On Thursday, July 14, 2016, the Staff in the Division of Corporation Finance posted a new C&DI on Section 13(d) that provides stockholders (and issuers) with some helpful insights, and perhaps greater clarity, on when significant stockholders can engage in a dialogue with management and still remain on Schedule 13G. As many practitioners know, Schedule 13G (the “short form” for reporting beneficial ownership of equity positions of 5% or more) often requires an affirmative certification from the reporting person(s) that the securities were not acquired, and are not held, with the purpose or effect of changing or influencing control of the issuer. This is commonly referred to as the “passive” investor certification which is set forth at the end of Schedule 13G, directly above the signature line.
Private Placement of Publicly Traded Equity Securities as Consideration in an M&A Transaction after the JOBS Act
In April 2012, we wrote here about the potential future impact of the Jumpstart Our Business Startups Act (“JOBS Act”) on M&A transactions in which an acquirer seeks to issue its privately placed equity securities as consideration in an acquisition. Our discussion at the time focused on the conditions of Rule 506 of Regulation D under the Securities Act of 1933 (the “Securities Act”) and, in particular, the tension faced by issuers that are required to determine the offerees’ status as “accredited investors” or as otherwise suitable to evaluate the potential investment. We noted that such issuers have historically been prohibited from using any form of “general solicitation” when offering securities in such transactions. Subsequently, in July 2013, the SEC adopted final rules (effective September 23, 2013) to eliminate the absolute prohibition against general solicitation in securities offerings conducted pursuant to Rule 506, as required by Section 201(a) of the JOBS Act (Gibson Dunn’s summary and analysis of the rules may be found here). The following discussion updates our earlier post to address the legal and practical effects of these new rules for M&A transactions that include a private placement component.
Proposed Amendments to DGCL Section 251 Increasing Attractiveness of Tender Offer Structure
The Delaware State bar recently proposed an amendment to Section 251 of the Delaware General Corporation Law (DGCL) to add new subparagraph (h) that would greatly enhance the appeal of the tender offer over a one-step merger structure.
Private Placement of Publicly Traded Equity Securities as Consideration in an M&A Transaction after the JOBS Act
An issuer with equity securities that are publicly traded often seeks to use its equity securities as consideration in an acquisition of another business. If the target business is privately held, the acquirer may seek to privately place the equity securities with the owners of the target rather than registering the securities due to the lead-time required for the registration process or for other reasons. The following discussion addresses many of the securities law issues that public companies should consider when using privately placed equity as acquisition currency, including a discussion of upcoming changes in the private placement landscape precipitated by the Jumpstart Our Business Startups Act (“JOBS Act”), signed into law by President Obama on April 5, 2012.