Corp Fin certainly has been busy updating its CDIs. Last week, Corp Fin issued two new Rule 13e-3 going-private CDIs (as well as a conforming revision to an existing CDI), two new tender offer CDIs and one updated Form S-4 business combination CDI.
Cooley’s Justin Kisner offers the following observations on the updates: “The Rule 13e-3 and tender offer CDIs do not represent a shift in Corp Fin policy. Rather, they largely formalize positions practitioners have seen reflected in transaction reviews, providing incremental clarity but no significant change in direction.
By contrast, the updated Form S-4 business combination CDI reflects an evolution in Corp Fin policy. The guidance continues the new Corp Fin administration’s more facilitative approach to reducing deal structure and disclosure burdens. Coming on the heels of the late January CDIs relating to written consents and lock-up agreements described in Securities Act Sections CDIs 139.29, 139.30, and 239.13, the change is not surprising.
- Section 112. Rule 13e-3(g)(2)
- New Question 112.03 – Clarifies Application of the (g)(2) “Equity-for-Equity” Exception. The (g)(2) exception is available even if the equity securities to be offered/received are not Section 12 registered or listed at the time the transaction is announced, provided that registration and listing are express conditions to close, disclosed as such, and all other conditions of the (g)(2) exception are satisfied.
- New Question 112.04 – Non-Waivable Condition Regarding Going-Private Effects. Corp Fin will generally not apply Rule 13e-3 if the offer includes an express, non-waivable condition in the tender offer that the issuer (or affiliate) would not purchase enough shares to produce any of the going-private effects described in paragraph (a)(3)(ii), such as triggering deregistration or suspension of reporting obligations.
- Section 212. Rule 13e-3(g)(2)
3. Revised Question 212.01 – (g)(2) Exception Unavailable for Non-Equivalent Debt Exchange. If listing of the new notes in an exchange is not an express closing condition and the new notes do not provide substantially the same rights as the outstanding notes being exchanged, the (g)(2) exception is not available. (Conforming update; see new CDI 112.03 above.)
b. Tender Offer Rules and Schedules
- Section 101. General Questions
4. New Question 101.22 – Clarifies/Confirms Parent Company Tender Offer for Affiliate is Subject to Regulation 14D. A parent company’s tender offer for Section 12-registered equity securities of a majority-owned affiliate (e.g., 60%) is subject to the third-party tender offer rules under Regulation 14D, not the issuer tender offer rules under Rule 13e-4. (The issuer exemption under Section 14(d)(8)(B) does not extend to controlling affiliates (other than 100%-owned subsidiaries) and the offer is exempt from Rule 13e-4 pursuant to Rule 13e-4(h)(4).)
- Section 163. Rule 14e-2
5. New Question 163.02 – Practical Relief for Issuers in “Mini Tender Offers.” Corp Fin won’t object if an issuer misses the 10-business day deadline under Rule 14e-2 in response to a mini-tender offer, provided the issuer was unaware of the offer and disseminates its required statement as soon as practicable after becoming aware. This position is consistent with the SEC’s 2000 Interpretive Release addressing mini tender offers (i.e., third-party tender offers structured to result in ownership of no more than 5% of an issuer’s securities), which also highlights potential abusive practices associated with such offers.
- Section 225. Form S-4
6. Revised 225.03 – Resale of Transaction-Related Securities on Form S-4. Securities previously issued to officers, directors, or affiliates of a target company in connection with a business combination may be registered for resale on the Form S-4 covering that transaction. After closing, the issuer can file a post-effective amendment to the Form S-4 on an eligible form to maintain an updated prospectus. This revised CDI relates to the late January CDIs relating to written consents and lock-up agreements described in Securities Act Sections CDIs 139.29, 139.30 and 239.13.”
Authored by
Broc Romanek