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Regulation 14E
The scope of Regulation 14E [Rules 14e-1 to 14f-1] was created to assist in providing legal parameters by which the following three conditions could best be regulated and communicated to the general trading public. The conditions are expounded upon within the scope of this paper.
Excerpt from the white paper... Transaction Structures While a wide range of mechanisms are available for public companies to go private (i.e., reverse stock splits, asset dispositions, bankruptcy-related acquisitions, etc.), long-form mergers and tender offers remain the predominant structures. Many of these transactions involve a large controlling shareholder or management group holding a large block of the outstanding common stock of the company. Long-Form Merger: In a long-form merger, an acquirer will negotiate a merger agreement with an issuer whereby the issuer will be merged into an acquisition subsidiary, with the existing shareholders receiving cash for their shares. Such a merger will require the requisite shareholder approval in accordance with applicable corporate statutes. Tender Offer: In a tender offer, a controlling stockholder or management group will make a tender offer for the remaining shares of an issuer, with the goal of obtaining 90 percent of the outstanding shares. Once 90 percent of the shares are obtained, the acquirer can effect a short-form merger and cash out the remaining shareholders. While arguably both structures involve a degree of tension between the interests of a controlling shareholder and minority shareholders, different state courts (i.e. Delaware) apply differing fiduciary standards to boards evaluating such transactions. Structures Examined Typical private transactions are usually structured as a merger, tender offer or a reverse stock split. Merger. A common transaction is a reverse merger in which an entity formed by the acquirer mergers with and into the public company, which survives the merger. As a result of the merger, the outstanding shares of the company’s stock, other than shares owned by the acquirer, are converted into the right to receive the merger consideration. The merger consideration is the cash paid to the shareholders. A merger typically leaves the surviving company with one shareholder, a subsidiary of the acquirer. Tender Offer. In a tender offer, the acquirer purchases the public shares directly from the company’s shareholders. As in a merger, the proponent of the transaction approaches the target, which may form a special committee to consider the proposal. The special committee retains legal and financial advisors and negotiates with the prospective acquirer. When the two sides reach an agreement, the acquirer sends the shareholders a written offering document, the “offer to purchase,” which contains disclosure required by SEC rules, and a letter of transmittal, which shareholders may use to tender their shares. The public company issues a press release announcing, among other things... [continued...] Want to know more? Download the White Paper "Tender Offers" for just $14.95. |
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