Attachment Attached is a listing of the recommendations of the SEC Advisory Committee on Tender Offers. With respect to each recommendation, please indicate whether you agree or disagree and, if you believe an explanation would be useful, stating the reasons for your views. If you do not have views on some recommendations, please feel free not to respond to those. I would particularly appreciate your response on certain major issues. With respect to the broad economic question of the usefulness of takeovers, the Advisory Committee concluded that takeovers and related transactions are a "valid method of capital allocation." (Recommendation 1) In July of this year, House Judiciary Committee Chairman Rodino, along with Representative Seiberling, introduced legislation which would impose an additional waiting period for review and a "public interest" test to evaluate business combinations involving the largest American corporations. Do you believe this or similar tests should be imposed with respect to takeovers? The Advisory Committee also concluded that there is "no material distortion in the credit markets resulting from control acquisition transactions, and no regulatory initiative should be undertaken to limit the availability of credit in such transactions". (Recommendation 2) Do you agree or disagree? Others in the Congress would disagree. For example, House Banking Committee Chairman St Germain included as part of credit control legislation a measure which gives the Federal Reserve Board stand-by authority to approve all bank loans used in mergers that involve more than $100 million in financing. Do you believe this or similar measures are appropriate? In addition, because the following areas addressed by the Advisory Committee received a great deal of debate, I would appreciate your commenting on as many of these issues as possible: What should be the objectives of federal and state regulation of takeovers (Recommendations 3-9 and 34)? What should be the length of time a takeover bid should remain "open" before shareholders are required to make a decision (Recommendation 17)? What should be the threshold percentage of ownership Should tender offers for less than all of the outstanding shares (partial tender offers) and tender offers in which a partial tender offer is followed by a second offer in which the remaining shares are bid for at a different price (a two-tier tender offer) be treated differently than tender offers for all of the shares (Recommendation 16)? In order to assure that the price paid for a target Should shareholders of a bidder be given the right to What "defensive" tactics by management of a target company What market practices or trading activity should be prohibited during a tender offer (Recommendations 44-48)? If you would like a copy of the complete 170-page Advisory Committee Report, please contact Mary Jo Grote of the Subcommittee at (202) 225-9304. LIST OF RECOMMENDATIONS I. Economics of Takeovers and their Regulation II. 1. The purpose of the regulatory scheme should be neither 2. There is no material distortion in the credit markets resulting from control acquisition transactions, and no regulatory initiative should be undertaken to limit the availability of credit in such transactions, or to allocate credit among such transactions. Objectives of Federal Regulation of Takeovers 3. Takeover regulation should not favor either the acquiror or the target company, but should aim to achieve a reasonable balance while at the same time protecting the interests of shareholders and the integrity and efficiency of the markets. 4. 5. 6. 7. Regulation of takeovers should recomize that such transactions take place in a national securities market. Cash and securities tender offers should be placed on an equal regulatory footing so that bidders, the market and shareholders, and not regulation, decide between the two. Regulation of takeovers should not unduly restrict Even though regulation may restrict innovations in takeover The evolution of the market and innovation in takeover techniques may from time to time produce abuses. The regulatory framework should be flexible enough to allow the Commission to deal with such abuses as soon as they appear. a. State Takeover Law. State regulation of takeovers b. C. a. e. State Corporation Law. Except to the extent necessary to eliminate abuses or interference with the intended functioning of federal takeover regulation, federal takeover regulation should not preempt or override state corporation law. Essentially the business judgment rule should continue to govern most such activity. State Regulation of Public Interest Businesses. Federal takeover regulation should not preempt substantive state regulation of banks, utilities, insurance companies and similar businesses, where the change of control provisions of such state regulation are justified in relation to the overall objectives of the industry being regulated, do not conflict with procedural provisions of federal takeover regulation and relate to a significant portion of the issuer's business. Federal Regulation. Federal takeover regulation should not override the regulation of particular industries such as banks, broadcast licensees, railroads, ship operators, nuclear licensees, etc. Federal Relationships with Other Federal Laws. Regulation of Acquirors of Corporate Control 10. Any regulation of one or more change of control transactions by either the Congress or the Commission should address the effects of such regulation in the context of all control acquisition techniques. 11. 12. 13. 14. 15. The concept of integration of disclosure under the Securities Act of 1933 and the Securities Exchange Act of 1934, previously effected by the Carnission in securities offerings for cash, should be extended to exchange offers. 16. Bidders should be permitted to commence their bids upon filing of a registration statement and receive tenders prior to the effective date of the registration statement. Prior to effectiveness, all tendered shares would be withdrawable. Effectiveness of the registration statement would be a condition to the exchange offer. If the final prospectus were materially different from the preliminary prospectus, the bidder would be required to maintain, by extension, a 10-day period between mailing of the amended prospectus and expiration, withdrawal and proration dates. This period would assure adequate dissemination of information to shareholders and the opportunity to react prior to incurring any irrevocable duties. No person may acquire directly or indirectly beneficial ownership of more than 5% of an outstanding class of equity securities unless such person has filed a Schedule 13D and that schedule has been on file with the Commission for at least 48 hours. Such person may rely on the latest Exchange Act report filed by the target company that reports the number of shares outstanding. The acquiror would have to report subsequent purchases promptly as provided by current law. No person may acquire voting securities of an issuer, it, immediately following such acquisition, such person would own more than 20% of the voting power of the outstanding voting securities of that issuer unless such purchase were made (i) from the issuer, or (ii) pursuant to a tender ofter. The Commission should retain broad exemptive power with respect to this provision. The Committee encourages the Commission to study means to strengthen the concept and definition of "group" or concerted activity. The minimum offering period for a tender offer for less than all the outstanding shares of a class of voting securities should be approximately two weeks longer than that prescribed for other tender offers. |