DSW Skyrocketing In After Hours On Merger Agreement (DSW)

Shares of women's shoe retailer DSW DSW are moving 11% high in after-hours after the company agreed to merge with Retail Ventures RVI From the press release: The transaction is expected to generate significant value for DSW, RVI and their respective shareholders, including the following: * Eliminates the complexity and public company expenses associated with RVI, which is a listed company whose only operating business is its 62% stake in DSW. * Allows RVI shareholders to become shareholders directly of DSW, an entity which produces significant revenues, has over $300 million in cash and short-term investments and has no debt. * Increases the public float of DSW shares to the extent that RVI public shareholders receive publicly listed DSW Class A shares. * Results in DSW having slightly fewer diluted shares outstanding upon closing. * Allows DSW the opportunity to efficiently decrease the number of diluted shares outstanding in the future without the need to repurchase common shares. DSW gains control of the settlement of RVI's outstanding Premium Income Exchangeable Securities (PIES) with a face value of $134 million that mature in September 2011. At that time, DSW would have the option to settle in cash as opposed to distributing DSW shares. Assuming the PIES are settled in cash, the number of DSW diluted shares outstanding would be reduced by approximately 10% resulting in accretion to DSW's 2011 diluted EPS. * Allows the potential to utilize approximately $350 million of federal net operating losses and additional tax credits to offset DSW's taxable income, which are expected to generate significant cash tax savings over the next several years. Shares of RVI will convert into Class A DSW common shares at an exchange ratio of 0.435 DSW shares per each RVI share, unless the holder properly and timely elects to receive a like amount of DSW Class B common shares in lieu of DSW Class A common shares. Class A shares are listed on the New York Stock Exchange and Class B shares are unlisted. The voting rights associated with the two classes of shares will be the same as the currently outstanding Class A common shares (one vote) and Class B common shares (eight votes) of DSW. RVI's largest shareholder, Schottenstein Stores Corporation and its affiliates, has indicated it intends to elect to receive Class B shares. At last check, shares of DSW were up $3.77 to $40.00, a gain of 10.4%.