Release No. 33-7759

Release No. 34-42054

Release No. 39-2378

International Series Rel. No. 1208

64 Fed. Reg. 61382 - Nov. 10, 1999

Securities and Exchange Commission

Cross-Border Tender and Exchange Offers, Business Combinations and Rights Offerings
 

Table of Contents

Section II.B

II. Discussion

B. The Tier II Exemption

Commenters generally supported the proposed scope and conditions of the Tier II exemption, under which offerors would be entitled to limited relief from the U.S. tender offer rules to minimize conflicts with foreign regulatory schemes. This relief will be available for both issuer and third party tender offers when the subject company is a foreign private issuer and U.S. ownership is no greater than 40 percent. The offeror must comply with the remaining tender offer provisions, including the procedural, disclosure, and filing requirements of the Williams Act. Because the offeror would file a Schedule TO,³⁴ a Form CB or F-X is not required. We are adopting the Tier II exemption with some modifications from the 1998 proposals, because some of the relief contained in the 1998 proposals is no longer necessary due to the amendments adopted today in the Regulation M-A Release.

First, as with Tier I, in order to provide a level playing field in the case of competing offers, if the initial offeror relies on the Tier II exemption to make a tender offer, a subsequent competing bidder would not be subject to the 40 percent ownership limitation condition of the Tier II exemption.

Second, the proposal that a cross-border tender offer would commence only upon mailing or publishing the offer rather than upon announcement is no longer necessary. In the Regulation M-A Release, we have repealed the requirement that a cash tender offer commence or be withdrawn within five business days of announcement. Instead, an offer commences once the bidder disseminates transmittal forms or discloses instructions on how to tender into an offer.³⁵ Only then is the bidder required to file the Schedule TO. Therefore, separate relief for foreign offers is not necessary.

Third, the proposal that a bidder could terminate withdrawal rights in a cross-border tender offer once all conditions were satisfied and keep the offer open for acceptances only is also not necessary. The Regulation M-A Release adopted a similar proposal to allow third-party bidders to provide at their election for a "subsequent offering period" without withdrawal rights and made it applicable to both domestic and foreign transactions.³⁶ Regulation M-A provides, in part, that bidders that include a subsequent offering period must promptly pay for tendered securities and announce the approximate number and percentage of outstanding securities that were deposited by the close of the initial offering period no later than 9:00 a.m. Eastern time on the next business day after the scheduled expiration date of the initial offering period and immediately begin the subsequent offering period. We have clarified that bidders relying on the Tier II exemption will satisfy the foregoing requirements if the bidder pays for tendered securities and makes the announcement in accordance with the law or practice of the bidder's home jurisdiction and the subsequent offering period commences immediately following such announcement.³⁷ The bidder would not have to extend withdrawal rights during the period between the close of the offer and the commencement of the subsequent offering period. Otherwise, separate relief for foreign offers is not necessary.

We are adopting the Tier II provisions relating to the All-Holders/Best Price provisions,³⁸ notice of extensions,³⁹ prompt payment,⁴⁰ and the interpretation regarding a waiver or reduction of minimum conditions as proposed. Under our interpretation on changes to the minimum condition, we will not object if bidders meeting the requirements for the Tier II exemption reduce or waive the minimum acceptance condition without extending withdrawal rights during the remainder of the offer (unless an extension is required by Rule 14e-1), if the following conditions are met:

• The bidder must announce that it may reduce the minimum condition five business days prior to the time that it reduces the condition. A statement at the commencement of the offer that the bidder may reduce the minimum condition is insufficient;

• The bidder must disseminate this announcement through a press release and other methods reasonably designed to inform U.S. security holders, which could include placing an advertisement in a newspaper of national circulation in the United States;

• The press release must state the exact percentage to which the acceptance condition may be reduced and state that a reduction is possible. The bidder must declare its actual intentions once it is required to do so under the regulations of the home jurisdiction;

• During this five-day period, security holders who have tendered their shares in the offer will have withdrawal rights;

• This announcement must contain language advising security holders to withdraw their tenders immediately if their willingness to tender into the offer would be affected by a reduction of the minimum acceptance condition;

• The procedure for reducing the minimum condition must be described in the offering document; and

• The bidder must hold the offer open for acceptances for at least five business days after the revision or waiver of the minimum acceptance condition.

Apparently because the Tier II proposals were codifications of exemptive and interpretive positions that we currently apply in cross-border acquisitions, they did not result in significant comment. To the extent that an offeror needs additional relief from that provided in Tier II, the staff, pursuant to delegated authority, will consider applications for exemptions on a case-by-case basis.⁴¹

Footnotes

³⁴ Schedules 13E-4 and 14D-1, the schedules previously used for issuer and third-party tender offers, respectively, have been combined into new Schedule TO in the Regulation M-A Release, supra note 6.

³⁵ Revised Rule 14d-2.

³⁶ The text of new Rule 14d-11 is contained in the Regulation M-A Release, supra note 6.

³⁷ Revised Rule 14d-1(d)(2)(v).

³⁸ Revised Rules 13e-4(i)(2)(i), 13e-4(i)(2)(ii), 14d-1(d)(2)(i), and 14d-1(d)(2)(ii). A bidder may make one offer to U.S. holders and another only to non-U.S. holders if the offer to U.S. holders is made on terms at least as favorable as those offered any other holder of the same class of securities that is the subject of the tender offers. A bidder may also offer loan notes solely to non-U.S. holders.

The exception to the equal treatment condition of the Tier I exemption for cash only consideration adopted today would not apply to Tier II offers. The staff will continue to consider requests for that type of relief on a case-by-case basis. See Amendments to Tender Offer Rules: All-Holders and Best-Price, Exchange Act Release No. 23421 (July 7, 1986), [51 FR 25973] at Section III.B.3. Likewise, vendor placement arrangements will be considered on a case-by-case basis.

³⁹ Revised Rules 13e-4(i)(2)(iii) and 14d-1(d)(2)(iii) (Notice of extensions may be made in accordance with the requirements of the home jurisdiction law or practice).

⁴⁰ Revised Rules 13e-4(i)( 2)(iv) and 14d-1(d)(2)(iv) (Payment made in accordance with the requirements of the home jurisdiction law or practice will satisfy the prompt payment requirements of Rule 14e-1(c)).

⁴¹ The offeror would need to submit a written application requesting relief, along with a discussion of the basis for the request. If the request relates to an issuer tender offer, the request should be directed to the Office of Risk Management and Control in the Commission's Division of Market Regulation and the Office of Mergers and Acquisitions in the Commission's Division of Corporation Finance. If the request relates to a third party tender offer, the request should be directed to the Office of Mergers and Acquisitions.

The application must comply with the requirements of Rule 0-12 under the Exchange Act. When U.S. ownership is greater than 40 percent, the staff will consider relief on a case-by-case basis only when there is a direct conflict between the U.S. laws and practice and those of the home jurisdiction. Any relief would be limited to what is necessary to accommodate conflicts between the regulatory schemes and practices.