Pro Rata, Subsequent Period, and Mini-Tenders

The proration and subsequent-offering-period rules are the back-end of the tender-offer process: what happens when too many shares get tendered, and how the bidder gives stragglers a second chance. Mini-tenders sit outside the main framework and are testable precisely because they escape the most procedural protections.

When Must a Bidder Accept Tenders Pro Rata?

A partial tender offer is one where the bidder offers to buy less than all outstanding shares of the class (e.g., "we will buy up to 30% of the outstanding stock at $50 per share").

When a partial offer is oversubscribed (more shares are tendered than the bidder agreed to buy), the bidder must allocate the acceptance pro rata. Without proration, late tenders or first-come-first-served acceptance would systematically disadvantage holders who took time to evaluate the offer.

• The bidder must accept tendered securities pro rata based on the number tendered by each depositor during the offer period
• The pro rata rule under the third-party tender offer rules extends pro rata treatment to all tenders made throughout the entire offer period, not just within a 10-day "proration period" originally specified in the statute
• This means a shareholder who tenders on day 1 and a shareholder who tenders on day 20 both get the same proration percentage

When Does Proration NOT Apply?

Proration only matters in partial, oversubscribed offers. Two cases never need proration:

• Any-and-all offers: The bidder will take every tendered share. There is no cap to oversubscribe.
• Partial undersubscribed offers: Fewer shares were tendered than the bidder agreed to buy. Every tendered share gets accepted at face.

Exam Tip: Gotchas

• Pro rata acceptance is mandatory ONLY for partial, OVERSUBSCRIBED offers. An any-and-all offer (bidder will take every tendered share) never needs proration. A partial offer that is undersubscribed also never needs proration.
• Pro rata treatment runs across the ENTIRE offer period, not just within a separate 10-day proration window. Holders who tender on day 1 are treated identically to holders who tender on day 20.

What Is the Subsequent Offering Period?

After the initial offer period closes and the bidder has accepted shares, the bidder may elect to provide an additional period during which holders who did not tender originally can still tender at the same price.

Subsequent-offering-period mechanics:

• Minimum 3 business days in length
• Available only when the offer is for all outstanding securities of the class; a partial offer, whether oversubscribed or undersubscribed, does not qualify
• Bidder must immediately accept and promptly pay for shares tendered during the subsequent period (and must have immediately accepted and promptly paid for shares tendered during the initial period as well)
• Bidder must offer the same form and amount of consideration as in the initial period, with no ceiling on any form of consideration
• NO withdrawal rights during the subsequent offering period
• NO guaranteed-delivery procedure during the subsequent offering period
• Bidder must announce the results of the initial period (the approximate number and percentage of securities deposited) no later than 9:00 a.m. Eastern time on the next business day after the initial period expires, and then immediately begin the subsequent period

The subsequent offering period is useful in an any-and-all offer where the bidder wants to sweep in remaining shares to reach a control threshold (e.g., 90% to enable a short-form merger under state law). It is not an option for a partial offer, even one that came in undersubscribed.

How Does a Subsequent Offering Period Differ From an Extension?

A subsequent offering period is NOT an extension of the initial offer. They are distinct concepts.

Think of it this way: An extension is the bidder saying "we are still buying, the deadline moves." A subsequent offering period is the bidder saying "the original deadline passed, we already bought, but we will accept more shares at the same price for a few more days, with no walk-away option."

Exam Tip: Gotchas

• A subsequent offering period is NOT an extension of the initial offer. The initial offer has closed; the bidder has accepted shares; the subsequent period is a follow-on window with NO withdrawal rights. Easy to confuse with an extension, which keeps the initial offer open and preserves withdrawal rights throughout.
• A subsequent offering period is available only for an offer for ALL outstanding securities of the class. A partial offer never qualifies, whether it was oversubscribed or undersubscribed.
• Withdrawal rights do NOT apply during the subsequent offering period. A shareholder who waits to tender until the subsequent period gets the same price but loses the option to walk away. This is one of the most-tested distinctions.
• The subsequent-offering-period minimum is 3 BUSINESS DAYS, not the 20-business-day initial-period minimum.

What Is a Mini-Tender Offer?

A mini-tender offer is one for less than 5% of a class of equity securities.

The 5% threshold matters because the third-party Williams Act regime, and the entirety of the third-party tender offer rules, applies only to a tender offer where the bidder would own more than 5% of the class after consummation. A mini-tender for less than 5% does not cross that threshold and therefore falls outside the third-party tender offer rules entirely.

What a mini-tender escapes:

• No Schedule TO filing required
• No formal Schedule 14D-9 filing required (that schedule attaches to the third-party tender offer rules)
• No all-holders or best-price rule (those sit in the third-party tender offer rules)
• No subsequent-offering-period or proration mechanics

What a mini-tender does NOT escape:

• The universal tender offer rules' anti-fraud provision still applies. The universal anti-fraud regime reaches every tender offer.
• The target's position-statement obligation still applies. The universal rule requiring the subject company to publish, send, or give its position within 10 business days of commencement is not conditioned on the 5% threshold, even though the target does not file the formal Schedule 14D-9.
• The 20-business-day minimum offering period still applies. It sits in the universal tender offer rules, not the third-party rules, though SEC interpretive guidance has noted enforcement focus is heavier for larger offers.
• The tender-offer insider trading rule still applies.
• The outside-purchase prohibition still applies (sits in the universal tender offer rules).

The SEC has issued investor alerts warning that mini-tenders often confuse retail investors because:

• They lack the procedural protections of the third-party tender offer rules
• They are often made at below-market prices (betting on shareholders who do not check the current quote before tendering)
• Withdrawal rights and price-change protections are inconsistent or absent

Exam Tip: Gotchas

• A mini-tender for under 5% escapes the third-party tender offer rules entirely. It does NOT escape the universal anti-fraud regime under the universal tender offer rules or the tender-offer insider trading rule. Misleading mini-tenders at below-market prices have been the subject of repeated SEC enforcement and investor alerts.
• The 5% threshold is the bidder's POST-CONSUMMATION ownership. A bidder who already owns 3% and is tendering for an additional 3% would end up at 6% post-consummation and would NOT qualify as a mini-tender. The aggregation matters.

How Does a Mini-Tender Compare to a Full Tender Offer?

What Should You Check on Exam Day?

• Apply proration only to partial, oversubscribed offers, and treat it as running across the entire offer period rather than a separate proration window.
• Do not confuse a subsequent offering period (initial offer closed, no withdrawal rights) with an extension (initial offer still open, withdrawal rights continue).
• Confirm the offer is for all outstanding securities of the class before concluding a subsequent offering period is available; a partial offer never qualifies, oversubscribed or not.
• Compute the mini-tender threshold on post-consummation ownership, not the size of the current tender alone.
• Remember a mini-tender still owes the universal anti-fraud provision, the 20-business-day minimum, the target's position-statement obligation, the tender-offer insider trading rule, and the outside-purchase prohibition, even though it escapes the third-party rules and the formal Schedule TO/Schedule 14D-9 filings.