Should tender offers for less than all of the outstanding shares (partial tender offers) and tender offers in which a partial tender offer is followed by a second offer in which the remaining shares are bid for at a different price (a two-tier tender offer) be treated differently than tender offers for all of the shares (Recommendation 16)? In order to assure that the price paid for a target Should shareholders of a bidder be given the right to What "defensive" tactics by management of a target company What market practices or trading activity should be prohibited during a tender offer (Recommendations 44-48)? If you would like a copy of the complete 170-page Advisory Committee Report, please contact Mary Jo Grote of the Subcommittee at (202) 225-9304. LIST OF RECOMMENDATIONS I. Economics of Takeovers and their Regulation The purpose of the regulatory scheme should be neither There is no material distortion in the credit markets resulting from control acquisition transactions, and no regulatory initiative should be undertaken to limit the availability of credit in such transactions, or to allocate credit among such transactions. Objectives of Federal Regulation of Takeovers 3. 4. 5. 6. 7. Takeover regulation should not favor either the acquiror Regulation of takeovers should recomize that such transactions take place in a national securities market. Cash and securities tender offers should be placed on an equal regulatory footing so that bidders, the market and shareholders, and not regulation, decide between the two. Regulation of takeovers should not unduly restrict Even though regulation may restrict innovations in takeover The evolution of the market and innovation in takeover techniques may from time to time produce abuses. The regulatory framework should be flexible enough to allow the Commission to deal with such abuses as soon as they appear. a. State Takeover Law. State regulation of takeovers b. C. State Corporation Law. Except to the extent necessary to eliminate abuses or interference with the intended functioning of federal takeover regulation, federal takeover regulation should not preempt or override state corporation law. Essentially the business judgment rule should continue to govern most such activity. State Regulation of Public Interest Businesses. Federal takeover regulation should not preempt substantive state regulation of banks, utilities, insurance companies and similar businesses, where the change of control provisions of such state regulation are justified in relation to the overall objectives of the industry being regulated, do not conflict with procedural provisions of federal takeover regulation and relate to a significant portion of the issuer's business. d. Federal Regulation. Federal takeover regulation should not override the regulation of particular industries such as banks, broadcast licensees, railroads, ship operators, nuclear licensees, etc. e. : Relationships with Other Federal Laws. Federal takeover regulation should not be used to achieve Regulation of Acquirors of Corporate Control 10. Any regulation of one or more change of control transac tions by either the Congress or the Commission should address the effects of such regulation in the context of all control acquisition techniques. 11. 12. 13. 14. 15. 16. The concept of integration of disclosure under the Securities Act of 1933 and the Securities Exchange Act of 1934, previously effected by the Carnission in securities offerings for cash, should be extended to exchange offers. Bidders should be permitted to commence their bids upon filing of a registration statement and receive tenders prior to the effective date of the registration statement. Prior to effectiveness, all tendered shares would be withdrawable. Effectiveness of the registration statement would be a condition to the exchange offer. If the final prospectus were materially different from the preliminary prospectus, the bidder would be required to maintain, by extension, a 10-day period between mailing of the amended prospectus and expiration, withdrawal and proration dates. This period would assure adequate dissemination of information to shareholders and the opportunity to react prior to incurring any irrevocable duties. No person may acquire directly or indirectly beneficial ownership of more than 5% of an outstanding class of equity securities unless such person has filed a Schedule 13D and that schedule has been on file with the Commission for at least 48 hours. Such person may rely on the latest Exchange Act report filed by the target company that reports the number of shares outstanding. The acquiror would have to report subsequent purchases promptly as provided by current law. No person may acquire voting securities of an issuer, it, immediately following such acquisition, such person would own more than 20% of the voting power of the outstanding voting securities of that issuer unless such purchase were made (i) from the issuer, or (ii) pursuant to a tender ofter. The Commission should retain broad exemptive power with respect to this provision. The Committee encourages the Commission to study means to strengthen the concept and definition of "group" or concerted activity. The minimum offering period for a tender offer for less than all the outstanding shares of a class of voting securities should be approximately two weeks longer than that prescribed for other tender offers. 17. The minimum offering period for an initial bid should be 18. The minimum offering period and prorationing period should not terminate for five calendar days from the announcement of an increase in price or number of shares sought. 19. 20. 21. 22. Where the bidder discloses projections or asset valuations to target company shareholders, it must include disclosure of the principal supporting assumptions provided to the bidder by the target. The Commission should review its disclosure rules and the The Commission should continue its efforts to facilitate direct communications with shareholders whose shares are held in street name. The Commission should require under its proxy and tender The |