Rule 14d-10

The "equal treatment" principle under Exchange Act Rule 14d-10 generally requires that a tender offer:

1. A.Require shareholder approval before the offer may even be commencedWrong. A tender offer is made directly to shareholders and does not require a prior shareholder vote to commence, unlike a statutory merger.
2. B.Be open only to institutional holders of the class of securities soughtWrong. Rule 14d-10 requires the offer be open to all holders of the class, not institutional holders only.
3. C.Allow the bidder to pay different prices to different shareholders based on the size of their positionWrong. This is precisely what the equal treatment requirement is designed to prevent.
4. D.Be open to all holders of the class of securities sought, at the highest consideration paid to any holderCorrect. This is the core requirement of Rule 14d-10.

Why: Rule 14d-10 requires that a tender offer be open to all holders of the class of securities sought, and that the consideration paid to any security holder be the highest consideration paid to any other security holder during the offer — preventing a bidder from favoring some shareholders over others.

During a pending tender offer, the bidder privately offers one large shareholder a side payment above the public tender price in exchange for that shareholder's agreement to tender its shares promptly, while all other shareholders are offered only the publicly stated tender price. Does this arrangement raise a problem under the tender offer rules, and why?

1. A.No, private side arrangements are always permitted as long as the public tender price stays the same for everyoneWrong. Rule 14d-10 looks at the highest consideration actually paid to any holder, which the private side payment would exceed.
2. B.Yes, this conflicts with the best-price/equal treatment requirement, since the private payment exceeds what other shareholders receiveCorrect. Rule 14d-10 requires that the highest consideration paid to any shareholder be paid to all shareholders in the offer.
3. C.No, because equal treatment rules apply only to institutional shareholdersWrong. Rule 14d-10's equal treatment requirement is not limited to institutional shareholders.
4. D.Yes, but only because the side payment was not disclosed in a press releaseWrong. The problem is the unequal consideration itself, not merely a disclosure formality about the arrangement.

Why: Yes — this arrangement conflicts with the equal treatment / best price requirement of Rule 14d-10, which requires that the highest consideration paid to any shareholder during the offer be paid to all shareholders. A private side payment above the public tender price to one holder, while others receive only the lower public price, is exactly the kind of unequal treatment the rule is designed to prevent.