Topic 14: Tender Offers

14100 Regulatory Schemes

(Last updated: 9/30/2008)

14110.1 Tender offers may be made by either the issuer of the securities or by a third party. The essence of the tender offer is that the offeror, or bidder, can go directly to security holders of the target company with an offer to buy their shares. The term "tender offer" has never been defined in any statutory provision or rule. Instead, courts and the staff of the SEC generally consider a number of factors to determine whether a particular acquisition program constitutes a tender offer.

14110.2 In a tender offer, the offeror may offer cash, securities, or a combination of cash and securities. If the consideration consists wholly of or partly of registered securities, the offeror generally will have to register them under the Securities Act unless an exemption from registration is available. The information required to be sent to the security holders of the target varies based on the type of consideration offered and other factors.

14110.3 The Division selectively reviews tender offer materials. The following summarizes the regulatory process for tender offers:

Cash tender offer — a tender offer by either the issuer of the subject securities or by a third party where the offer consideration is cash only. The bidder commences the offer by sending tender material to security holders, including a request that they tender their shares. On the same day, the bidder files this material publicly with the SEC, along with a tender offer schedule that contains additional information. The offer must remain open for at least 20 business days, and then the bidder can purchase the tendered shares if all conditions to the offer have been satisfied or waived. Unlike in most stock tender offers, the SEC staff does not have the opportunity to review cash tender offer materials until after the tender offer has begun. If the staff decides to review the filed material, the staff gives comments to the bidder during the tender offer period and the bidder addresses the comments appropriately. For example, the bidder may need to send additional information to the security holders of the target and the offer may have to be extended in order for the security holders to have time to consider the information.
Exchange offer (stock tender offer) — a tender offer by the issuer of the subject securities or by a third party, where the offer consideration is wholly or partially securities. The bidder files a Securities Act registration statement containing a prospectus covering the securities it is offering to security holders of the target in exchange for their shares. The prospectus also contains the information about the exchange offer required by the tender offer rules. This is a public document. The bidder may send the preliminary prospectus to security holders of the target, but it usually does not do so because it cannot request tenders or buy any shares until the registration statement is declared effective (but see discussion of early commencement exchange offers below). The Division selectively reviews tender offer materials. Unless the exchange offer commences early, the staff gives comments to the bidder before the tender offer commences. Commencement of an offer occurs when the bidder publishes, sends or gives to security holder the means by which to tender into the offer, such as by filing a letter of transmittal. After these comments are resolved, the bidder requests that the staff declare the registration statement effective. Once the registration statement is effective, the tender offer may commence, the bidder sends the combined final prospectus/tender offer document to security holders and requests that they tender their shares. The bidder also may commence the offer before effectiveness of the registration statement under specified circumstances ("early commencement"). If this early commencement option for an exchange offer is chosen, then on the day the offer begins, bidder files with the SEC the registration statement containing the prospectus and the same tender offer materials that would be filed for a cash tender offer. For both kinds of exchange offers, the offer must remain open for at least 20 business days from commencement and the registration statement must be effective before the bidder can purchase any shares.

14110.4 Bidders in a tender offer may also communicate about the transaction before or after a registration statement is filed and effective, provided such written communications are filed with the SEC and contain an appropriate legend urging investors to read the relevant documents filed or to be filed with the SEC.

14200 Documents Filed

(Last updated: 9/30/2008)

14210.1 The primary 1934 Act document used to file tender offers is Schedule TO. EDGAR tags to Schedule TO are TO-I, Tender Offer/Issuer; TO-T, Tender Offer/Third Party; and TO-C, Tender Offer/Communications. Schedule TO-I must be filed when an issuer that has a class of equity securities registered pursuant to Section 12 of the Exchange Act is offering to buy back any class of its own equity securities (including debt that is convertible into equity securities). Schedule TO-T must be filed when a third party is offering to buy equity securities that are registered pursuant to Section 12 of the Exchange Act (including Section 12 registered debt that is convertible into equity securities) in a transaction that would result in the third party owning greater than 5% of the class of securities subject to the offer if the offer is fully subscribed. Schedule TO-C must be filed for written communications about the transaction before the offer commences.

14210.2 A tender offer may be a "going private" transaction, in which case Schedule 13E-3 must be filed as well. To be subject to Rule 13e-3, a going private transaction must involve a purchase of an equity security, a tender offer or specified kind of solicitation by an issuer or an affiliate. It must also be intended to or reasonably likely to cause a class of equity securities registered under the Exchange Act to: 1) become eligible for termination of registration under Rule 12g-4 or Rule 12h-6 or suspension under Rule 12h-3; or 2) be de-listed from a securities exchange or inter-dealer quotation system. Rule 13e-3 covers single transactions, as well as a series of transactions, where the elements of the rule are met. A party engaged in a going private transaction must file and disseminate to security holders the information specified in Schedule 13E-3. This Schedule requires detailed information addressing whether the filing person believes the transaction is fair to unaffiliated security holders and why. Schedule 13E-3 can be combined with Schedule TO, in which case the Rule 13e-3 box on the cover page to Schedule TO must be checked.

14300 Cash Offer Financial Statement Requirements

(Last updated: 9/30/2008)

> 14310 Financial Statement Requirements of Schedule TO

NOTE: If the tender offer consideration includes registered securities, the financial statement requirements of Forms S-4 or F-4 should be followed.

14310.1 Instructions to Item 10 of Schedule TO provide the following:

If material, the financial information required by Item 1010(a) and (b) of Regulation M-A for the issuer in an issuer tender offer and for the offeror in a third-party tender offer must be filed. See Section 14400.
Other guidance included in Instructions to Item 10:
1. Financial statements must be provided when the offeror's financial condition is material to a security holder's decision whether to sell, tender or hold the securities sought. The facts and circumstances of a tender offer, particularly the terms of the tender offer, may influence a determination as to whether financial statements are material, and thus required to be disclosed.
2. Financial statements are not considered material when:
  1. the consideration offered consists solely of cash;
  2. the offer is not subject to any financing condition; and either:
  3. the offeror is a public reporting company under Section 13(a) or 15(d) of the 1934 Act that files reports electronically on EDGAR, or
  4. the offer is for all outstanding securities of the subject class.
3. The filer may incorporate by reference financial statements contained in any document filed with the SEC, solely for the purposes of this schedule, if:
  1. the financial statements substantially meet the requirements of this item;
  2. an express statement is made that the financial statements are incorporated by reference;
  3. the information incorporated by reference is clearly identified by page, paragraph, caption or otherwise; and
  4. if the information incorporated by reference is not filed with this schedule, an indication is made where the information may be inspected and copies obtained.
  Financial statements that are required to be presented in comparative form for two or more fiscal years or periods may not be incorporated by reference unless the material incorporated by reference includes the entire period for which the comparative data is required to be given.
4. If the offeror in a third-party tender offer is a natural person, and that person's financial information is material, the net worth of the offeror must be disclosed. If the offeror's net worth is derived from material amounts of assets that are not readily marketable or there are material guarantees and contingencies, the nature and approximate amount of the individual's net worth that consists of illiquid assets and the magnitude of any guarantees or contingencies that may negatively affect the natural person's net worth must be disclosed.
5. Pro forma financial information is required in a negotiated third-party cash tender offer when securities are intended to be offered to remaining target security holders in a subsequent merger (two-tier transaction) and the acquisition of the target company is significant to the offeror. The offeror must disclose the financial information specified in Item 3(f) and Item 5 of Form S-4 in the schedule filed with the SEC, but may furnish only the summary financial information specified in Item 3(d), (e) and (f) of Form S-4 in the disclosure document sent to security holders. When pro forma financial information is required, then the bidder's historical financial statements for all periods stipulated in Item 1010(a) are required as well.
6. The materials sent to security holders may contain the summarized financial information specified by Item 1010(c) instead of the financial information required by Item 1010(a) and (b). In that case, the full financial information required by Item 1010(a) and (b) must be incorporated by reference or disclosed in the Schedule TO. If summarized financial information is sent to security holders, instructions on how more complete financial information can be obtained must be disclosed. If the summarized financial information is prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP or IFRS as issued by the IASB, the summarized financial information must be accompanied by a reconciliation as described in Instruction 8 below.
  Note: When financial information is considered material and the offeror elects to incorporate that information by reference, the disclosure materials disseminated to security holders must nonetheless contain at least summarized financial information specified by Item 1010(c). In addition, when that summarized financial information is disseminated to security holders instead of full financial information required by Item 1010(a) and (b), the full financial information must be provided in the Schedule TO or incorporated by reference. See the Division of Corporation Finance's July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H7.
7. If the offeror is a non-reporting company, the financial statements required need not be audited if audited financial statements are not available or obtainable without unreasonable cost or expense. A statement to that effect and the reasons for their unavailability must be disclosed.
8. If the financial statements required by this Item are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP or IFRS as issued by the IASB, a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F must be provided, unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. At a minimum, however, when financial statements are prepared on a basis other than U.S. GAAP or IFRS as issued by the IASB, a narrative description of all material variations in accounting principles, practices and methods used in preparing those financial statements from U.S. GAAP must be presented.
Note: If a bidder's financial statements prepared on a basis other than U.S. GAAP or IFRS as issued by the IASB are not required to be filed in conjunction with an all-cash tender offer based on Reg. M-A, but the bidder includes its financial statements anyway (for example, in order to comply with a foreign jurisdiction's rules and regulations), a U.S. GAAP reconciliation is required unless it is not available. If a U.S. GAAP reconciliation is not provided in this circumstance, the following disclosures should be provided:
1. The headnote to those financial statements should explain why the bidder's financial statements are included, that they are not required to be filed under the SEC's rules, and that they don't include all the disclosures that would be required under the SEC's rules, such as a U.S. GAAP reconciliation.
2. Narrative description of the GAAP differences that normally would be required under Instruction 3 to Item 8.A.5 of Form 20-F is encouraged but not required.
This guidance is included in the Division of Corporation Finance's July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H10.

14310.2 A manually signed copy of the accountant’s report is not required to be filed with the SEC in connection with a Schedule TO. See the Division of Corporation Finance’s July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H11. (Last updated: 6/30/2009)

14310.3 Previously issued historical financial statements of the issuer (in an issuer tender offer) or of the bidder (in a third-party tender offer) to be included in a Schedule TO (because they are considered material under 14310.1 (b.1) and 14310.1 (b.2) above) are not required to be recast to reflect a subsequent discontinued operation or a subsequent organizational change causing a change to its reportable segments. This is because previously issued financial statements are not considered to be "reissued" merely by disclosure included in a Schedule TO. However, sufficient information about the subsequent discontinued operation or change in reportable segments must be provided in the Schedule TO so that security holders are informed of those changes and their impact on the reported financial statements. The effect of the discontinued operation should be reflected through pro forma financial information prepared in accordance with S-X Article 11. Segment information under both the old basis and the new basis of segmentation should be presented, to the extent practicable, for all periods for which a statement of comprehensive income has been filed in the Schedule TO.

14310.4 During the tender offer period, an issuer's periodic report on Form 10-K or Form 10-Q may become due and be filed in the normal course. There is no per se requirement to amend the Schedule TO to update information previously disclosed based on current information derived from the newly filed Form 10-K or 10-Q. However, management must evaluate whether the newly filed Form 10-K or 10-Q contains a "material change in information" previously disseminated to security holders. If that newly filed periodic report contains a material change in information, such as, for example, a significant change in the company's business or a material event, the registrant should file an amendment to the Schedule TO in order to summarize the nature of the material change and/or incorporate the newly filed Form 10-K or 10-Q. Because the SEC generally has required that at least five business days remain in the offer period after disseminating information about a material change, the registrant may need to extend the offer period to allow security holders time to receive and consider the new information. If the newly filed periodic report does not contain a material change in information, the registrant may nevertheless choose to file an amendment to the Schedule TO.

> 14320 Financial Statement Requirements of Schedule 13E-3

14320.1 The financial information required by Item 1010(a) and (b) of Regulation M-A for the issuer of the subject class of securities must be filed. See Section 14400.

14320.2 Instructions to Item 13 provide the following:

The disclosure materials sent to security holders may contain the summarized financial information required by Item 1010(c) instead of the financial information required by Item 1010(a) and (b). In that case, the financial information required by Item 1010(a) and (b) must be disclosed directly or incorporated by reference in the Schedule 13E-3. If summarized financial information is sent to security holders, instructions on how more complete financial information can be obtained must be disclosed. If the summarized financial information is prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP or IFRS as issued by the IASB, the summarized financial information must be accompanied by a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F.
If the financial statements required are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP or IFRS as issued by the IASB, a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F must be provided.
The filer may incorporate by reference financial statements contained in any document filed with the SEC, solely for the purposes of this schedule, if:
1. the financial statements substantially meet the requirements of this Item;
2. an express statement is made that the financial statements are incorporated by reference;
3. the matter incorporated by reference is clearly identified by page, paragraph, caption or otherwise; and
4. if the matter incorporated by reference is not filed with this Schedule, an indication is made where the information may be inspected and copies obtained.
Financial statements that are required to be presented in comparative form for two or more fiscal years or periods may not be incorporated by reference unless the material incorporated by reference includes the entire period for which the comparative data is required to be given.

Issuers that incorporate financial statements by reference must disseminate to security holders the summarized financial information required by Item 1010(c).

14400 Item 1010 of Regulation M-A: Financial Statements

(Last updated: 9/30/2008)

> 14410 Financial Information — Item 1010(a)

14410.1 Audited financial statements for the two fiscal years required to be filed with the company's most recent annual report under Sections 13 and 15(d) of the 1934 Act;

For a bidder that is not subject to the periodic reporting requirements of the Exchange Act, audited financial statements for its most recently completed fiscal year must be included in a Schedule TO if the mailing date is beyond 90 days after the end of the fiscal year. If the proposed mailing date falls within 90 days after the end of the fiscal year, that Schedule need not include financial statements more current than as of the end of the third fiscal quarter of the most recently completed fiscal year unless the financial statements for the most recently completed fiscal year are available. See the Division of Corporation Finance's July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H8.
For a bidder that is a foreign private issuer, the audited year-end financial statements must be included in a Schedule TO if the mailing date is beyond four months after the end of the fiscal year, unless the financial statements for the most recently completed fiscal year are available.

14410.2 Unaudited balance sheets, comparative year-to-date statements of comprehensive income and related earnings per share data, and statements of cash flows required to be included in the company's most recent quarterly report filed under the 1934 Act.

For a bidder that is a foreign private issuer, quarterly or other interim financial statements need not be included in a Schedule TO unless it has filed such information in a report on Form 6-K or made it publicly available in its home jurisdiction. This also applies to a foreign private issuer filing a Schedule 13E-3. If the foreign private issuer prepares its financial statements on the basis of a comprehensive body of accounting principles other than U.S. GAAP or IFRS as issued by the IASB, the quarterly or other interim financial information should include disclosures consistent with the guidance in Instruction 3 to Item 8.A.5 of Form 20-F. See the Division of Corporation Finance's July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H9. (Last updated: 9/30/2012)

14410.3 [Reserved]

(Last updated: 10/30/2020)

14410.4 Book value per share as of the date of the most recent balance sheet presented.

> 14420 Pro Forma Information — Item 1010(b)

14420.1 If material, pro forma information must be filed disclosing the effect of the transaction on:

The company's balance sheet as of the date of the most recent balance sheet presented under Section 14410.
The company's statement of comprehensive income and earnings per share for the most recent fiscal year and the latest interim period provided under Section 14410.2; and
The company's book value per share as of the date of the most recent balance sheet presented under Section 14410.

> 14430 Summary Information — Item 1010(c)

14430.1 A fair and adequate summary of the information specified in Sections 14410 and 14420 must be filed for the same periods specified. A fair and adequate summary includes:

The summarized financial information specified in S-X 1-02(bb)(1);
Income per common share from continuing operations (basic and diluted, if applicable);
Net income per common share (basic and diluted, if applicable);
[Reserved] (Last updated: 10/30/2020);
Book value per share as of the date of the most recent balance sheet; and
If material, pro forma data for the summarized financial information specified in Section 14430.1(a) through (e) disclosing the effect of the transaction.