Torchmark Corp.Jan. 15, 1988INQUIRY LETTERWACHTELL, LIPTON, ROSEN & KATZ 299 PARK AVENUE NEW YORK, N.Y. 10171-0149 (212) 371-9200 January 11, 1988
Division of Market Regulation Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549
I would appreciate your confirming that, in the Staffs view, the features of the Offer described in this letter comply with Rule 13e-4 or, alternatively, that the Staff is taking a "no action" position with respect to the Offer. The Offer is a standard Dutch auction self-tender. Stockholders are permitted to tender shares at prices ranging between $26 and $30 in increments of $.50. The Offer is for up to 4,500,000 shares. Purchases of shares in an issuer tender offer can result in either dividend or capital gain treatment for a tendering stockholder, depending on the effect of purchase on such stockholders proportionate ownership of the company. In order to permit a tendering stockholder to avoid receiving dividend treatment, which for many stockholders would result in greater tax liability, the Offer permits stockholders to make conditional tenders; i.e., a stockholder specifies a minimum number of shares that must be purchased if any of his shares are purchased. Attached as Annex I is the section of Torchmarks Offer to Purchase dated December 22, 1987 describing the stockholders right to tender conditionally. The language of this provision was adapted without substantive change from earlier self-tenders and is similar to the conditional tender provision of each of the recent self-tenders with which we are familiar and that permit conditional tenders. In fact, there has been no substantive variation in the language, to our knowledge, since the adoption of Rule 13e-4. The procedure for determining whether a conditional tender is accepted in the Offer will be as follows (for simplicity, I have omitted any consideration of the special treatment for odd-lot tenders; such omission does not affect the discussion set forth below): 1. The number of shares tendered, whether conditionally or unconditionally, will be totaled (the "Preliminary Total"). If the Preliminary Total is less than on equal to 4,500,000, all shares tendered will be accepted. If the Preliminary Total exceeds 4,500,000, a preliminary proration factor will be obtained by dividing 4,500,000 by the Preliminary Total. 2. The number of shares tendered by each stockholder will be multiplied by the preliminary proration factor. If a conditional tender specifies a minimum number of shares that is greater than this product, such tender will be considered to have been withdrawn. 3. The number of shares tendered in the remaining tenders (i.e., unconditional tenders and conditional tenders for which the minimum number of shares specified is less than or equal to the preliminary prorated acceptance) will then be totaled (the "Revised Total"). (a) If the Revised Total is greater than 4,500,000, the quotient obtained by dividing 4,500,000 by the Revised Total will be the final proration factor, which will be applied to all the remaining tenders. Since the final proration factor will be larger than the preliminary proration factor, the "minimum condition" of each conditional tender remaining at this stage will be met. (b) If the Revised Total is less than 4,500,000 (the circumstances addressed by the second paragraph in Annex I), Torchmark will accept all of the shares tendered under each tender making up the Revised Total. Torchmark will then select by lot conditional tenders previously eliminated and will purchase from each such selected tender the minimum number of shares specified in such tender. Selections by lot will continue until the shares so accepted bring the total number of shares accepted in the Offer to 4,500,000. Only in the limited circumstances described in paragraph 3(b) will the "by lot" procedure is used. Thus, the "by lot" procedure is used only in circumstances where all unconditional tenders are accepted in full. Accordingly, the requirements of Rule 13e-4(f)(3)(ii) are satisfied by the Offer. The Torchmark Offer, including the procedures to be followed for conditional tenders, complies not only with the literal terms of Rule 13e-4, but also with the policies of stockholder protection that stand behind the Rule. The alternative of submitting a conditional tender is open to all stockholders and is made available by Torchmark entirely as an accommodation to its stockholders. The Company has no direct interest in whether any stockholder receives dividend or capital gain treatment on amounts received pursuant to the Offer. I note also that in proposing Rule 13e-4, the Commission understood the option of making a conditional tender to be a benefit to stockholders. See Release 34-14234, 1977-78 Transfer Binder Fed. Sec. L. Rep. (CCH) 81,380 at 88,787 n.28. The Torchmark Offer is currently scheduled to expire at midnight on January 21, 1988. Accordingly, your prompt response would be greatly appreciated. Very truly yours,
January 14, 1988
Wachtell, Lipton, Rosen & Katz 299 Park Avenue New York, New York 10171-0149
File No. TP 88-169
You make the following representations: On December 22, 1987, Torchmark commenced a modified dutch auction cash tender offer in which stockholders are permitted to tender shares of Common Stock at prices ranging between $26 and increments of $.50 ("Tender Offer"). The Tender Offer is for up to 4,500,000 shares. Purchases of shares in an issuer tender offer can result in either dividend or capital gain treatment for a tendering stockholder, depending on the effect of the purchase on such stockholders proportionate ownership of the company. In order to permit a tendering stockholder to avoid receiving dividend treatment, which for many stockholders would result in greater tax liability, the Tender Offer permits stockholders to make conditional tenders, i.e., a stockholder specifies a minimum number of shares that must be purchased if any of his shares are purchased. The stockholders right to tender conditionally is fully described in the Tender Offer documents. The procedure for determining whether a conditional tender is accepted in the Tender Offer will be as follows (for simplicity, you have omitted any consideration of the special treatment for odd-lot tenders); 1. The number of shares tendered, whether conditionally or unconditionally, is totaled ("Preliminary Total"). If the Preliminary Total is less than or equal to 4,500,000, all shares tendered will be accepted. If the Preliminary Total exceeds 4,500,000, a preliminary proration factor will be obtained by dividing 4,500,000 by the Preliminary Total. 2. The number of shares tendered by each stockholder is multiplied by the preliminary proration factor. If a conditional tender specifies a minimum number of shares that is greater than this product, such tender is considered to have been withdrawn. 3. The number of shares tendered in the remaining tenders (i.e., unconditional tenders and conditional tenders for which the minimum number of shares specified is less than or equal to the preliminary prorated acceptance) is then totaled ("Revised Total"). (a) If the Revised Total is greater than 4,500,000, the quotient obtained by dividing 4,500,000 by the Revised Total will be the final proration factor, which will be applied to all the remaining tenders. Since the final proration factor will always be larger than the preliminary proration factor, the "minimum condition" of each conditional tender remaining at this stage will be met. (b) If the Revised Total is less than 4,500,000, Torchmark will accept all of the shares tendered under each tender making up the Revised Total. Torchmark will then select by lot conditional tenders previously eliminated and will purchase from each such selected tender minimum number of shares specified in such tender. Selections by lot will continue until the shares so accepted bring the total number of shares accepted in the Tender Offer to 4,500,000. Only in the limited circumstances described in paragraph 3(b) above will the "by lot" procedure be used. Thus, the "by lot" procedure is used only in circumstances where all unconditional tenders are accepted in full. Accordingly, you believe the requirements of Rule 13e-4(f)(3)(ii) are satisfied by the Tender Offer. In your view, the Tender Offer, including the procedures to be followed for conditional tenders, complies not only with the literal terms of Rule 13e-4, but also, the policies of stockholders protection that underlie the Rule. The alternative of taking into account certain conditional tenders is open to all stockholders and is made available by Torchmark entirely as an accommodation to its stockholders. Torchmark has no direct interest in whether any stockholder receives dividend or capital gain treatment for amounts received pursuant to the Tender Offer. Response:
On the basis of your representations and the facts presented, in particular, the tax consequences faced by a tendering stockholder as a result of an issuers repurchase of its own stock, this Division will not recommend that the Commission take enforcement action under Rule 13e-4(f)(3)(ii) if Torchmark conducts the Tender Offer as described above. The foregoing no-action position is based solely on your representations and the facts presented and is strictly limited to issuer tender offers providing for conditional tenders as described above. The Divisions determination to grant relief in this matter is a staff position regarding enforcement action only and should not be understood to express any legal conclusions regarding the applicability of statutory or regulatory provisions of the federal securities laws. Because the no-action position is based solely on the representations that you have made, any different facts might require a different conclusion. Finally, your attention is directed to the antifraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a), 10(b) and 14(e) and Rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with Torchmark. The Division expresses no view with respect to other questions that the proposed transaction may raise, including but not limited to, the adequacy of disclosure concerning, and the applicability of other federal or state laws to, the proposed transaction. You have agreed to waive the provision of the Commissions rule concerning publication of interpretive and no-action letters and other written communications, 17 C.F.R. 200.81, which provides for public availability of written communications requesting interpretive legal advice together with any response. Accordingly, your letter dated January 11, 1988 and this letter shall be placed in the Commissions public file on January 15, 1988. Sincerely,
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