SEC Permits 10-Business-Day Equity Tender Offers

Rules 13e-4(f)(1)(i) and 14e-1(a) under the Securities Exchange Act of 1934, as amended (Exchange Act), generally require tender offers to remain open for a minimum of 20 business days. In an effort to “address market inefficiencies, better reflect technological advancements, and reduce exposure to market fluctuation,” the US Securities and Exchange Commission (SEC) issued an exemptive order on April 16 that will permit public and private issuers and certain third parties to conduct tender offers for equity securities with a minimum offering period of 10 business days, provided that specified conditions are satisfied.

Reporting Company Tender Offers

For reporting companies, the SEC will permit a tender offer to remain open for a minimum period of 10 business days, provided that:

• The tender offer is made for equity securities.
• The tender offer is subject to either the provisions of Regulation 14D or Rule 13e-4 under the Exchange Act.
• The consideration offered consists exclusively of cash at a fixed price.
• The offeror publicly announces the tender offer by no later than 10:00 a.m. Eastern on the launch date in a widely disseminated press release. The press release must include the basic terms of the offer (including the identity of the offeror, the class of equity securities sought, the consideration offered, and the offer’s expiration date), as well as an active hyperlink to a website where securityholders may access the tender offer materials.
• As of the public announcement, the equity securities subject to the tender offer are not subject to a previously announced or pending tender offer by another offeror.
• If the tender offer is not conducted by the issuer, the offer must be for all outstanding securities of the relevant class, the offer must be made pursuant to a merger agreement or business combination agreement negotiated between the offeror and the issuer, and the issuer must file and disseminate its Schedule 14D-9 no later than 5:30 p.m. Eastern on the first business day following the launch date.
• If the tender offer is conducted by the issuer, the tender offer must be for less than all outstanding securities of the subject class of equity securities and must not constitute a “going private” transaction pursuant to Rule 13e-3 under the Exchange Act.
• The tender offer is not conducted in reliance on the cross-border exemptions in rules 14d-1 or 13e-4 under the Exchange Act.

If another tender offer for the same class of equity securities is announced after the tender offer is launched in reliance on the exemptive order, the initial tender offer must be extended so that it remains open for a minimum of 20 business days from the launch date.

In addition, the offeror must publicly announce, by no later than 9:00 a.m. Eastern on the fifth business day prior to the expiration date, any:

• Increase or decrease in the percentage of securities subject to the tender offer (other than an additional amount not to exceed 2% of the securities subject to the tender offer).
• Change in the consideration offered.

Any other material change to the terms of the tender offer must be publicly announced by no later than 9:00 a.m. Eastern on the second business day prior to the expiration date.

Private Company Tender Offers

The exemptive order also permits private companies (i.e., companies that do not have a class of securities registered pursuant to Section 12 of the Exchange Act and that are not otherwise subject to the SEC’s reporting requirements) to conduct 10-business-day equity tender offers, provided that:

• The consideration offered consists exclusively of cash at a fixed price.
• The tender offer is conducted by the issuer or a wholly owned subsidiary of the issuer.
• Any (i) increase or decrease in the percentage of securities subject to the tender offer (other than an additional amount not to exceed 2% of the securities subject to the tender offer) or (ii) change in the consideration offered is communicated to holders of the subject securities by no later than 9:00 a.m. Eastern on the fifth business day prior to the expiration date.
• Any other material change to the terms of the tender offer is communicated to the holders of the subject securities by no later than 9:00 a.m. Eastern on the second business day prior to the expiration date.

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