Like this Walgreen’s deal with Sycamore.

Very quick thing I note about it: It includes the equivalent of an earnout, namely, in addition to the cash consideration Walgreen’s shareholders receive, they also receive a “Divested Asset Proceed Right,” or DAP Right, which will entitle them to an additional $3 per share if Sycamore is able to sell VillageMD, (They get 70% of the net proceeds of the sale, up to $3 per share).

I don’t think the merger agreement is public yet, but this from the press release caught my eye:

WBA shareholders will receive, at closing of the Sycamore transaction, one non-transferable DAP Right per WBA share.

Why non-transferable? After all, it would be more valuable to shareholders if they could sell their DAP right, and that way informed traders could price it based on the likelihood of it reaching the $3 max payout, etc etc.

After all, that’s how Bristol did this not long ago, when it acquired Celgene:

If the merger is completed, Celgene stockholders immediately prior to the completion of the merger will be entitled to receive $50.00 in cash, one share of Bristol-Myers Squibb common stock and one contingent value right (each, a “CVR”) for each share of Celgene common stock held by them…The merger agreement obligates Bristol-Myers Squibb to use its reasonable best efforts to cause the Bristol-Myers Squibb common stock and the CVRs to be issued in the merger to be listed on the NYSE…

But look what happened! And also…. (There’s also an ongoing contract dispute). And a similar thing happened when Genzyme acquired Sanofi and paid with CVRs.

So the next time Bristol got the bright idea to buy a company using a CVR component, well:

Section 2.1 CVRs. Each CVR represents the contractual right of a Holder (granted to each Initial Holder as part of the consideration of the Merger pursuant to the terms of the Merger Agreement) to receive the Milestone Payment pursuant to, and subject to the terms and conditions of, this Agreement.

Section 2.2 Nontransferable. The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted CVR Transfer; the foregoing restrictions shall apply notwithstanding that certain of the CVRs will be held through DTC. Any attempted sale, assignment, transfer, pledge, encumbrance or disposition of CVRs, in whole or in part, in violation of this Section 2.2 shall be void ab initio and of no effect. The CVRs will not be listed on any quotation system or traded on any securities exchange.

I can only assume the change was made so that the CVR would look less like a security – more like a contractual agreement – and therefore could not be the subject of a class action securities fraud claim.

And my guess is, that’s the same logic for the Walgreens/Sycamore DAP Right. Whether that’s enough to defeat the Howey test … well, that would be an intriguing Section 12(a)(1) claim, let me tell you.

And another thing. I lied, I’m still talking about SB 21, only this time in a Shareholder Primacy podcast with Mike Levin (we cover the original version as introduced by the Delaware legislature last month). Here at Apple, here at Spotify, and here at YouTube.