When a company wishes to issue itself on a stock exchange, it must publish a prospectus to potential investors, in which it must disclose a vast amount of information, including its financial statements, significant contracts it has executed, the remuneration of its executives, etc. However, is there an obligation to publish a double prospectus (in Israel and in the target country) when an Israeli company wishes to merge with a foreign traded company? Improper construction of a transaction might result in that.
Generally, when a public company (i.e., a company that has already published a prospectus approved by the Securities Authority) wishes to merge with a company (for example, through a 'SPAC' merger transaction ), the company must publish an additional prospectus for its Israeli shareholders. However, because the transaction itself requires publication of a prospectus on the target stock exchange outside of Israel, the Israeli Securities Authority usually exempts from the obligation of the publishing an additional prospectus in Israel.
Thus, for example, in the matter of DoorDash and Wolt Enterprises Oy, the Israeli Securities Authority decided in April, 2022, with regards to the allocation of securities of a foreign company traded on the New York Stock Exchange (NYSE) to holders of securities in a private company, that the company is not required to publish a prospectus in Israel because the company is not traded in Israel, was incorporated outside of Israel and the percentage of the holders of company shares among the Israeli public was negligible. In the matter of a merger between Irisity AB and Agend Video Intelligence Ltd., the Israeli Securities Authority decided in December, 2021, regarding a purchase agreement by way of exchange of shares between a foreign company traded on the stock exchange in Sweden and a private Israeli company, that the company is not required to publish a prospectus because no significant marketing efforts or any actions were made with relation to Israeli shareholders and because the transaction is subject to the provisions of a foreign securities law and will continue to be subject to such even after the completion of the transaction. Regarding the merger between ECI Group Ltd. and Ribbon Communications Inc., the Israeli Securities Authority decided in July, 2020 regarding a reverse triangular merger of a private Israeli company into a foreign company traded on NASDAQ, that the company is not required to publish a prospectus because the absorbing company is traded on NASDAQ and the information about it is public.
The manner in which the transaction is structured as well as the construction of the merger strategy may have a material meaning regarding the obligation to publish the prospectus to the Israeli shareholders, which may involve valuable time and costly resources. Therefore, it is vital to be accompanied by an attorney with experience in the field of IPOs outside of Israel as well as in the field of mergers and acquisitions, who will know how to outline the transaction and draft the documents that construct it in a manner that corresponds to the guidelines of the Israeli Securities Authority and knows how to work in cooperation with attorney in the destination country of the merger in order to ensure the proper construction of the transaction (including in other aspects, such as taxation and preserving the rights of the existing shareholders) so that the transaction does not ultimately fail due to regulatory restrictions in Israel.