Staff Compliance & Disclosure Interpretations - Tender Offers
Staff Compliance & Disclosure Interpretations - Tender Offers
On 6 Mar. 2025, the staff of the Division of Corporation Finance issued amended and new compliance and disclosure interpretations concerning the tender offer rules.
Question 101.17
Question: Must an all-cash tender offer always remain open for at least five business days after disclosure of a material change?
Answer: No. The Commission has stated that "as a general rule," the offer should remain open for a minimum of five business days from the date that the material change is first disclosed. See Release No. 34-24296 (April 3, 1987). The Commission, however, has also acknowledged that it is impracticable to delineate every possible material change or the requisite time period attendant to that change. Accordingly, a shorter time period may be adequate if disclosure and dissemination of the material change allows security holders sufficient time to consider such information and factor it into their decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares. See Release No. 34-24296 (April 3, 1987); see also footnote 70 in Release No. 34-23421 (July 11, 1986) ("The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of the terms or information"). [March 6, 2025]
Question 101.18
Question: An offeror commences an all-cash tender offer subject to Regulation 14D without sufficient funds or committed financing to purchase the maximum amount of securities sought in the offer (a "partly financed" or "unfinanced" tender offer). It discloses the lack of sufficient funds and committed financing in its offer to purchase. Would the subsequent securing of committed financing necessary to fund the purchase of all securities sought in the offer (a "fully financed" tender offer) constitute a material change to the previously disclosed information?
Answer: Yes. The staff views the securing of committed financing needed for the purchase of all securities sought in the tender offer as a material change. Accordingly, an offeror must:
promptly disclose the change from an unfinanced tender offer to a fully financed tender offer in accordance with Rule 14d-6(c);
promptly file an amendment to Schedule TO to report the material change in accordance with Rule 14d-3(b)(1); and
promptly disseminate disclosure of the change to security holders in a manner reasonably designed to inform security holders of the change in accordance with Rule 14d-4(d)(1).
Because the change from an unfinanced (or partly financed) tender offer to a fully financed tender offer is viewed as a material change, the offeror must ensure that disclosure of the material change is disseminated with sufficient time for security holders to consider such information and factor it into the decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares. Accordingly, if the change from an unfinanced tender offer to a fully financed tender offer occurs near or at the end of the tender offer, the offeror must ensure sufficient time remains in the offer to allow for adequate dissemination, including by extending the offer if necessary.
This position equally applies to issuer tender offers subject to Rule 13e-4 and its comparable requirements (i.e., Rules 13e-4(c)(3), 13e-4(d)(2) and 13e-4(e)(3)). [March 6, 2025]
Question 101.19
Question: Is a tender offer considered fully financed if the offeror has obtained a binding commitment letter from a lender to provide the funds necessary to purchase the maximum amount of securities sought in the offer?
Answer: Yes. A tender offer is considered fully financed if the offeror has obtained a binding commitment letter from a lender. A "highly confident" letter from a lender, however, is not viewed as the equivalent of a binding commitment letter. Accordingly, a tender offer is not considered fully financed if the offeror has only received a highly confident letter. [March 6, 2025]
Question 101.20
Question: An offeror commences a cash tender offer for all securities of the subject class. At the time of commencement, the offeror discloses in its offer to purchase that it has obtained a binding commitment letter from a lender to provide the funds necessary to purchase the maximum amount of securities sought in the offer. The offeror also discloses the possibility that it may purchase the securities using alternative funding sources. Prior to expiration of the tender offer, the offeror decides to purchase the securities sought in the offer by using an alternative source of funds, such as its available cash or through committed financing provided by a different lender. The alternative funding source is sufficient to fund the purchase of all securities of the subject class. Would this type of change in the source of the funds constitute a material change?
Answer: No. The substitution of a funding source, or the substitution of available cash, is not considered a material change. The offeror should consider, however, whether the tender offer materials should be updated to reflect the substitution of the funding source (or the substitution of cash) and the material terms of the new funding source. [March 6, 2025]
Question 101.21
Question: An offeror commences an all-cash tender offer subject to Regulation 14D. The offeror discloses in its offer to purchase that it has obtained a binding commitment letter from a lender to provide the funds necessary to purchase all securities sought in the offer. Notwithstanding this binding commitment, the offeror conditions its purchase of the tendered securities on the actual receipt of the funds from the lender (a "funding condition") by the offer's expiration. Does the satisfaction or waiver of this funding condition constitute a material change?
Answer: When the offeror has a binding commitment letter from a lender and receives the expected funds, no material change in the information given to security holders has occurred because the lender has simply satisfied the funding condition by fulfilling its contractual obligation.
If the lender does not fulfill its contractual obligation by providing the expected funds, but the offeror waives the funding condition because it is able to use an alternative source of funds to purchase all securities sought in the offer, then, consistent with Question 101.20, no material change has occurred.
If the lender does not fulfill its contractual obligation by providing the expected funds, but the offeror waives the funding condition despite having no alternative funding source to purchase all securities, then the waiver would constitute a material change, requiring the offeror to:
promptly disclose the material change in accordance with Rule 14d-6(c);
promptly file an amendment to Schedule TO to report the material change in accordance with Rule 14d-3(b)(1); and
promptly disseminate disclosure of the change to security holders in a manner reasonably designed to inform security holders of the change in accordance with Rule 14d-4(d)(1).
Further, the waiver of the funding condition and the lack of funding could implicate other tender offer provisions, such as the prompt payment requirement in Rule 14e-1(c) as well as the provisions of Section 14(e).
This position equally applies to issuer tender offers subject to Rule 13e-4 and its comparable requirements (i.e., Rules 13e-4(c)(3), 13e-4(d)(2) and 13e-4(e)(3)). [March 6, 2025]