Industry News | August 15, 2006

Sonic Turns to Modified Dutch Auction

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Sonic is beginning a modified "Dutch Auction" tender offer. The drive-in company is offering to purchase up to 25,454,545 shares of its common stock at a price per share between $19.50 and $22.00, for a maximum aggregate purchase price of $560 million.

The high end of this range represents an 11.5 percent premium to the closing price for the company's common stock on August 11, 2006. The tender offer is set to expire on September 22, although it could be extended. The number of shares proposed to be purchased accounts for approximately 30 percent of Sonic's currently outstanding common stock.

According to a Sonic press release, the modified Dutch Auction works like this: Sonic stockholders will have the opportunity to tender some or all of their shares in the set price range. Based on the number of shares tendered and the prices specified by the tendering stockholders, Sonic will determine the purchase price per share by selecting the lowest per share price within the range that will enable it to buy 25,454,545 shares of stock, or fewer shares if a lesser number is properly tendered.

All shares accepted in the tender offer will be purchased at the same price per share even if tendered at a lower price. If stockholders tender more than 25,454,545 shares of stock at or below the purchase price per share, Sonic will purchase the shares tendered by those stockholders on a pro rata basis.

Sonic's intent is to purchase up to $560 million of common stock in the tender offer. In the event the final purchase price is less than the maximum price of $22.00 per share and more than 25,454,545 shares are tendered in the tender offer at or below the purchase price, Sonic will exercise its right to purchase up to an additional 2 percent of outstanding shares without extending the tender offer.