Tender Offer

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.

An acquirer publicly offers to buy up to 40% of Cranmore Industries' outstanding shares directly from shareholders at $58, a premium to the $47 market price. Which statement about this tender offer is correct?

1. A.If more shares are tendered than the bidder seeks, the bidder purchases on a pro rata basis from tendering shareholders.Correct. Oversubscribed tender offers are filled pro rata among those who tendered.
2. B.Shareholders who tender their shares may not withdraw them while the offer remains open.Withdrawal rights persist while the offer is open.
3. C.All shareholders are legally obligated to tender once the offer is declared effective.Tendering is entirely voluntary for each shareholder.
4. D.The offer may be closed at the bidder's discretion within 48 hours of announcement.A tender offer must remain open for at least 20 business days.

Why: A tender offer is an offer made directly to shareholders to purchase their shares, usually at a premium, and it must remain open for at least 20 business days. Shareholders who tender may withdraw their shares while the offer remains open, and if the offer is oversubscribed the bidder purchases on a pro rata basis from those who tendered. Shareholders are never compelled to tender.

Schedule TO, filed with the SEC in connection with a tender offer, is best described as:

1. A.The tender offer statement disclosing the offer's material terms, the bidder's identity, and the source of fundsCorrect. This is what Schedule TO discloses.
2. B.A proxy statement soliciting shareholder votes on a mergerWrong. That describes Schedule 14A, a distinct filing from Schedule TO.
3. C.A beneficial ownership disclosure filed upon crossing a 5% ownership thresholdWrong. That describes Schedule 13D/13G, not Schedule TO.
4. D.A quarterly financial report filed by the target companyWrong. That describes Form 10-Q, unrelated to a tender offer statement.

Why: Schedule TO is the tender offer statement filed with the SEC under Section 14(d)(1) or 13(e)(1) of the Exchange Act, disclosing the material terms of the tender offer, the identity of the bidder, the source and amount of funds, and other required information.

Exchange Act Rule 14e-5 generally prohibits a person making a tender offer, and certain related parties, from:

1. A.Purchasing target securities outside the tender offer itself while the offer is pendingCorrect. This is the core prohibition under Rule 14e-5.
2. B.Ever making a tender offer for a company in the same industryWrong. There is no such blanket same-industry prohibition; Rule 14e-5 targets off-offer purchases during a pending tender offer.
3. C.Publishing research reports about the bidder's own securitiesWrong. Research report publication is governed by separate rules, not Rule 14e-5's prohibition on off-offer purchases.
4. D.Filing Schedule TO with the SECWrong. Filing Schedule TO is a required step for the tender offer, not something Rule 14e-5 prohibits.

Why: Rule 14e-5 generally prohibits the bidder and related parties from purchasing (or arranging to purchase) target securities outside the tender offer itself while the tender offer is pending, which would otherwise let the bidder favor some sellers with off-offer purchases over shareholders participating in the tender.