SEC Form S-4

What Is SEC Form S-4?

SEC Form S-4 is filed by a publicly traded company with the Securities and Exchange Commission (SEC). It is required to register any material information connected with a merger or acquisition. Furthermore, the form is also filed by companies going through an exchange offer, where securities are offered in place of cash.

Understanding SEC Form S-4

SEC Form S-4 is also known as the Registration Statement under the Securities Exchange Act of 1933. (The Securities Exchange Act of 1933, frequently alluded to as "reality in securities" law, requires that these registration forms provide essential facts and are filed to disclose important endless supply of a company's securities.)

Public or reporting companies must submit Form S-4 to the Securities and Exchange Commission (SEC) on account of mergers, acquisitions, or stock exchange offers. Mergers happen when companies need to exhaust, join efforts, move into some new segments, or gain higher revenues and profits to augment stakeholder value. When a merger is completed, the new shares are distributed to current shareholders of both consolidating companies. An exchange offer usually happens in bankruptcy cases, when a firm or financial entity exchanges securities for similar ones at less unbending terms.

Types of Merger that Require Form S-4

All mergers require SEC Form S-4 filing. For instance, the following are five ordinary types of merger.

Conglomerate mergers. These mergers include two unrelated companies in terms of business who participate with an end goal to grow their current markets.

Congeneric Mergers. In this type of merger, the companies possess the same market. The merger creates efficiencies or economies of scale because the companies might use the same raw materials, technology, and R&D processes.

Market Extension Mergers. Here, the companies that are combining might have similar products operating in various markets. The goal for all parties is to venture into new markets.

Horizontal Mergers. The consolidating parties are competitors inside the same industry. The goal of the merger is to grow market share.

Vertical Mergers. Vertical mergers happen for supply chain reasons. One company is regularly a supplier to the next, and the merger reduces the costs of the end result.

Hostile Takeovers

Assuming that a merger or takeover is hostile, investors assume that stock prices will trade at a premium. Hence, in the interests of disclosure, companies seeking a hostile takeover of another company must file form S-4 to provide public notice.

For a M&A transaction, the SEC requires that Form S-4 contain information in regards to, inter alia, the terms of the transaction, risk factors, ratio of earnings to fixed charges and different ratios, pro-forma financial information, material contracts with the company being acquired, extra information required for reoffering by persons and parties considered to be underwriters, and interests of named experts and counsel.

Real World Example

On Dec. 22, 2015, Marriott International filed a Form S-4 describing its proposed combination with Starwood Hotel and Resorts Worldwide. The 192-page document, excluding appendices, contains complete details of the proposed transaction, which in the end closed on Sept. 23, 2016. For investors, notwithstanding the pro-forma figures and valuation numbers of the transaction, perhaps the most interesting sections of the filing are the reasons given by each company for the combination and the timetable of the deal and how and when the deal met up.

Highlights

• The SEC requires that Form S-4 contain information in regards to the terms of the transaction, risk factors, ratios, pro-forma financial information, and material contracts with the company being acquired.
• For hostile takeovers, investors assume that stock prices will trade at a premium, and companies seeking a hostile takeover of another company must file form S-4 in the interests of public disclosure.
• SEC Form S-4 is filed by a publicly traded company to register any material information connected with a merger or acquisition.