Tender Offer Rules and Schedules

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: 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: 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: 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: 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: 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: 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: 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: 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]

Question: An issuer’s employee stock ownership plan (ESOP) intends to conduct a tender offer for a class of equity securities of the issuer which is registered pursuant to Exchange Act Section 12. Is the tender offer subject to Exchange Act Section 14(d) and Regulation 14D, or alternatively, to Rule 13e-4?

Answer: If, assuming the offer is fully subscribed, the ESOP will be the beneficial owner of more than 5 percent of the class, the tender offer will be subject to Section 14(d) and Regulation 14D and not Rule 13e-4, so long as the ESOP is not a wholly-owned subsidiary of the issuer. Refer to Rule 13e-4(h)(4), which exempts from Rule 13e-4 any tender offer which is subject to Section 14(d).

If, however, the ESOP is a 100 percent-owned subsidiary of the issuer, the offer will be subject to Rule 13e-4. See Release No. 34-14234 (December 8, 1977) (noting that the Commission has only extended the exemption from Section 14(d) provided by Section 14(d)(8)(B) to tender offers by 100 percent-owned subsidiaries of an issuer). In either case, such tender offer will be subject to Exchange Act Section 14(e) and Regulation 14E. [March 17, 2023]

Question: In a “partial offer” for less than all outstanding securities of the subject class, Rule 13e-4(f)(3)(i) permits the issuer or an affiliate making an issuer tender offer to accept all shares tendered by persons who own an aggregate of not more than a specified number of shares, provided that the number is less than 100 shares of that security, before prorating securities tendered by others. Is this “odd-lot” preference available for tender offers governed by Regulation 14D?

Answer: No, as this preference, by its terms, is available only for issuer tender offers governed by Rule 13e-4. [March 17, 2023]

Question: In a tender offer subject to Regulation 14D or Rule 13e-4, can a bidder or issuer exclude a security holder from participating in a tender offer because they hold restricted securities?

Answer: No. Such an exclusion would not be permitted under Rule 14d-10 or Rule 13e-4(f)(8)(i), which requires a tender offer to be open to all security holders of the class of the securities subject to the tender offer. [March 17, 2023]

Question: Is a statutory merger subject to Regulations 14D and 14E?

Answer: No, a statutory merger is not in and of itself a tender offer and therefore not subject to Regulations 14D and 14E. [March 17, 2023]

Question: Are exchange offers by newly formed investment companies, unitary trust funds, and other investment vehicles for the equity securities of a public company considered tender offers?

Answer: Yes. Unless an affirmative statement is made in the offering materials that the amount of equity securities to be acquired, when added to the securities already beneficially owned by the sponsor of the trust or investment company, will not exceed 5 percent of the outstanding securities in the class, the exchange offer must be made in compliance with Regulation 14D to the extent the subject class of equity securities is registered under Exchange Act Section 12. In all events, Section 14(e) and Regulation 14E will apply and the time periods set forth in Rule 14e-1 must be observed. [March 17, 2023]

Question: Are the proration, withdrawal and other provisions set forth in subsections (1) through (8) of Exchange Act Section 14(d) only applicable to tender offers conducted pursuant to Regulation 14D, or do they also apply to tender offers governed solely by Regulation 14E?

Answer: The provisions set forth in subsections (1) through (8) of Section 14(d) are only applicable to tender offers conducted pursuant to Regulation 14D. They do not apply to tender offers governed solely by Regulation 14E. [March 17, 2023]

Question: If a limited partnership’s general partner makes a tender offer for a class of the limited partnership’s units registered pursuant to Exchange Act Section 12, is the tender offer subject to Rule 13e-4 or Regulation 14D?

Answer: If, after consummation of the tender offer, the general partner will be, directly or indirectly, the beneficial owner of more than 5 percent of such class, such tender offer will be subject to Regulation 14D and the general partner will be required to file a Schedule TO. In addition, assuming the general partner speaks on behalf of the limited partnership, the general partner is obligated to comply with Rules 14e-2 and 14d-9(b). The general partner may do so by including a statement in the offering materials on behalf of the partnership and incorporating such statement by reference into the Schedule 14D-9 filed by the partnership. [March 17, 2023]

Question: Must an all-cash tender offer always remain open for at least five business days after disclosure of a material change?

Answer: No. The Commission has stated that "as a general rule," the offer should remain open for a minimum of five business days from the date that the material change is first disclosed. See Release No. 34-24296 (April 3, 1987). The Commission, however, has also acknowledged that it is impracticable to delineate every possible material change or the requisite time period attendant to that change. Accordingly, a shorter time period may be adequate if disclosure and dissemination of the material change allows security holders sufficient time to consider such information and factor it into their decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares. See Release No. 34-24296 (April 3, 1987); see also footnote 70 in Release No. 34-23421 (July 11, 1986) ("The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of the terms or information"). [March 6, 2025]

Question: An offeror commences an all-cash tender offer subject to Regulation 14D without sufficient funds or committed financing to purchase the maximum amount of securities sought in the offer (a "partly financed" or "unfinanced" tender offer). It discloses the lack of sufficient funds and committed financing in its offer to purchase. Would the subsequent securing of committed financing necessary to fund the purchase of all securities sought in the offer (a "fully financed" tender offer) constitute a material change to the previously disclosed information?

Answer: Yes. The staff views the securing of committed financing needed for the purchase of all securities sought in the tender offer as a material change. Accordingly, an offeror must:

• promptly disclose the change from an unfinanced tender offer to a fully financed tender offer in accordance with Rule 14d-6(c);
• promptly file an amendment to Schedule TO to report the material change in accordance with Rule 14d-3(b)(1); and
• promptly disseminate disclosure of the change to security holders in a manner reasonably designed to inform security holders of the change in accordance with Rule 14d-4(d)(1).

Because the change from an unfinanced (or partly financed) tender offer to a fully financed tender offer is viewed as a material change, the offeror must ensure that disclosure of the material change is disseminated with sufficient time for security holders to consider such information and factor it into the decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares. Accordingly, if the change from an unfinanced tender offer to a fully financed tender offer occurs near or at the end of the tender offer, the offeror must ensure sufficient time remains in the offer to allow for adequate dissemination, including by extending the offer if necessary.

This position equally applies to issuer tender offers subject to Rule 13e-4 and its comparable requirements (i.e., Rules 13e-4(c)(3), 13e-4(d)(2) and 13e-4(e)(3)). [March 6, 2025]

Question: Is a tender offer considered fully financed if the offeror has obtained a binding commitment letter from a lender to provide the funds necessary to purchase the maximum amount of securities sought in the offer?

Answer: Yes. A tender offer is considered fully financed if the offeror has obtained a binding commitment letter from a lender. A "highly confident" letter from a lender, however, is not viewed as the equivalent of a binding commitment letter. Accordingly, a tender offer is not considered fully financed if the offeror has only received a highly confident letter. [March 6, 2025]

Question: An offeror commences a cash tender offer for all securities of the subject class. At the time of commencement, the offeror discloses in its offer to purchase that it has obtained a binding commitment letter from a lender to provide the funds necessary to purchase the maximum amount of securities sought in the offer. The offeror also discloses the possibility that it may purchase the securities using alternative funding sources. Prior to expiration of the tender offer, the offeror decides to purchase the securities sought in the offer by using an alternative source of funds, such as its available cash or through committed financing provided by a different lender. The alternative funding source is sufficient to fund the purchase of all securities of the subject class. Would this type of change in the source of the funds constitute a material change?

Answer: No. The substitution of a funding source, or the substitution of available cash, is not considered a material change. The offeror should consider, however, whether the tender offer materials should be updated to reflect the substitution of the funding source (or the substitution of cash) and the material terms of the new funding source. [March 6, 2025]

Question: An offeror commences an all-cash tender offer subject to Regulation 14D. The offeror discloses in its offer to purchase that it has obtained a binding commitment letter from a lender to provide the funds necessary to purchase all securities sought in the offer. Notwithstanding this binding commitment, the offeror conditions its purchase of the tendered securities on the actual receipt of the funds from the lender (a "funding condition") by the offer's expiration. Does the satisfaction or waiver of this funding condition constitute a material change?

Answer: When the offeror has a binding commitment letter from a lender and receives the expected funds, no material change in the information given to security holders has occurred because the lender has simply satisfied the funding condition by fulfilling its contractual obligation.

If the lender does not fulfill its contractual obligation by providing the expected funds, but the offeror waives the funding condition because it is able to use an alternative source of funds to purchase all securities sought in the offer, then, consistent with Question 101.20, no material change has occurred.

If the lender does not fulfill its contractual obligation by providing the expected funds, but the offeror waives the funding condition despite having no alternative funding source to purchase all securities, then the waiver would constitute a material change, requiring the offeror to:

• promptly disclose the material change in accordance with Rule 14d-6(c);
• promptly file an amendment to Schedule TO to report the material change in accordance with Rule 14d-3(b)(1); and
• promptly disseminate disclosure of the change to security holders in a manner reasonably designed to inform security holders of the change in accordance with Rule 14d-4(d)(1).

Further, the waiver of the funding condition and the lack of funding could implicate other tender offer provisions, such as the prompt payment requirement in Rule 14e-1(c) as well as the provisions of Section 14(e).

This position equally applies to issuer tender offers subject to Rule 13e-4 and its comparable requirements (i.e., Rules 13e-4(c)(3), 13e-4(d)(2) and 13e-4(e)(3)). [March 6, 2025]