Definition
A top-up option is a right granted in the merger agreement by the target to the bidder, allowing the bidder to purchase newly-issued treasury shares at the offer price to “top up” its position above 90% — the threshold for a short-form merger under Delaware §253.
Why it mattered
Pre-2013, deals where the tender cleared 50% but not 90% required a long-form back-end merger (with shareholder vote and proxy statement) — adding 2–3 months to the timeline. The top-up option avoided that delay by letting the bidder reach 90% via newly-issued shares immediately after tender expiration, then close the back-end via short-form merger.
Modern relevance
Delaware §251(h) (added 2013) substantially reduced reliance on top-up options by allowing immediate squeeze-out following a successful tender (≥50%) without the 90% requirement. Top-up options still appear in deal agreements as a fallback, especially in structures that don’t qualify for §251(h).
Stockholder approval
Top-up issuances must comply with applicable exchange listing rules (typically requiring stockholder approval if the issuance exceeds 20% of outstanding shares pre-tender). Most top-up provisions include caps to stay below the 20% threshold.