Merger & Acquisition - Potential SEC violation
by
Stephanie Padly-Julien on Nov. 01, 2012
Business Business Merger & Acquisition International
Summary: The Two-Track merger structure, also known as the Burger King Merger, may cause the SEC to be triggered early and a violation of rule 14e-5 of the 1934's Act.
In order to expedite mergers, the use of a two-track merger, also known as the Burger King Merger due to its origin, has become more and more popular. This merger structure, allows companies to go after a traditional one-step merger and a tender offer at the same time. Firms involved in such deals have to agree that if the company that is doing the acquiring is unable to arrive at the majority of shares (usually 90%) through the tender offer, midway through the process they can choose to do a one-step merger instead. Unfortunately, while this process makes it more efficient to undergo a merger, attorney Daniel Duchovny, special counsel to the Securities and Exchange Commission Corporation Finance Division's Office of Mergers and Acquisitions, has indicated that this type of merger and acquisition structure could cause certain 1934 Securities Exchange Act provisions to be triggered.
While Mr. Duchovny's views are his own, the SEC is currently is investigating the dilemma and specifically any conflict that may arise with the 1934 Act’s Rule 14e-5, which, “prohibits buying or offering to buy the target company's securities outside a tender offer.” The one-step merger path could activate this prohibition because the acquiring company has to submit a preliminary proxy statement with the Commission and the filing could be considered a deal to buy securities outside of the tender offer.
During its investigation, the SEC is currently contacting firms involved in two-track mergers and asking them to hold off on submitting a definitive proxy statement before the expiration of the tender offer period. What this really means in material terms is that the transactions could not be done as efficiently as the parties probably would like, especially in urgent merger situations. Some Burger King merger-style attorneys suggest to start the tender offer, let the SEC know of plans to submit a preliminary proxy statement, and turn in only that statement while the tender offer is still outstanding.
If you are planning a merger and acquisition, we can help. Give us a call so we can get you started!
*This article is intended as general information and should not be considered legal advice. Every situation is unique and requires an individualized analysis. It further does not create any client-attorney privilege or relationship. Call us so we can start representing you.