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 Summary
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 Tender
offers for less than 5% of a companys stock
- Bidders limit the offer to under 5% to avoid the
filing, disclosure and procedural requirements of Regulation 14D
- Including rules which require shareholders to receive
detailed descriptions of the offer
- Regulation 14E protections still apply
Typically
priced below the market price
- Bidder hopes to catch an uniformed investor off
guard
- Alternatively, a bidder may offer an above-market
price
but suspend withdrawal rights and then extend the offer until the market price
is greater than the offer price
- Either way, the bidder cannot lose;
Can profit from the below-market spread that's captured
Target
companies will often recommend against
- Some companies will be unaware of offer
- Bidder is not required to notify the target
company
because Regulation 14D doesn't apply
- Even though target company has an obligation
under Rule 14e-2 (an anti-fraud rule) to respond to a tender offer
- When they do respond they'll often recommend
against shareholders tendering
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SEC Guidance
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Interpretive Release 34-43069
2000
- Provides SEC views on mini-tender offers (§II)
- Also covers offers for limited partnership units
(§III)
Release
states SEC's view that:
- A bidder confusing an investor about the price
being offered is a manipulative practice per Exchange Act § 14(e)
- Target companies should respond per Rule 14e-2
- If a target company does not learn of the tender
offer until after the ten-day period within which it is supposed to respond, it
should still comply with Rule 14e-2 as soon as possible
Guidance
for broker-dealers
Tips for Investors
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SEC Enforcement Actions
Precedent
SEC_CODE_REF_0090001192884
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 Chevron
2006
Ameriprise
Financial 2005
Colgate-Palmolive
2005
Elan
plc 2005
Novellus
Systems 2005
Coca-Cola
Enterprises 2005
Alcoa
2004
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