The option exchange on the Mitel acquisition of Aastra will reflect the worst of the exchange ratio and the s. 7(1.4) rule

Mitel is proposing to acquire Aastra under a CBCA plan of arrangement, with U.S.$6.52 of cash and 3.6 Mitel common shares being paid for each Aastra share.   Mitel will sign and return completed s. 85 election forms that are provided to it within 90 days of the effective date, but is not offering any website assistance in this regard.  The disclosure is non-committal as to whether Aastra will be amalgamated post-arrangement.

Each Aastra employee stock options will be exchanged for an option on that number of Mitel common shares equal to the "Exchange Ratio."  The Exchange Ratio is equal to 3.6, plus $6.52 divided by the 5-day VWAP of Mitel shares immediately preceding the Arrangement (i.e., the cash consideration is converted into an equivalent Mitel share, so that the Exchange Ratio is increased to around 4.3).

The plan of arrangement states that the exercise price under the replacement option will equal the greater of: the old exercise price divided by the Exchange Ratio; and "such minimum amount that meets the requirements of paragraph 7(1.4)(c)," i.e., the exercise price that results in the in-the-money value of the replacement option (based on the Mitel share value immediately after the option exchange) not exceeding the in-the-money value of the old options (based on the Aastra share value immediately before the exchange).  This does not appear to be a raw deal for the option holders as such value of the Aastra shares would reflect the cash consideration, given that shareholder approval would have been achieved.

Neal Armstrong.  Summary of Circular of Aastra Technologies under Mergers & Acquisitions – Mergers – Shares for Shares and Cash.