Alamos consideration for Esperanza acquisition includes warrant sweetener

In the acquisition of Esperanza by a Newco subsidiary of Alamos under a B.C. plan of arrangement, the shareholders of Esperanza are receiving out-of-the-money warrants on shares of Alamos in addition to cash.  (For another warrant consideration example, see Coeur d'Alene offer.)  The U.S. tax disclosure indicates that future adjustments to the number of Alamos shares to be issued on the exercise of the Alamos warrants, or to the warrants’ exercise price, could be treated as a constructive distribution to a U.S. holder of the Alamos warrants to the extent that such adjustments have the effect of increasing the holder’s proportionate interest in the "earnings and profits" or assets of Alamos.

Esperanza is a PFIC, presumably because of the cash needs of its exploration program – a common problem in the resource sector.

Neal Armstrong and Abe Leitner.  Summary of Esperanza Circular re acquisition by Alamos under Mergers – Shares for Cash and Warrants.