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“Mini” Tender Offers

Tender offers for less than five percent of the stock of a company have been labeled mini-tender offers. Such offers are subject to some regulation but are not subject to the full range of rules enacted to protect investors who own stock in a company for which a full tender offer is made. Thus, while a mini-tender offer may include a premium over market price for a selling shareholder, the lack of all of the protections provided for recipients of a full tender offer suggests a more cautious view of the merits of the mini-tender offer.

A mini-tender offer is subject to Regulation 14E of the Securities and Exchange Commission. A bidder making a mini-tender offer must not engage in fraud or deceptive practices in connection with the offer. Also, the bidder must hold the offer open for minimum time periods and promptly pay selling investors after the completion of the tender offer. Bidders do not have to notify the company whose shares are the target of the mini-tender offer. However, if the company learns of the offer, it is obligated under Regulation 14E to state its position concerning the offer and recommend acceptance or rejection of the offer to its shareholders or take a neutral position.

Mini-tender offers are not subject to rules applicable to tender offers for more than five percent of a company’s shares. Such rules require bidders to disclose information about themselves and the terms of the offer. Such bidders must file their offering documents with the Securities and Exchange Commission where such documents become public. Also, those making full tender offers are required to provide the target company and any others who may bid for the company with full information about their tender offers.

Several protections for shareholders in a company that is the target of a full tender offer are not available for shareholders receiving a mini-tender offer. Investors in a company subject to a full tender offer must be given the right to change their position to withdrawal or acceptance during the time that the tender offer is open. Acceptance of a mini-tender offer normally may not be withdrawn even if the open period for the tender offer has not expired.

Rules requiring equal treatment of investors receiving a full tender offer are not applicable to investors receiving a mini-tender offer. For example, if a “full” tender offer — a tender offer for more than five percent of a company’s shares — is oversubscribed, those shareholders accepting the offer are entitled to pro-rata purchase of their shares by the bidder so that one shareholder is not favored over another.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.