking up big fees, holding on to huge chunks of cash for long periods, and sometimes adding many new shareholder accounts - and which ones may be losing most or all of a big client’s shareholder records forever.

Over the past few years, we have noted an increasing and disturbing trend: Tombstones that mention “the Depository” - and sketchily outline the major roles they play - but which completely fail to give the Depository’s name, much less their address, or how best to contact them if they have a last minute need to tender, guarantee delivery, assure themselves that their deliveries have been received in good order or to revoke their tenders.

In a September 23rd tombstone in the WSJ, for example, two-thirds of a page was taken up by teeny-tiny type outlining an Offer to Purchase for Cash by Hilltop Holdings of an eye-popping $350,000,000 of its shares, where “the Depository” was mentioned nine times in six of the tombstone’s 15 paragraphs…but never once mentioned by name. “What sort of ‘Information’ is THIS?” one might well ask. Who IS the unknown entity that is being entrusted to hold, and to properly pay out $350,000,000 of shareholders’ money???

Readers: This is really important information for you to note when doing your due diligence before announcing a deal, and it has the potential to save Mega-Money for your company:

Are the proposed Information Agent and the proposed Depository proposing “reasonable fees” and commercially reasonable terms? Are they really earning their pay, or simply counting on you to be preoccupied with other matters and willing to go with the flow? A tiny bit of comparison shopping can, in many instances, save your company millions of dollars.

A much more important question to ask however; What if an employee of the Depository you select anonymously “wires out” a big chunk of the dollars to persons unknown, or simply absconds with the funds? Or, as outlined in our must-read article on Transfer Agent Liabilities, what if the T-A mismanages the payout process and comes up way short of funds…and has insufficient insurance and cash reserves of its own to cover the loss? Guess who is on the hook?” Your company.