The SEC’s Division of Corporation Finance (the “Division”) has issued an exemptive order¹ permitting certain equity tender offers to remain open for an abbreviated 10 business day period, as opposed to the traditional 20 business days required under the Securities Exchange Act of 1934 (the “Exchange Act”). The exemptive order is intended to address inefficiencies, reflect technological advancements and reduce exposures to market fluctuations.

Background

Under the Exchange Act Rules 13e-4(f)(l)(i) and 14e-1(a), tender offers generally must remain open for at least 20 business days. Over time, however, the Division has issued a number of exemptive orders and no-action letters for certain types of tender offers, permitting shorter offering periods. In an effort to facilitate the tender offer process, the Division has concluded that providing further flexibility to issuers and third parties by shortening the 20-business day minimum offering period to 10 business days in certain types of tender offers is appropriate and consistent with its investor protection goals. 

Tender Offers for Reporting Companies

The Division’s exemptive order permits tender offers for equity securities of SEC-registered reporting companies to remain open for a minimum of only 10 business days, provided the following conditions are met.

• the tender offer is subject to Regulation 14D or Rule 13e-4 under the Exchange Act;
• offers subject to Regulation 14D (third-party tender offers) may utilize the shortened offering period if (i) the offer is made pursuant to a negotiated merger agreement or similar business combination agreement; (ii) the offer covers all outstanding securities of the subject class; (iii) the target company files and disseminates its Schedule 14D-9 no later than 5:30 p.m. (ET) on the first business day after the commencement of the tender offer;
• tenders offers subject to Rule 13e-4 (issuer tender offers), must be for less than all outstanding securities of the subject class;
• the consideration for the tender offer must consist only of cash at a fixed price;
• the tender offer may not be subject to Rule 13e-3 under the Exchange Act;
• the tender offer may not rely on cross-border exemptions under Rule 14d-1(d) or Rule 13e-4(i) under the Exchange Act;²
• the subject securities may not already be the subject of a previously announced or pending tender offer by another offeror;
• if a competing tender offer for the subject securities is publicly announced after the initial offer begins, the initial tender offer must be extended so that it remains open at least 20 business days from its commencement;
• the tender offer must be announced through a widely disseminated news or wire service press release by 10:00 a.m. (ET) on the date of its commencement, and must include the basic terms of the offer, and an active hyperlink to a website address to access the tender offer materials and related documents;
• any (i) increase or decrease in the percentage of the subject securities (other than the acceptance for payment of an additional amount of securities not to exceed two percent of the subject securities), or (ii) a change in the consideration offered, must be disclosed by a widely disseminated press release or other public announcement no later than 9:00 a.m. (ET) on the fifth business day before the offer expires; and
• any other material change to the terms of the tender offer must be disclosed by a widely disseminated press release or other public announcement no later than 9:00 a.m. (ET) on the second business day before expiration of the offer.

Tender Offers for Non- Reporting Companies

The exemptive order also grants similar relief for certain issuer tender offers by non-reporting (unregistered) companies, allowing a 10-business day minimum offering period if the following conditions are met:

• the tender offer is made for the equity securities of an issuer that has no class of securities registered under, and is not required to report under, the Exchange Act;
• the tender offer is made by the issuer of the securities, or by the issuer’s wholly owned subsidiary;
• the consideration offered in the tender offer consists only of cash at a fixed price;
• any (i) increase or decrease in the percentage of the subject securities sought (other than the acceptance for payment of an additional amount of securities not to exceed two percent of the subject securities), or (ii) any change in the consideration offered, must be communicated by notice to holders of the subject securities no later than 9:00 a.m. (ET) on the fifth business day before expiration of the offer; and
• any other material change to the terms of the tender offer must be disclosed through a widely disseminated press release or other public no later than 9:00 a.m. (ET) on the second business day before expiration of the offer.

The Division’s exemptive order, which is in effect now, marks a meaningful step toward modernizing the tender offer framework. This relief offers greater efficiency by accelerating the completion of cash tender offers, while preserving core investor protections, making it an important development for negotiated transactions.  If you have any questions about this exemptive order or structuring tender offers in compliance with it and other relevant SEC guidance, please contact any of the partners listed below or your primary attorney at Seward & Kissel LLP.