Questions and Answers of General Applicability
Section 101. General Questions
Question 101.01
Question: An offeror conditions its obligation to complete its tender offer upon the occurrence or non-occurrence of certain events and discloses these conditions in its offer to purchase. May some of these conditions be determinable based on subjective criteria?
Answer: No. A tender offer may be subject to conditions only where the conditions are based upon objective criteria and otherwise not within the offeror's control. See Release No. 34-43069 (July 24, 2000). If an offeror could arbitrarily determine or control whether an offer condition has been triggered (e.g., by stating that determination of whether a condition has been triggered is in the offeror's "sole" discretion instead of its "reasonable" discretion), the offer would be illusory and may constitute a manipulative or deceptive act or practice under Section 14(e). Whether or not each condition has been triggered should therefore be objectively verifiable. Once a condition is determined to have been triggered under the objective criteria, however, the offeror can then lawfully decide, in its sole discretion, to assert or waive that condition. [March 17, 2023]
Question 101.02
Question: A tender offer is conditioned on receipt of regulatory approvals, such as receipt of permits from a state authority. The offeror further discloses that the conditions may be invoked, and the offer terminated, "regardless of the circumstances giving rise to such conditions, including any action or inaction by the offeror." Is inclusion of such a term at risk of constituting a manipulative or deceptive act or practice under Section 14(e)?
Answer: Yes. If an offeror may terminate an offer "regardless of the circumstances giving rise to such conditions," including its own actions or inaction, the offer, according to its terms, could be terminated at any time for any reason. Because such an offeror might intentionally fail to take the requisite steps to obtain the regulatory approvals, the offer may be illusory and thus undertaken in contravention of Section 14(e). [March 17, 2023]
Question 101.03
Question: An offeror issues a press release stating that the offer has been terminated "pursuant to the offer conditions." The press release does not specify which offer condition or conditions were triggered. Could the issuance of a press release without specifying the exact condition(s) upon which the offeror relied to terminate the tender offer constitute an omission of a material fact within the meaning of Section 14(e)?
Answer: Yes. The failure to disclose the specific basis for the termination of the offer may constitute a material omission under Section 14(e) and raises the possibility that the offer might have been illusory. [March 17, 2023]
Question 101.04
Question: Because Rule 14d-2 provides that commencement does not begin until the means of tendering have been given to security holders, would the staff review a Schedule TO filing that does not include a transmittal form, issue and clear comments, and then allow a bidder to disseminate their tender offer materials?
Answer: Yes. The staff, however, will give priority in its review to transactions that have already commenced. Because prompt review of a tender offer that has not commenced may be impracticable, the staff still encourages concurrent filing and dissemination of tender offer documents. Prospective bidders are reminded that Rule 14e-8 requires bidders to have a bona fide intent to commence a tender offer once a Schedule TO has been filed. In addition, if a bidder files a Schedule TO before commencing the offer, the materials should make it clear that the offer has not yet commenced in order to avoid confusing investors. Furthermore, the Schedule TO filed should be filed using EDGAR tag "SC TO-C," and not EDGAR tag "SC TO-I" or "SC TO-T." [March 17, 2023]
Question 101.05
Question: Does the determination of who is the "bidder" for purposes of Regulations 14D and 14E stop at the entity used to make the offer and purchase the securities?
Answer: No. Rule 14d-1(c)(1) also requires persons "on whose behalf" the tender offer is being made to be included as bidders. For instance, where a parent company forms an acquisition entity for the purpose of making the tender offer, both the acquisition entity and the parent company are bidders even though the acquisition entity will purchase all securities tendered. The staff views the acquisition entity as the nominal bidder and the parent company as the real bidder. They both should be named bidders in the Schedule TO. Each offer must have at least one real bidder, and there can be co-bidders as well. [March 17, 2023]
Question 101.06
Question: Does the fact that the parent company or other persons control the purchaser through share ownership mean that the entity is automatically viewed as a bidder?
Answer: No. Bidder status is a question that is determined by the particular facts and circumstances of each transaction. Determining who the bidder is requires consideration of the parent's or control person's role in the tender offer, including the following non-exclusive factors:
- Did the person play a significant role in initiating, structuring, and negotiating the tender offer?
- Is the person acting together with the named bidder?
- To what extent did or does the person control the terms of the offer?
- Is the person providing financing for the tender offer, or playing a primary role in obtaining financing?
- Does the person control the named bidder, directly or indirectly?
- Did the person form the nominal bidder, or cause it to be formed?, and
- Would the person beneficially own the securities purchased by the named bidder in the tender offer or the assets of the target company?
- One or two of these factors may control the determination, depending on the circumstances.
If a named bidder is an established entity with substantive operations and assets apart from those related to the offer, the staff ordinarily will not go further up the chain of ownership to analyze whether that entity's control persons are bidders. However, it still would be possible for other parties involved with the offer to be co-bidders. The factors listed above would be used in the analysis. In addition, the staff would consider the degree to which the other party acted with the named bidder, and the extent to which the other party benefits from the transaction. [March 17, 2023]
Question 101.07
Question: Must a person who qualifies as a bidder under Rule 14d-1(c)(1) be included as a bidder on the Schedule TO even if the disclosure in the Schedule TO will not change as a result?
Answer: Yes. Instruction C elicits information about the control persons of the bidder. Merely disclosing the Instruction C information does not eliminate the requirement that the real bidder sign the Schedule TO and take direct responsibility for the disclosure. Where the real bidder does not sign the Schedule TO and does not provide the required disclosure, the parties run the risk of having to extend the offer to provide a full 20 business day period for shareholders to consider the new information. [March 17, 2023]
Question 101.08
Question: May an issuer making an exchange offer for the securities of another person use Form S-3 (or Form F-3 if the registrant is a foreign private issuer) to register the transaction?
Answer: No, as specifically noted in Release No. 33-6383, the Commission determined not to make Form S-3 available for registration of an exchange offer. [March 17, 2023]
Question 101.09
Question: The parent of an insurance company owns over 50 percent of the insurance company's outstanding common stock. The common stock of the insurance company was not registered pursuant to Exchange Act Section 12(g) because of the exemption provided by Section 12(g)(2)(G). The parent desires to make a tender offer for the common shares it does not own.
(1) Must the tender offer be made in compliance with Section 14(d) and Regulation 14D? (2) Do the going-private provisions of Rule 13e-3 also apply to the proposed tender offer given that the insurance company is exempt from registration under Section 12 pursuant to Section 12(g)(2)(G)?
Answer: (1) Yes, Exchange Act Section 14(d)(1) requires that tender offers for a class of securities exempt from registration under Section 12(g)(2)(G) be made in compliance with Section 14(d) and Regulation 14D, just as though the securities were registered under Section 12. (2) No, Rule 13e-3 would not apply to such tender offer unless the insurance company is required to file periodic reports with the Commission pursuant to Exchange Act Section 15(d). This interpretation is based on the absence in Section 13(e)(1) and Rule 13e-3(b) of language similar to that which appears in Section 14(d)(1), subjecting Section 12(g)(2)(G) companies to the tender offer provisions. [March 17, 2023]
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