Download Securities Law for Non-Securities Lawyers by Amy Bowerman Freed

Securities Law for Non-Securities Lawyers
by Amy Bowerman Freed
and William I. Intner
I.
TENDER OFFERS
A.
Definition of Tender Offer. The Williams Act was passed in 1968 to protect
shareholders in the course of takeovers and tender offers by granting the SEC and the
courts the power to manage problems that arise. The Act does not, however, define
what constitutes a “tender offer.” This has allowed the SEC and the courts to
continue to apply the tender offer rules to novel transaction structures that might not
have been covered by a conventional definition. Two of the tests that have been used
by the courts in determining whether a series of purchases or offers constitute a “
tender offer” are particularly useful; the Wellman Test and the Totality of the
Circumstances Test.
1.
2.
Wellman Test. In Wellman v. Dickinson, 475 F.Supp. 783 (S.D.N.Y.
1979) aff’d on other grounds, 682 F.2d 355 (2d Cir. 1982) cert. denied,
460 U.S. 1069 (1983), the court set forth and approved the use of eight
factors suggested by the SEC to determine whether a series of purchases
constitutes a “tender offer.” Not all of the following eight factors need be
present:
a)
Active and widespread solicitation of public shareholders;
b)
Solicitation made for a substantial percentage of the target’s stock;
c)
Offer is at a premium to the prevailing market price;
d)
Terms are fixed rather than negotiable;
e)
Offer contingent on the tender of a fixed minimum number of shares
to be purchased;
f)
Offer is only open for a limited period of time;
g)
Offerees are subjected to pressure to sell their stock; and
h)
Public announcements of a purchase program for the target's
securities precede or accompany rapid accumulation of large amounts
of the target’s securities.
Totality of Circumstances Test. This test focuses on whether there is a
likelihood that unless the pre-acquisition filing requirements of Section 14(d)
are complied with, there will be a substantial risk that persons solicited will
-12- \\\BA - 71439/400 - #89301 v4
lack information needed to make a carefully considered appraisal of the
bidder’s proposal. See Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843,
848-49 (2d Cir.), cert. denied, 479 U.S. 987 (1986).
B.
Self Tender. The provisions of Section 14(d) do not apply to the issuer of the
securities. Rule 13e-4 prescribes filing, disclosure and dissemination requirements for
tender offers by an issuer for its own equity securities and includes antifraud
provisions.
C.
Commencement and Dissemination of Tender Offers.
1.
2.
Date of Commencement of a Tender Offer – Rule 14d-2:
a)
The bidder will have commenced its tender offer on the date it has
first published, sent or given the means to tender to the shareholders.
b)
However, a communication by the bidder will not constitute
commencement of the tender offer if:
(1)
The communication does not include the means for the target’
s shareholders to tender; and
(2)
All written communications from and including the first public
announcement of the tender offer are filed on a Schedule TO
no later than the date of the communication. The bidder must
also deliver to the target and any other bidders its first
communication relating to the tender offer filed with the SEC.
Cash Tender Offers and Exempt Securities Offers – Rule 14d-4(a). As soon
as practicable on the date of commencement of the tender offer, a bidder
must publish, send, or give the disclosure required by Rule 14d-6 by
complying with any of (a), (b) or (c) of the following:
a)
Long Form Publication. The bidder may publish a long form
publication that includes all of the information that is required to be
filed on the Schedule TO (with the exception of the exhibits thereto).
b)
Summary Publication. The bidder may (except in connection with a
tender offer subject to Rule 13e-3) publish a summary advertisement
of the tender offer and promptly furnish the bidder’s tender offer
materials to any shareholder who requests them. The summary
advertisement must at least contain the following information:
(1)
The identity of the bidder;
(2)
The identity of the target;
-12- \\\BA - 71439/400 - #89301 v4
(3)
The amount and class of securities sought and the type and
amount of consideration offered;
(4)
The scheduled expiration date of the tender offer, whether a
subsequent offering period will be offered, whether the tender
offer may be extended and, if so, the procedures for
extension of the tender offer;
(5)
Withdrawal right dates and the method of withdrawal or
payment;
(6)
The manner in which the securities will be accepted for
payment;
(7)
An explanation of any material differences in the rights of the
shareholders as a result of the transaction, if material;
(8)
A statement regarding the accounting treatment of the
transaction, if material;
(10)
The federal income tax consequences of the transaction, if
material;
(11)
For partial tender offers, the pro rata selection period and
selection intentions of the bidder and whether the bidder
intends to acquire or influence control of the target;
(12)
A statement that certain items of Schedule 14D-1 are
incorporated by reference;
(13)
Instructions as to how to obtain the bidder’s tender offer
materials; and
(14)
If the tender offer materials will be sent to shareholders
pursuant to use of a shareholder list, a statement that such
dissemination will occur and that a shareholder list has been
requested.
c)
Use of Stockholder Lists and Security Positions Listings. If the
bidder chooses to use either security position listings or stockholder
lists obtained from the target pursuant to Rule 14d-5 to disseminate
the information directly to shareholders, it must also either satisfy the
long-form publication or summary advertisement requirements.
d)
Adequate Publication. Adequate publication for purposes of long
form or summary publication depends on the facts and circumstances
-12- \\\BA - 71439/400 - #89301 v4
involved; publication in all editions of a daily newspaper with a
national circulation is adequate.
3.
Registered Securities Offers – Rule 14d-4(b).
a)
Basic Rule. For tender offers where the consideration consists solely
or partially of securities registered under the Securities Act of 1933, a
registration statement must have been filed and a preliminary
prospectus (or one meeting the requirements of Section 10(a) of the
Securities Act) must be delivered to the shareholders.
b)
Going-private transactions. For going-private transactions (as
defined by Exchange Act Rule 13e-3) and roll-up transactions (as
described by Item 901 of Regulation S-K), a registration statement
must have become effective and only a prospectus that meets the
requirements of Section 10(a) may be delivered to shareholders on
the date of commencement.
(2)
4.
D.
In a hostile transaction, the bidder must file a registration
statement, file a Schedule TO and begin dissemination of the
offer by making a request under Rule 14d-5.
Obtaining a Shareholder List – Rule 14d-5
a)
A target must respond within two business days of a bidder’s written
request for a shareholder list, with notice of the target’s election to
either mail the tender offer materials or provide a shareholder list to
the bidder. If the target elects to mail the tender offer materials, it
must do so within three business days of receiving those materials.
b)
State law. Under the law of many states, a bidder may obtain a
shareholder list upon proper request.
Disclosure and Filing Requirements.
1.
Regulation M-A. To promote consistency in filings with the SEC, disclosure
requirements for issuer tender offers, third-party tender offers and
going-private transactions are all set forth in Regulation M-A.
2.
Filing and Disclosure – Rule 14d-3. A bidder may not make a tender offer
unless it:
a)
Files a Schedule TO with the SEC (amendments must be filed
promptly if material changes occur in the information set forth in the
Schedule TO);
-12- \\\BA - 71439/400 - #89301 v4