Statutory Merger
A merger governed by corporate law in which one company absorbs another, which ceases to exist as a separate legal entity.
What is Statutory Merger?
A statutory merger is a merger structured under and governed by the corporate statutes of a specific jurisdiction—most commonly Delaware in the United States—in which one corporation (the surviving entity) legally absorbs another (the non-surviving entity). The non-surviving corporation ceases to exist as a separate legal entity, and all of its assets, liabilities, rights, and obligations transfer by operation of law to the surviving entity without requiring individual asset assignments or liability assumptions. Shareholders of the non-surviving corporation receive the merger consideration—cash, stock, or a combination—specified in the merger agreement. Statutory mergers require board approval from both companies and typically a majority (or supermajority) shareholder vote from both sets of shareholders, unless a short-form merger exception applies.
Example
The 2022 combination of Discovery, Inc. and AT&T's WarnerMedia segment was structured as a Reverse Morris Trust statutory merger under Delaware law. Discovery, Inc. survived as the legal entity and was renamed Warner Bros. Discovery, Inc. (Nasdaq: WBD). WarnerMedia was spun off from AT&T, simultaneously merged into Discovery in a tax-free exchange, and ceased to exist as a standalone entity, with all WarnerMedia assets, liabilities, and employee contracts transferring by operation of law to Warner Bros. Discovery.