Is the Integrys–Wisconsin Energy merger a "do" for investors?
(Part 6 of 10)
Investors should consider the Integrys–Wisconsin Energy contract
The material adverse change clause, or MAC
The MAC clause is one of the first thing arbs look at. For this deal, it lays out the circumstances under which Wisconsin Energy (WEC) can back out of its deal with Integrys (TEG). Let’s take a look at the specific conditions that could stop this deal.
The MAC clause (paraphrased)
A material adverse effect is any fact, circumstance, effect, change, event, or development that materially adversely affects a company’s business, properties, or a financial condition. It could also result from operations as a whole. These changes exclude:
- Changes or conditions generally affecting the company’s industries
- General economic or regulatory, legislative, or political conditions or securities, credit, financial, or other capital market conditions
- Any failure to meet any internal or published projections, forecasts, estimates, or predictions for revenues, earnings, or other financial or operating metrics for any period
- The execution and delivery of the agreement or the public announcement or pendency of the initial merger or any related transactions to obtain approval from any governmental entity for the transactions
- Any change in market prices for commodities
- Any hurricane, tornado, flood, earthquake, or other natural disaster or other weather-related event with a disproportionate effect clause
- A change that disproportionately adversely affects the two companies compared to other industry participants in the Midwest region of the United States
Other important mergers
Other important merger spreads you should consider include the Covidien (COV) and Medtronic (MDT) deal as well as the DIRECTV (DTV) and AT&T (T) deal.