USA Law and Practice Contributed by: Nicholas A Dorsey, Ryan J Patrone, Kelly M Smercina and Margaret R M Rallings, Cravath, Swaine & Moore LLP
10. Jurisdiction-Specific Features 10.1 Other Acquisition Finance Issues Acquisition finance is sometimes coupled with a purchase (or repurchase) of existing securi- ties. Purchasers of securities will need to con- sider whether the manner and size of purchases constitute a tender offer, thereby rendering said purchases subject to the US tender offer rules. One key US tender offer rule is that the offeror must generally keep the tender offer open for at least 20 business days. In addition, the tender offer must remain open for at least five to ten business days after the offeror announces cer- tain material changes to the terms of the offer, such as a change in the percentage of the class of securities sought in the offer, a change in the consideration offered or the waiver of a material condition. Tender offers are also subject to US anti-fraud rules. In 2015, the SEC staff issued “no-action letter” that described the key criteria of a tender offer for non-convertible debt securities that, if satis- fied, permit the offeror to keep the tender offer open for just five business days, rather than 20. The main requirements include that: • the tender offer is made by the issuer or one of its wholly owned subsidiaries or a parent company; • the tender offer is for any and all of the sub- ject securities; and • the consideration consists solely of cash and/ or qualified debt securities. In addition, the tender offer cannot be made in connection with a solicitation of consents to amend the indenture nor be financed with new debt that is senior (broadly defined) to the debt that is the subject of the tender offer. If any of
satisfy the US proxy rules as to both form and substance. The proxy statement is publicly filed and may be reviewed by the SEC. Borrowers and financing sources should be aware that the acquisition of a US public compa- ny is often the subject of litigation. Shareholders of the target public company may challenge the process that the board of directors undertook when considering the transaction and/or the adequacy of the disclosure in the proxy state- ment. Borrowers and financing sources should also consider the US margin rules, which are discussed briefly in 7.2 Claw-Back Risk (Mar- gin Rules). US-listed acquirers should be aware that offer- ing shares as a component of the acquisition consideration may trigger a stock exchange requirement that such acquirer obtain share- holder approval for the issuance of shares. For example, the New York Stock Exchange rules for listed companies provide that shareholder approval is required prior to the issuance of stock in a transaction if: • the common stock represents at least 20% of the voting power outstanding before the issu- ance of such stock; or • the number of shares of common stock to be issued represents at least 20% of the num- ber of shares of common stock outstanding before the issuance. NASDAQ has a similar rule. There are limited exceptions to this 20% test, including for a pub- lic offering for cash and certain bona fide private financings.
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