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.G

II. Discussion

G. Internet Disclosure

There is no limitation under the exemptive provisions adopted today on the use of the Internet to publish offering materials and other information about the cross-border transaction.⁸⁷ However, when materials are required to be disseminated directly to U.S. holders (for example, in a Tier II offer subject to Regulation 14D or when materials are mailed in the home country in a Tier I offer), Internet dissemination of the offering materials would not, without more, constitute adequate dissemination under the new exemptive rules.⁸⁸ If an offeror publishes in its home country, posting the materials on its web site would not constitute adequate publication in the United States. Electronic dissemination could satisfy a dissemination requirement only if conducted in a manner consistent with the guidance provided in our 1995 release on electronic dissemination, including the requirement to obtain the U.S. holder's consent to receive the mandated materials by electronic means or other evidence of delivery.⁸⁹

In response to the request of several commenters, we are providing guidance on whether materials relating to offshore tender and exchange offers could be posted on the Internet without triggering U.S. tender offer and securities registration requirements with respect to that offer. We note that the exemptions adopted today are intended to facilitate the inclusion of U.S. investors in cross-border transactions, not to provide a means to avoid U.S. jurisdiction. However, U.S. investors would benefit from timely and reliable information about foreign corporate actions, even if they are not able to participate in the transactions.

1. General Approach

The posting of information on a web site may constitute an offer of securities for purposes of the U.S. securities laws. We recently published our views clarifying when the posting of materials on Internet web sites would not be considered an offer or soliciting activity in the United States for purposes of the registration requirements of the federal securities laws (the "1998 Internet Release").⁹⁰ In the 1998 Internet Release, we expressed the view that offering materials posted on a web site would not be viewed as an offer, general solicitation or directed selling efforts in the United States, so long as the offeror implements precautionary measures that are reasonably designed to ensure that the Internet offer is not targeted to persons in the United States or to U.S. persons. The 1998 Internet Release stated that when an offeror prominently discloses that the offer is being made to countries other than the United States and implements adequate measures reasonably designed to guard against sales to persons in the United States or to U.S. persons in an offshore Internet offer, we will not view the offer as targeted to persons in the United States or to U.S. persons and thus will not treat it as occurring in the United States for Securities Act registration purposes.

Offshore rights offerings fall squarely within the guidance set forth in that release. As a general matter, an offeror conducting a tender or exchange offer also may rely on the guidance in the 1998 Internet release. This discussion provides additional guidance as to what constitutes adequate precautions to prevent participation by persons in the United States or U.S. persons in the context of these types of offshore transactions. What constitutes adequate measures depends on all the facts and circumstances of any particular situation. These procedures are not exclusive; other procedures that suffice to guard against sales to persons in the United States or to U.S. persons also can be used to demonstrate that the offer is not targeted at the United States.

2. Offshore Tender and Exchange Offers, Rights Offerings and Business Combinations on the Internet

Posting materials relating to tender and exchange offers and rights offerings on the web site of the offeror or subject company, or a third party, presents special problems not present in the context of public underwritten offerings. U.S. holders of the subject securities already are familiar with the subject company and its securities and are more likely to be alerted immediately to the posting of offering materials. Investors may either monitor the target's web site or employ a search service to alert it to any materials posted on the Internet relating to that company. Also, because of their existing investment in those securities, U.S. investors are more likely to have an incentive to find indirect means to participate in the offer, even though the materials state that the offer is not being made in the United States. As a result, offerors using a web site to publicize their offer should take special care that it is not used as a means to induce indirect participation by U.S. holders of those securities.

One way in which the offeror could take special care to prevent sales to U.S. holders would be, in responding to inquiries and processing letters of transmittal, to obtain adequate information to determine whether the holder is a person in the United States or a U.S. person. Another example of such special care would be if the offeror obtains representations by the investor, or anyone tendering on the investor's behalf, that the investor is not a person in the United States or a U.S. person. Similarly, in disseminating the cash or securities consideration to tendering investors, special care should be taken to avoid mailing into the United States.

Despite the use of disclaimers and the implementation of precautionary measures against accepting tenders or the exercise of rights from the United States, a web site posting could be viewed as an offer in the United States if the content of the web page clearly is designed to induce U.S. investors to find an indirect means to participate in the offer through offshore nominees or other means. Offerors cannot accomplish indirectly what they purport not to be doing directly.

In many cases, even though the offer materials disseminated outside the United States state that the offer is not being made in the United States, the bidder will allow U.S. institutional investors to participate either under Regulation S for offers and sales taking place outside the United States, or as a private or limited placement under Section 4(2) or other exemption from registration.⁹¹ In the 1998 release, we concluded that a posting of offering materials on a web site was not necessarily offering activity in the United States, even though the web site is accessible by investors in the United States. This conclusion was premised on the implementation of measures both to prevent the targeting of U.S. investors and to prevent actual sales to persons in the United States or to U.S. persons in the offshore offer. A web site that is accessible in the United States cannot be used to entice U.S. investors to participate in the offering offshore. Accordingly, reliance on Regulation S to allow participation by U.S. persons offshore would not be appropriate with respect to tender or exchange offers posted on an unrestricted web site.

Business combinations present different issues from tender or exchange offers because participation by U.S. holders is not voluntary. In order to attempt to avoid U.S. jurisdiction, offerors often do not provide U.S. investors an opportunity to vote on the transaction. It is neither practicable nor desirable to treat U.S. holders differently from other security holders when their company is merged out of existence. No special precautions should be taken to prevent U.S. holders from receiving the merger consideration in a business combination involving a foreign company merely because the proxy statement/prospectus was posted on a web site available in the United States.

3. U.S. Exempt Component

The 1998 Internet Release recognized that a simultaneous private offering in the United States could accompany the offshore Internet offering.⁹² In that case, special precautions must be instituted to assure that the Internet offering is not used as a general solicitation to find qualified investors in the private offering. A general solicitation for participants in a private offering is inconsistent with the requirements of Section 4(2) of the Securities Act ⁹³ as well as Regulation D.⁹⁴ Likewise, to the extent an offeror conducting an offshore exchange offer or rights offering on the Internet wishes to extend that offer to persons in the United States on a private offering basis, means must be in place to provide reasonable assurance that the web site is not used to solicit U.S. investors for the private U.S. offering. Measures to assure that the U.S. participants did not learn about the offering from the web site could include:

• not placing U.S. investors that respond to the offshore Internet offering in the U.S. private offering;

• extending the U.S. offer only to U.S. investors who were solicited before, or independently from, the posting of offering materials on the Internet;

• using separate contact persons for the Internet solicitation from that for the U.S. offering; and

• not referring to the private U.S. offering in the web site materials, except to the extent mandated by foreign law.

These measures are not exclusive. Other procedures that suffice to guard against sales to persons in the United States or to U.S. persons also can be used to demonstrate that the web site is not used to solicit U.S. investors for the private U.S. offering.

4. Domestic Issuers

In the 1998 Internet release, we expressed special concerns with U.S. companies' use of the Internet to conduct a purportedly offshore Internet offer. We stated that a domestic company could not use a web site to disseminate the offering materials, unless access to that site was limited to non-U.S. persons. This position was based on the potential for abuse when a U.S. company purports to rely on Regulation S to conduct an offering of its securities solely offshore, and on our approach under Regulation S to put offshore unregistered offerings by domestic companies on the same regulatory footing as private placements.

In light of the exemptive relief adopted today, we believe that there will be very limited circumstances where a U.S. bidder would have a reason to exclude U.S. holders of the foreign subject company from an exchange or tender offer for that company. At a minimum, any U.S. offeror purporting to extend an Internet tender or exchange offer solely to non-U.S. investors should likewise limit access to the web site to non-U.S. persons.

Footnotes

⁸⁷ The Internet materials would be filed or submitted with, or as an amendment to, the Schedule TO or the Form CB, when applicable.

⁸⁸ See Section II.D.2. of the Regulation M-A Release, supra note 6.

⁸⁹ See Electronic Dissemination, Securities Act Release No. 7233 (Oct. 6, 1995) [60 FR 53458].

⁹⁰ Statement of the Commission Regarding Use of Internet Web Sites to Offer Securities, Securities Act Release No. 7516 (March 23, 1998) [63 FR 14806].

⁹¹ Exchange offers for securities subject to Section 14(d) of the Exchange Act could not be made in the United States on a private offering basis, consistent with the all-holders provisions of Rule 14d-10.

⁹² See note 90 supra, at Section IV.A.2.

⁹³ 15 U.S.C. 77d.

⁹⁴ 17 CFR 230.501 through 17 CFR 230.508.