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Schedule TO-T

Schedule TO-T
InvestingLaws and RegulationsSECSec and Regulatory Bodies

What Is Schedule TO-T?

Schedule TO-T is a form that must be recorded with the Securities Exchange Commission (SEC) by any entity that makes a tender offer for another company's equity securities, as registered under the Securities Exchange Act of 1934. The "TO" in schedule TO stands for "tender offer," and the "T" for "third party."

Understanding Schedule TO-T

Tender offers occur as part of public takeover bids. An investor or company might make a tender offer to purchase shares of another company from some or all of its shareholders when they want to acquire it. The entity making the offer ordinarily does so publicly, offering to pay a premium to the market price for the stock. By purchasing a majority of another company's shares directly from its stockholders, the acquiring company might have the option to take control of the target firm, whether or not that company wants to be acquired.

Third parties that make tender offers must disclose their intentions to the SEC assuming they intend to acquire over 5% of the target's shares. This is finished by filing Schedule TO-T. Share issuers, then again, are exempt from filing the form.

Information on Schedule TO-T includes:

  • The entity making the tender offer
  • The subject company
  • The CUSIP number of the securities
  • The number of shares
  • The price per share according to the tender offer
  • The transaction valuation

Schedule TO-T additionally includes the total amount of the filing fee. The fee calculation method is outlined in the form. The schedule may likewise include any amendments to a TO statement initially recorded with the SEC.

Other SEC Forms Required in a Tender Offer

Schedule TO-T is a subset of the Schedule TO filing — likewise alluded to as a tender offer statement. Other schedules include TO-I, which contains issuer information, and TO-C, which must be recorded when written communications are produced and distributed relating to the tender offer.

History of Schedule To-T

The concept of reporting a tender offer — of publicly spreading the word about an effort to acquire a publicly-traded company — is pursuant to Section 14d or 13e of the Securities Exchange Act of 1934, which was established to regulate the exchange of securities on the secondary market. The act intends to furnish the market with more accuracy and transparency while mitigating financial fraud.

The Schedule TO-T form replaced Schedule 14D-1 in January 2000.

According to Regulation 14d, a completed Schedule TO-T, third-party tender offer statement, or third-party tender offer must likewise be sent to certain parties in addition to the SEC. These include the issuer of the security and whatever other entities that have placed competing bids for the target. The regulation likewise sets forth other requirements that must be complied with in connection with a tender offer.

Special Considerations

A third-party tender offer is generally performed as the first part of a two-step merger, otherwise called a two-tier bid, because it is far-fetched that a company's all's shareholders want to sell their stock pursuant to the future acquirer.

Securities an acquirer's tender offer owned by a shareholder are called assented stock or assented shares. Securities owned by stockholders what refuse's identity is called non-assented stock.

On the off chance that the bidder or acquiring company claims 90% of the stock in the company to be acquired, they can perform a short-form merger. This type of deal doesn't need stockholder endorsement from the target company. It is improbable, though, that a company is ever able to acquire 90% of another company's stock through a tender offer. That's the reason mergers like these generally take place between a parent company and its subsidiary.

It is much more normal, nonetheless, for a buyer to perform a back-end merger. This occurs when the buyer acquires a majority of stock during a tender offer, then acquires the company as a whole by capitalizing on its leverage as a majority shareholder to consent to the merger. The most common form of back-end merger is a reverse triangular merger, in which the target company continues as a subsidiary of the buyer. This sort of merger requires less administrative work as third-party consents.

Highlights

  • The rules pertaining to Schedule TO-T are pursuant to Section 14d or 13e of the Securities Exchange Act of 1934.
  • Schedule T0-T must likewise be sent to the company whose stock is being acquired and whatever other entities that have placed competing bids for the target firm's shares.
  • The form must be documented with the Securities and Exchange Commission any time an entity plans to acquire over 5% of another firm's shares.
  • Schedule TO-T must be documented at whatever point an entity makes a tender offer for another company's shares, as part of a takeover bid.