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Western has also declared a dividend payable to Western stockholders in the form of 1.32 million shares of Steak n Shake common stock presently owned by an investment subsidiary of Western.
Together, the dividend and the merger are estimated to have an aggregate transaction value to Western's stockholders of approximately $38.8 million, or $13.67 per Western share, based on 2.84 million shares of Western outstanding as of October 22, 2009 and the closing price of Steak n Shake common stock on October 22, 2009.
The merger agreement currently provides for Steak n Shake to issue and deliver to Western stockholders subordinated debentures of Steak n Shake with a principal amount of $22.96 million, subject to adjustment as provided in the merger agreement.
At the effective time of the merger, each share of Western's common stock would be converted into the right to receive debentures in principal amount equal to approximately $8.08 per share. The aggregate and per share amounts of debentures to be issued to Western stockholders are subject to reduction on account of certain potential tax contingencies that could arise in connection with the Western special dividend that will be resolved as of the date of distribution of that dividend.
The Steak n Shake debentures will have a term of five years from the effective date of the merger, will bear interest at the rate of 14% per annum and will be pre-payable without penalty at the option of Steak n Shake after one year from the date of issuance.
The merger agreement was negotiated between special committees of the boards of directors of both companies, both of which were composed entirely of independent directors.
Closing of the merger transaction is subject to satisfaction (or waiver) by the parties of certain conditions, including approval by Western's stockholders.
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