Question
From: (redacted)
Sent: Tuesday, June 17, 2008 11:30 AM
To: 'Verne, B. Michael'
Subject: ForeignIssuer / "Scheme of Arrangement"
Mr. Verne:
I'm troubling youwith lots of questions this week. Sorry for the deluge. I am always gratefulfor your assistance.
Here's another.
I have atransaction in which a U.S. issuer is making an all-cash offer to buy 100% of theoutstanding voting securities of a foreign issuer. The transaction does notqualify for the 801.51 exemption because the target has too much in the way of U.S. assets, so an HSR filing will be required. The offer is conditioned on expiration ofthe HSR waiting period and expiration of waiting periods for antitrust filingsin various European countries.
What I am trying todetermine is whether the transaction constitutes a cash tender offer (withinthe meaning of Rule 801.1 (g that would make it subject to the 15-daywaiting period as an 801.30 transaction, or whether the full 30-day periodwould apply. The transaction is structured as a "scheme ofarrangement" under English law (the target is a publicly traded Englishcompany). Because it is a scheme of arrangement, it is not subject to Section14 of the Exchange Act. It is my understanding, however, that the PNO takes theview (per Informal Interpretation 71 in the Premerger Notification PracticeManual) that cash tender offers for control of a foreign issuer which are notsubject to Section 14 of the Exchange Act are nevertheless entitled to the15-day waiting period.
This begs thequestion of whether a "scheme of arrangement" constitutes a de facto"cash tender offer," which raises the underlying question of what a"tender offer" is. From my research, I understand that the term"tender offer" has no established regulatory or statutory meaning.Many courts have followed an eight-factor test, the elements of which areconsidered to be characteristic of a "tender offer." It appears thata number of these factors are present in the transaction I am working on. Theprimary difference is that pursuant to the "scheme of arrangement," avote of the target's shareholders would be taken on the transaction based on apositive recommendation from the target's board of directors.
Does the PNO have acurrent position on whether "schemes of arrangement" of this typeunder English law are, in effect, cash tender offers entitled to the 15-daywaiting period?
Thank you and bestregards,
__________________
From: (redacted)
Sent: Wednesday, June 18,20089:08 AM
To: Verne, B. Michael
Subject: FW:Foreign Issuer / "Scheme of Arrangement"
Mr. Verne,
Further to myquestion of yesterday, I would note some of the differences between ascheme of arrangement and the alternative UK structure for takeover of a public company, called an "offer
From what Iunderstand, a "scheme of arrangementrequires a petition to anEnglish court to order a meeting of target shareholders at which thetransaction is voted on in similar fashion to a US merger. The acquiror workswith management of the target to secure an agreement by which the board ofdirectors of the target recommends the transaction to its shareholders. 75% ofthe shares of each class approve the scheme for it to pass. .After theshareholder vote, the court approves d1e scheme and the scheme becomes bindingon all shareholders.
.A second method oftakeover of a UK public company is an "offer.fI Like a UStender offer, in an "offer" the acquiror deals directly with thetarget shareholders. The target itself is not a party to the acquiror'sagreement with the shareholders. '1'he acquiror must receive acceptances fromat least 50% of the target's voting shares for tl1e offer to beaccepted.
Again, the keyquestion seems to be whether a scheme of arrangement-where theacquiror is offering all cash for the target's shares is sufficiently similarto a US "cash tender offer" to be treated as such for purposes of HSR(and specifically, whether the 15-day waiting period for US cash tender offersapplies). Does the fact that a court proceeding and shareholder vote arerequired in a scheme of arrangement" make the distinction such thatthis is not really a cash tender offer within the meaning of 801.1(g), so thatthe waiting period would be 30 days?