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K. Rules 13e-3 and 13e-4
us SEC - C&DI - Proxy Rules and Schedules
Question 1
Q: In a registered exchange offer that is also a going-private transaction, where the bidder files a joint Schedule 13E-3/Schedule TO, when must the Schedule 13E-3 be filed?
A: The general instructions to Schedule TO state that a bidder may file a combined Schedule 13E-3/TO where the transaction is both a tender offer and a going private transaction. In a standard unaffiliated transaction, a Schedule TO is typically filed when the Form S-4 is declared effective. However, where a joint Schedule 13E-3/TO is filed, it must be filed when the Form S-4 is initially filed. This will alert the public and the staff that a going private transaction is involved. This is consistent with General Instruction D to Schedule 13E-3, which states that the schedule must be filed "[a]t the same time as filing a registration statement under the Securities Act of 1933." The Schedule should make it clear that the offer has not yet commenced, and should be amended when the offer does commence.
Question 2
NEW
Q: In a going-private transaction subject to Rule 13e-3, is the target company to a tender offer considered to be "engaged" in the transaction pursuant to Rule 13e-3 if the target merely recommends the tender offer to its security holders, even where the target has not signed a business combination agreement with the offeror?
A: Yes. If the affiliation between the offeror and target is sufficient to trigger Rule 13e-3, the staff believes that the favorable recommendation alone would be sufficient to cause the target to be "engaged" in the going-private transaction. As a result, the target would have to comply with Rule 13e-3(d), (e) and (f). While the staff understands that the target has an obligation under Rule 14e-2 to make a statement with respect to the tender offer, the target is not required to recommend in favor of the offer. The target's choices are to recommend acceptance or rejection of the offer, express no opinion and remain neutral, or state that it is unable to take a position. Given the importance to security holders of their management's recommendation and the conflicted nature of the transaction, the staff believes the protections of Rule 13e-3 are warranted in these circumstances. Illustration two to Q&A No. 5 in Exchange Act Release 17719 (April 13, 1981) is not inconsistent with this view since that illustration does not contemplate that the target recommended the tender offer to its security holders.
Question 3
NEW
Q: May an issuer purchase its common stock during the ten business days following an issuer exchange offer for options to purchase the same class and series of common stock without violating Rule 13e-4(f)(6)?
A: Yes. The common stock that is the subject of the issuer repurchase program is neither considered to be a member of the same class or series of securities being offered or acquired in the option exchange offer nor a right to purchase any such security.
For other issues involving option exchange offers, see the Rule 13e-4 exemptive order issued March 21, 2001, and Part II of the Division of Corporation Finance Current Issues and Rulemaking Projects Outline (March 31, 2001 update).
This is a work of the U.S. Government
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