Tender Offer Regulations

The whole unit on one sheet: the framework, the schedules, the timing numbers, equal treatment, insider trading, proration, and mini-tenders.

The One-Liners That Win Points

• The Williams Act (1968 amendment to the Securities Exchange Act of 1934) is neutral by design: disclosure and procedural neutrality, not a limit on takeovers.
• Two buckets: the third-party tender offer rules (narrow: third-party bidder, Exchange Act-registered equity, over 5% after consummation) and the universal tender offer rules (broad: every tender offer, debt or equity, issuer or third-party, registered or not).
• The statute never defines "tender offer"; courts apply the Wellman 8-factor totality-of-circumstances test (not all eight need be present).
• Schedule TO is the bidder's disclosure; Schedule 14D-9 is the target's response. Numbers run consecutively but the filers differ.
• Schedule TO-I = issuer self-tender; Schedule 13E-3 = going-private (enhanced fairness disclosure), filed IN ADDITION to the underlying form.
• Target board picks one of four positions: recommend acceptance, recommend rejection, remain neutral, or unable to take a position. It cannot stay silent; neutral or unable requires a reason.
• The stop-look-listen notice buys time WITHIN the 10-business-day window; it does not replace the Schedule 14D-9 obligation.
• The all-holders rule requires the offer be open to all holders of the class; the best-price rule requires the highest consideration paid to any holder flow to every tendering holder.
• The tender-offer insider trading prohibition needs NO fiduciary breach (parity-of-information), unlike the general anti-fraud regime.
• A mini-tender (under 5%) escapes the third-party rules but not the universal anti-fraud provision or the tender-offer insider trading rule.

Numbers to Lock In

The Williams Act Framework and the Three Frameworks

• Third-party tender offer: filed on Schedule TO, full third-party plus universal rules, target responds on Schedule 14D-9 within 10 business days. Applies only when the bidder owns over 5% after consummation (pre-existing ownership counts).
• Going-private: the consequence-based trigger (reasonable likelihood of dropping below 300 holders, terminating Exchange Act reporting, or delisting). File Schedule 13E-3 with fairness disclosure ON TOP of the underlying form.
• Issuer self-tender: the mechanism (issuer buying back through tender procedure). File Schedule TO-I; parallel 20-business-day period, withdrawal rights, prompt payment, proration, and equal-treatment rules.
• A self-tender that takes the issuer below 300 holders or off-exchange is BOTH: Schedule TO-I AND Schedule 13E-3.

Schedule TO: The Bidder's Disclosure Vehicle

• The Tender Offer Statement filed by the bidder at commencement; copies go to the subject company (target) and the principal national securities exchange (or FINRA for over-the-counter securities).
• Disclosure content drawn from the items of Regulation M-A: identity, terms, source and amount of funds, purpose and plans, past contacts, persons retained.
• Dissemination: long-form newspaper publication, summary advertisement plus mailing on request, or use of stockholder lists. Publication in all editions of a national-circulation daily newspaper is deemed adequate; the bidder mails materials first-class to any holder who requests them.
• A material change in disseminated information requires an amendment (no quiet amendments) and may trigger an extension; a final amendment reports results.

Target Response: Schedule 14D-9 and Stop-Look-Listen

• Position statement (Schedule 14D-9, the Solicitation/Recommendation Statement) due within 10 business days of commencement, running from commencement, NOT from the Schedule TO filing with the SEC.
• Content: reasons for the position, fairness opinion (if any), conflicts, director and officer tender intent, and material events leading up to the offer.
• Any board recommendation must go on Schedule 14D-9; a back-channel message to a strategic shareholder violates the rule.

Timing Mechanics: Periods, Extensions, Withdrawal, Prompt Payment

• The 20-business-day minimum is business days, not calendar days; weekends and holidays are excluded.
• A price change (up OR down) or a change in the percentage of the class sought triggers at least a 10-business-day extension from the date notice is disseminated; other material changes get 5 to 10 business days.
• Withdrawal rights run throughout the open initial period and revive after 60 business days if the offer has not consummated; they do NOT apply during a subsequent offering period.
• The offer cannot terminate without prior notice to security holders.

Equal Treatment: Best-Price and All-Holders

• All-holders applies per class: a bidder may tender for the common only and not the preferred; within a class, no exclusion by block size, state, or holder type.
• Best-price applies ONLY to consideration paid for tendered securities. If the bidder raises the price mid-offer, the new price flows to everyone, including earlier tenders.
• Compensation carve-out: employment, severance, and benefit arrangements approved by a committee of independent directors (of the bidder's OR the target's board) are presumptively NOT tender consideration. The carve-out narrowed the rule; it did not abolish it.

Insider Trading and Trading Restrictions

• The tender-offer insider trading rule triggers once substantial steps toward commencing an offer have been taken; it reaches anyone who possesses material nonpublic information from the bidder, target, or their insiders. No fiduciary breach required; it was adopted in 1980 to fill the Chiarella financial-printer gap.
• Net-long rule (partial offers): a person may tender only up to their net long position (long positions minus short positions). Long 10,000 / short 4,000 = net long 6,000 maximum tender; applies to broker-dealers AND customer accounts.
• Outside-purchase prohibition: from public announcement through expiration, the bidder and covered persons (dealer-managers, contingent-fee advisors, persons acting in concert) may not buy the subject security outside the offer.

Proration, Subsequent Period, and Mini-Tenders

• Proration is mandatory ONLY for partial, oversubscribed offers, and it runs across the ENTIRE offer period (day-1 and day-20 tenders get the same percentage). Any-and-all and undersubscribed partial offers never need it.
• A subsequent offering period (minimum 3 business days) is NOT an extension: the initial offer has closed and the bidder has accepted shares, same price and consideration, no withdrawal rights, no guaranteed-delivery.
• A mini-tender (under 5% post-consummation) skips Schedule TO, Schedule 14D-9, and the all-holders and best-price rules, but the universal anti-fraud provision, the tender-offer insider trading rule, and the outside-purchase prohibition still bind; the SEC has issued investor alerts on below-market mini-tenders.

Memory Aid: WAGS Bids

WAGS Bids: Williams Act creates the regime, All-holders rule prevents discrimination, Going-private covers the issuer-driven freeze-out, Schedule TO is the master disclosure document.

One-Breath Recap

The Williams Act built a neutral disclosure-and-process regime and split tender offers into the third-party rules (registered equity, bidder over 5% after consummation) and the universal rules (every offer), with courts filling the missing "tender offer" definition through the Wellman 8-factor test. The bidder files Schedule TO at commencement, the target answers on Schedule 14D-9 within 10 business days (recommend, oppose, neutral, or unable, never silence), and the offer stays open at least 20 business days, extending 10 business days for price or percentage changes and 5 to 10 for other material changes, with withdrawal rights that revive after 60 business days and prompt payment generally within 3 business days. Equal treatment (all-holders, best-price with its independent-committee compensation carve-out) blocks side deals, and the tender-offer insider trading rule bans trading on deal information with no fiduciary breach required. Add the net-long and outside-purchase restrictions, proration for oversubscribed partial offers, the optional 3-business-day subsequent period with no withdrawal rights, and the under-5% mini-tender that still owes anti-fraud, and this nine-section unit maps onto three axes: which framework, which timing, which document.

Need more than the recap? This is a condensed summary. If it is not enough, read the full Tender Offer Regulations unit for the complete lesson.