Registration Statements: Form S-4

The Rules

Merging firms are required to file Form S-4 in advance of a merger. Firms also file Form S-4 when they’re planning an exchange offering, meaning they are going to exchange securities of one kind for another — perhaps offering a new bond issue in exchange for an older series of bonds. The forms include detailed company information and financial results, as well as discussions on the merger or exchange offering’s terms.

Form S-4 generally includes the following information:

• Risk factors
• Selected historical financial data
• Text of the merger agreement
• Details on how to convert shares
• Background on directors, including compensation
• Executive compensation details

What to Look For

S-4 forms can be hundreds of pages long. Fortunately, you don’t have to read every page, but there are some sections you shouldn’t miss. In addition to the company description and detailed financial discussions, here’s what to look out for:

How will your holdings be affected? Pay close attention to the Q&A;, which generally appears at the beginning of Form S-4. In addition to providing a thumbnail sketch of the deal, the Q&A; includes details on the deadlines you must adhere to in order to vote on the deal (if a vote is required) or exchange your shares. The summary, which typically follows the Q&A;, also details whether the transaction will be taxable—a key point, says John Kareken, senior analyst with Wolters Kluwer Financial Services’ Capital Changes, which monitors SEC filings for changes that will affect shareholders. “People tend to think that a stock-for-stock transaction won’t be taxable,” he says. “But many of them are these days, including the [2009] Wyeth-Pfizer merger, in which Wyeth shareholders were taxed on the Pfizer shares they received.”

What are the risks? The risk factors section of Form S-4 includes lots of boilerplate. But it’s worth browsing to see if anything jumps out at you. In the Wyeth deal, for example, Pfizer’s S-4 noted that it would accrue “substantial additional indebtedness” to finance the merger—and that, as a result, it would lose business flexibility and face increased borrowing costs.

*Footnote:

Form S-4 includes lots of names, phone numbers and dates that may be important to shareholders—for example, information on how to contact the transfer agent and when you must decide how you’ll take compensation for your shares.