Two Mergers Are Better than One

The seldom-used double-dummy structure is trotted out in one of the year's most talked-about deals.

Bigger Targets

In its filings, Oklahoma City–based Devon offered a choice of two merger structures: a double dummy or the more commonly used reorganization under Section 368. At the time, points out Devon CFO Brian Jennings, oil and gas prices were falling, and consequently so was the company’s stock price. If Devon’s stock price had dropped before the reorganization was complete, the 40 percent equity-consideration threshold might not have been met and shareholders receiving stock, including the Mitchell family, would have been taxed immediately on the receipt of Devon stock. That’s why Devon proposed a double dummy as a hedge. Ultimately, Devon and Mitchell never had to use the double dummy.

Delaware recently made it easier for companies incorporated within the state to expedite a double dummy with changes in state law. Delaware no longer requires stockholder approval for the “sale, lease, or exchange” of corporate assets between a parent company and its subsidiaries. Ozark Holdings is a Delaware corporation.

Marie Leone is senior editor of CFO.com.

Big Dummies
A list of the largest double-dummy transactions by deal value includes some of Wall Street’s most memorable mergers.
Year Merger Partners Deal Value*
2000 AOL/Time Warner $164
2000 SmithKline Beecham/Glaxo Wellcome 80
1998 Daimler-Benz/Chrysler 61
2001 Conoco/Philips Petroleum 27
2004 Kmart/Sears, Roebuck 20
*In $ billions
Source: Capital IQ

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