[Federal Register: May 9, 2008 (Volume 73, Number 91)]
[Proposed Rules]
[Page 26875-26921]
[DOCID:fr09my08-24]

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Part IV

Securities and Exchange Commission

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17 CFR Parts 230, 232, 239, 240, and 249

Revisions to the Cross-Border Tender Offer, Exchange Offer, and
Business Combination Rules and Beneficial Ownership Reporting Rules for
Certain Foreign Institutions; Proposed Rule

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, 239, 240, and 249

[Release Nos. 33-8917; 34-57781; File No. S7-10-08]
RIN 3235-AK10

Revisions to the Cross-Border Tender Offer, Exchange Offer, and
Business Combination Rules and Beneficial Ownership Reporting Rules for
Certain Foreign Institutions

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: After eight years of experience with the current cross-border
exemptions adopted in 1999, the Commission is proposing changes to
expand and enhance the utility of these exemptions for business
combination transactions. Our goal continues to be to encourage
offerors and issuers in cross-border business combinations, and rights
offerings by foreign private issuers, to permit U.S. security holders
to participate in these transactions in the same manner as other
holders. Many of the rule changes we propose today would codify
existing interpretive positions and exemptive orders in the cross-
border area. In several instances, we request comment about whether the
rule changes we propose also should apply to tender offers for U.S.
companies. In this release, we also address certain interpretive issues
of concern for U.S. and other offerors engaged in cross-border business
combinations. We hope that this guidance will prove useful in
structuring and facilitating these transactions in a manner consistent
with U.S. investor protection.

DATES: Comments should be received on or before June 23, 2008.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/proposed.shtml);
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-10-08 on the subject line; or
     Use the Federal Rulemaking Portal (http://
www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-10-08. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments
also are available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Christina Chalk, Senior Special
Counsel, or Tamara Brightwell, Senior Special Counsel, at (202) 551-
3440, in the Division of Corporation Finance, and Elizabeth Sandoe,
Branch Chief, at<PHONE_NUMBER>, in the Division of Trading and Markets
(for questions relating to the proposed changes to Rule 14e-5), U.S.
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-3628.

SUPPLEMENTARY INFORMATION: We propose to amend Rules 162,\1\ 800 \2\
and 802 \3\ under the Securities Act of 1933 \4\ and Rule 101 \5\ of
Regulation S-T.\6\ We also propose to amend Rules 13d-1,\7\ 13e-3,\8\
13e-4,\9\ 14d-1,\10\ and 14e-5 \11\ under the Securities Exchange Act
of 1934.\12\ We also propose changes to Form S-4,\13\ Form F-4,\14\
Form F-X,\15\ Form CB,\16\ Schedule 13G \17\ and Schedule TO.\18\
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    \1\ 17 CFR 230.162.
    \2\ 17 CFR 230.800.
    \3\ 17 CFR 230.802.
    \4\ 15 U.S.C. 77a et seq.
    \5\ 17 CFR 232.101.
    \6\ 17 CFR 232.10 et seq.
    \7\ 17 CFR 240.13d-1.
    \8\ 17 CFR 240.13e-3.
    \9\ 17 CFR 240.13e-4.
    \10\ 17 CFR 240.14d-1.
    \11\ 17 CFR 240.14e-5.
    \12\ 15 U.S.C. 78a et seq.
    \13\ 17 CFR 239.25.
    \14\ 17 CFR 239.34.
    \15\ 17 CFR 239.42.
    \16\ 17 CFR 239.800.
    \17\ 17 CFR 240.13d-102.
    \18\ 17 CFR 240.14d-100.
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Table of Contents

I. Background
    A. Introduction
    1. Treatment of U.S. target security holders before the adoption
of the cross-border exemptions
    2. Overview of the cross-border exemptions
    B. Summary of the rule proposals and interpretive guidance
II. Discussion
    A. Eligibility threshold--determining U.S. ownership
    1. Methods for determining U.S. ownership under the existing
cross-border exemptions
    a. Negotiated transactions
    b. Non-negotiated transactions
    2. Current eligibility test for negotiated transactions
    a. Concerns
    b. Proposed changes to the eligibility standard for negotiated
transactions
    3. The current test for non-negotiated or hostile tender offers
    a. Concerns
    b. Proposed changes to the presumption for non-negotiated
transactions
    4. Possible new eligibility standards for negotiated and hostile
transactions
    B. Proposed changes to Tier I exemptions
    1. Expanded exemption from Rule 13e-3
    2. Technical changes to Rule 802
    C. Proposed changes to Tier II exemptions
    1. Extend Tier II relief where target securities are not subject
to Rule 13e-4 or Regulation 14D
    2. Expand Tier II relief for dual or multiple offers
    a. Offeror may make more than one non-U.S. offer
    b. U.S. offer may include non-U.S. persons and foreign offer(s)
may include U.S. persons
    c. Proration and the use of the dual or multiple offer structure
    3. Termination of withdrawal rights while tendered securities
are counted
    4. Expanded relief for subsequent offering periods
    a. Proposed revisions to prompt payment rule
    b. Prompt payment and ``mix and match'' offers
    5. Additional guidance with respect to terminating withdrawal
rights after reduction or waiver of a minimum acceptance condition
    6. Early termination of the initial offering period or a
voluntary extension of the initial offer period
    7. Codification of Rule 14e-5 cross-border exemptions
    D. Expanded availability of early commencement for exchange
offers
    E. Proposed changes to schedules and forms
    1. Form CB
    2. Proposed changes to Schedule TO, Form F-4 and Form S-4
    F. Beneficial ownership reporting by foreign institutions
    1. Background
    2. Proposed rules
    G. Interpretive Guidance
    1. Application of the all-holders rule to foreign target
security holders
    2. Ability of bidders to exclude U.S. target security holders
    3. Vendor placements

III. General Request for Comment
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Impact on Economy, Burden on Competition and
Promotion of Efficiency, Competition and CAPITAL FORMATION
VII. Initial Regulatory Flexibility Analysis
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Statutory Basis and Text of Proposal

I. Background

A. Introduction

    Securities markets today are characterized by increasing
globalization. Advances in information technology, the increased use of
ADR \19\ facilities giving U.S. investors an ownership interest in the
securities of foreign companies, and other factors have increased
significantly the number of U.S. and foreign companies engaged in
cross-border business combination transactions.\20\ Computerization and
the advent of the Internet age have fueled a revolution in investor
participation in global capital markets. With increasing globalization
of worldwide securities markets, U.S. investors frequently purchase
securities issued by foreign companies, including foreign private
issuers.
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    \19\ ``ADRs'' refer to American Depositary Receipts. We use this
term synonymously with American Depositary Shares, or ADSs.
    \20\ See Jessica Hall, Cross-Border Mergers Defy U.S. Slump,
REUTERS (October 18, 2007)(noting that cross-border deals reached
record highs through mid-October 2007, and were up 82 percent over
levels for the same period in 2006, according to figures compiled by
the research firm Dealogic).
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    The Commission has undertaken several recent rulemaking initiatives
that impact foreign private issuer reporting and registration
requirements. For example, we recently revised our rules to make the
U.S. capital markets more attractive to foreign private issuers by
allowing the use of financial statements prepared in accordance with
International Financial Reporting Standards (or IFRS) as issued by the
International Accounting Standards Board (or IASB), without a
reconciliation to U.S. GAAP.\21\ In addition, we amended the
deregistration rules for exiting the U.S. regulatory system when the
level of U.S. interest in a foreign private issuer's securities has
decreased, such that continued registration is no longer justified.\22\
We also have proposed a change to the manner of determining the
availability of the Rule 12g3-2(b) exemption from Exchange Act
registration.\23\ Further, we have proposed rule revisions applicable
to foreign issuers, intended to improve the accessibility of the U.S.
public capital markets and enhance the information available to
investors.\24\
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    \21\ Acceptance From Foreign Private Issuers of Financial
Statements Prepared in Accordance With International Financial
Reporting Standards Without Reconciliation to U.S. GAAP, Release No.
33-8879 (December 21, 2007) [73 FR 986].
    \22\ Termination of a Foreign Private Issuer's Registration of a
Class of Securities Under Section 12(g) and Duty to File Reports
Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
Release No. 34-55540 (March 27, 2007) [72 FR 16934]
(``Deregistration Release'').
    \23\ Exemption from Registration Under Section 12(g) of the
Securities Exchange Act of 1934 for Foreign Private Issuers, Release
No. 34-57350 (February 19, 2008) [73 FR 10102] (``Rule 12g3-2(b)
Release'').
    \24\ Foreign Issuer Reporting Enhancements, Release No. 33-8900
(February 29, 2008) [73 FR 13404].
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    We believe these changes benefit investors and issuers. U.S.
investors benefit from additional investment opportunities in
securities of foreign companies, while issuers benefit from the
potential for increased investor interest and a reduction in the cost
of regulatory compliance. Consistent with these recent efforts to
enhance our regulatory system applicable to foreign private issuers, we
are proposing enhancements to our rules governing cross-border business
combination transactions.
    The rule revisions we propose today are based on our experiences in
the cross-border area during the eight years since the current cross-
border exemptions were adopted. The revisions are intended to address
the areas of conflict or inconsistency with foreign regulations and
practice that acquirors frequently encounter in cross-border business
combination transactions.\25\ Whether non-U.S. issuers list their
securities on a U.S. market or U.S. investors access overseas trading
markets to purchase their securities, cross-border business combination
transactions frequently present conflicts between U.S. and foreign
regulatory systems.\26\ The cross-border exemptions are premised on the
status of the target company in a business combination, or the issuer
in a rights offering, as a foreign private issuer as defined in our
rules.
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    \25\ The proposed revisions are, with a few exceptions, limited
to cross-border business combination transactions. ``Cross-border''
refers to business combinations in which the target company is a
``foreign private issuer'' as defined in Exchange Act Rule 3b-4(c)
[17 CFR 240.3b-4(c)], and rights offerings where the issuer is a
foreign private issuer, as so defined. In the past under very
limited circumstances, offerors have obtained no-action and
exemptive relief for business combinations in which the target
company was a foreign issuer but did not meet the definition of
foreign private issuer in Rule 3b-4. Such relief continues to be
considered only in special circumstances and will be as narrowly
tailored as practicable.
    \26\ ``Business combination'' is defined in Securities Act Rule
800(a) as any ``statutory amalgamation, merger, arrangement or
reorganization requiring the vote of security holders of one or more
participating companies. It also includes a statutory short form
merger that does not require a vote of security holders.'' In this
release, we use the term more broadly to include those kinds of
transactions, as well as tender and exchange offers. See Securities
Act Rule 165(f)(1) [17 CFR 230.165(f)(1)] (defining the term more
broadly, to include the types of transactions listed in Rule 145(a)
[17 CFR 230.145(a)], as well as exchange offers).
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    We believe the revisions we propose today represent an appropriate
balance between the need to protect U.S. investors through application
of the protections afforded by U.S. law, and the desirability of
facilitating and enabling transactions that may benefit all security
holders, including those in the United States. We also believe
expanding the availability of the cross-border exemptions will serve
the public interest by encouraging bidders to include U.S. holders in
cross-border business combination transactions from which they
otherwise might be excluded, thereby extending the benefits of those
transactions to U.S. investors.
1. Treatment of U.S. Target Security Holders Before the Adoption of the
Cross-Border Exemptions
    Before the cross-border exemptions became effective in January
2000, U.S. holders \27\ of a foreign issuer or foreign target company
frequently were excluded from cross-border business combination
transactions or rights offerings because of actual or perceived
conflicts between U.S. and foreign law. Where U.S. security holders
held a relatively small percentage of a foreign target's securities,
their participation was not necessary to the successful completion of
the business combination transaction and acquirors frequently excluded
them.\28\ Even where the percentage of securities held in the United
States was significant, acquirors and issuers in business combination
transactions and rights offerings

sometimes avoided extending the offer into the United States because of
perceived litigation risks or conflicts in rules or practice, or the
desire not to engage in the process of preparing and filing a
Securities Act registration statement.\29\ Exclusion deprived U.S.
investors of some or all of the benefits of such cross-border
transactions.
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    \27\ See, e.g., Instruction 2 to Exchange Act Rules 14d-1(c) and
14d-1(d) (defining ``U.S. holder'' as ``any security holder resident
in the United States'').
    \28\ See Cross-Border Tender Offers, Business Combinations and
Rights Offerings, Release No. 33-7611 (November 13, 1998) [63 FR
69136] (``1998 Cross-Border Proposing Release''), Section II.A. The
U.K. Takeover Panel (the entity that regulates tender offers in the
United Kingdom) provided us with information it compiled in 1997
based on a random sample of 31 tender offers (out of 171 possible
mergers or tender offers). When the U.S. ownership of the target was
less than 15 percent (30 offers), the bidders excluded U.S. persons
in all of the offers. When the U.S. ownership was more significant,
such as 38 percent (one offer), the bidders included U.S. persons.
In the 30 offers that excluded U.S. persons, the ownership
percentage was as follows: in 27 offers, U.S. persons held less than
5 percent; in the remaining three offers, U.S. persons held 7
percent, 8 percent and 10-15 percent, respectively.
    \29\ Id.
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2. Overview of the Cross-Border Exemptions
    In an effort to facilitate the inclusion of U.S. security holders
in primarily foreign transactions, we adopted the cross-border
exemptions on October 26, 1999.\30\ These exemptions represented the
culmination of efforts since 1991, when we issued two proposing
releases addressing cross-border issues.\31\ Between 1991 and 1999, the
staff gained valuable experience addressing numerous individual
requests for no-action and exemptive relief in the cross-border
area.\32\ The cross-border exemptions addressed areas of frequent
regulatory conflict or differences in practice encountered by the staff
during those years.
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    \30\ Cross-Border Tender and Exchange Offers, Business
Combinations and Rights Offerings, Release No. 33-7759, 34-42054
(October 22, 1999) [64 FR 61382] (``Cross-Border Adopting
Release''). In this release, we refer to the cross-border exemptions
adopted in the Cross-Border Adopting Release as the ``cross-border
exemptions.'' The cross-border exemptions may be found in Securities
Act Rules 800-802 [17 CFR 230.800-802] and Exchange Act Rules 13e-
3(g)(6) [17 CFR 240.13e-3(g)(6)], 13e-4(h)(8) [17 CFR 240.13e-
4(h)(8)], 13e-4(i) [17 CFR 240.13e-4(i)], 14d-1(c) [17 CFR 240.14d-
1(c)], 14d-1(d) [17 CFR 240.14d-1(d)], and 14e-2(d) [17 CFR 240.14e-
2(d)].
    \31\ See International Tender and Exchange Offers, Release No.
33-6897 (June 5, 1991) [56 FR 27582] and Cross-Border Rights Offers;
Amendments to Form F-3, Release No. 33-6896 (June 4, 1991) [56 FR
27564]. Additionally, we addressed a number of issues presented in
the cross-border context in a concept release in 1990. See Concept
Release Multinational Tender and Exchange Offers, Release No. 33-
6866 (June 6, 1990) [55 FR 23751].
    \32\ Where we refer in this release to ``relief,'' we mean
exemptive or no-action relief provided by letter in the context of
an individual transaction, unless otherwise indicated. See footnote
49 below referring to the staff's delegated authority to provide
exemptive relief from U.S. rule provisions for specific cross-border
transactions. Where we refer to ``interpretive guidance,'' we mean
oral positions taken by the staff or written interpretations
promulgated by the Division of Corporation Finance in the Manual of
Publicly Available Telephone Interpretations available on our Web
site. We refer to ``Commission guidance'' or ``Commission
interpretive guidance'' to mean positions expressed by the
Commission in releases.
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    Generally speaking, the cross-border exemptions are structured as a
two-tier system based broadly on the level of U.S. interest in a
transaction, measured by the percentage of target securities of a
foreign private issuer held by U.S. investors.\33\ Where no more than
ten percent of the subject securities are held in the United States
(Tier I and Rules 801 and 802), a qualifying cross-border transaction
will be exempt from most U.S. tender offer rules \34\ and from the
registration requirements of Section 5 of the Securities Act of
1933.\35\ Tier I provides a broad exemption from the filing,
dissemination and procedural requirements of the U.S. tender offer
rules and the heightened disclosure requirements applicable to going
private transactions as defined in Rule 13e-3.\36\ Tier I also exempts
the subject company of a tender offer from the obligation to express
and support a position with respect to that tender offer.\37\ At the
same level of U.S. ownership, Rules 801 and 802 also provide relief
from the registration requirements of Securities Act Section 5 for
securities issued in rights offerings and business combination
transactions.
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    \33\ Although the target (or issuer in a rights offering) must
be a foreign private issuer, the acquiror relying on the cross-
border exemptions need not be a foreign private issuer and, in fact,
may be a U.S. company.
    \34\ The U.S. anti-fraud and anti-manipulation rules and civil
liability provisions continue to apply to these transactions. See
Cross-Border Adopting Release, Section I.A.
    \35\ 15 U.S.C. 77e.
    \36\ Exchange Act Rules 13e-3(g)(6), 13e-4(h)(8) and 14d-1(c).
    \37\ Exchange Act Rule 14e-2(d).
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    Issuers relying on Rule 801, offerors relying on Rule 802, and
third-party bidders and issuers relying on the Tier I cross-border
exemption must furnish a Form CB to the Commission.\38\ Form CB is a
cover sheet for an English translation of the disclosure document used
in the foreign home jurisdiction and disseminated to U.S. target
security holders.\39\ This form must be submitted to the Commission by
the next business day after the disclosure document attached and used
in the foreign home jurisdiction is published or otherwise disseminated
in accordance with home country rules.\40\ The materials submitted
under cover of Form CB are not deemed filed with the Commission, and
the filer is not subject to the liability provisions of Section 18 of
the Exchange Act.\41\
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    \38\ Securities Act Rules 801(a)(4)(i) and 802(a)(3)(i), and
Exchange Act Rules 13e-4(h)(8)(iii) and 14d-1(c)(3)(iii).
    \39\ Item 1 of Form CB [17 CFR 239.800].
    \40\ Securities Act Rules 801(a)(4)(i) and 802(a)(3)(i) and
Exchange Act Rules 14d-1(c)(3)(iii) and 13e-4(h)(8)(iii). If the
bidder is a foreign company, it must also file a Form F-X with the
Commission appointing an agent for service of process in the United
States. See, e.g., Exchange Act Rule 14d-1(c)(3)(iii).
    \41\ 15 U.S.C. 78r. See also, the Cross-Border Adopting Release,
Section II.A.2. However, an acquiror or other person submitting Form
CB is subject to U.S. anti-fraud provisions. See footnote 34 above.
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    A bidder relying on the Tier I exemption must submit a Form CB only
if the tender offer would have been subject to Regulation 14D \42\ or
Rule 13e-4, but for the Tier I exemption. No filing requirement exists
for a tender offer subject only to Exchange Act Section 14(e) and
Regulation 14E; accordingly, furnishing a Form CB is not necessary.\43\
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    \42\ Exchange Act Rules 14d-1 through 14d-11.
    \43\ See Cross-Border Adopting Release, Section II.A.2.
Regulation 14E applies to all tender offers, including those not
subject to Section 13(e) or 14(d) of the Exchange Act. These include
tender offers for non-equity securities and securities that are not
registered under Section 12 of the Exchange Act [15 U.S.C. 78l], as
well as partial offers for less than all of the subject class, where
the bidder will not own, based on purchases in the tender offer and
ownership in the target before the offer commences, more than five
percent of the subject class of equity securities after the tender
offer.
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    Where U.S. holders own more than ten percent but no more than 40
percent of the target securities (Tier II), the cross-border exemptions
provide targeted relief from some U.S. tender offer rules to address
certain recurring areas of regulatory conflict. The Tier II exemptions
encompass narrowly-tailored relief from certain U.S. tender offer
rules, such as the prompt payment, extension and notice of extension
requirements in Regulation 14E. The Tier II exemptions do not provide
relief from the registration requirements of Securities Act Section 5,
nor do they include an exemption from the additional disclosure
requirements applicable to going private transactions by issuers or
affiliates.
    The scope of the Tier I and Tier II cross-border exemptions and the
exemptions from the Securities Act registration requirements provided
in Rules 801 and 802 are based broadly on the level of U.S. interest in
a given transaction, as illustrated by the percentage of shares held by
U.S. persons. In addition to these U.S. ownership thresholds, the
cross-border exemptions are conditioned on other requirements, such as
the principle that U.S. target security holders be permitted to
participate in the offer on terms at least as favorable as those
afforded other target holders.\44\ This approach differs from our
approach in adopting revisions to the deregistration rules applicable
to foreign private issuers in 2007 \45\ and more recently, in our
proposed revisions to Rule 12g3-2(b) recommending the

use of an average daily trading volume test (``ADTV'').\46\
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    \44\ Securities Act Rules 801(a)(3) and 802(a)(2) [17 CFR
230.801(a)(3) and 230.802(a)(2)]; Exchange Act Rules 13e-4(h)(8)(ii)
and (i)(2)(ii); and 14d-1(c)(2) and (d)(2)(ii).
    \45\ See the Deregistration Release.
    \46\ See the Rule 12g3-2(b) Release and the discussion in
Section II.A.4 below.
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B. Summary of Rule Proposals and Interpretive Guidance

    We believe the existing cross-border exemptions have facilitated
the inclusion of U.S. security holders in foreign transactions in a
manner consistent with our investor protection mandate.\47\ We
recognize that in some instances, however, the exemptions are not
operating as optimally as intended, or do not address continuing and
recurring conflicts of law and practice not anticipated when we adopted
them.\48\ As a result, companies repeatedly call upon the Commission's
staff to address particular areas of conflict in the context of
individual cross-border transactions.\49\
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    \47\ Another area in which we have modified our rules in the
foreign private issuer context is the Multijurisdictional Disclosure
System (``MJDS'') with Canada. See Exchange Act Rule 14d-1(b). That
system allows a bidder in a cross-border tender offer to conduct its
offer in accordance with Canadian rules and/or the rules of any
applicable Canadian province instead of U.S. tender offer
requirements, where the conditions in the rule are met. These
include the requirement that the target company in the tender offer
be a foreign private issuer and not an investment company, and that
U.S. holders own less than 40 percent of the subject securities. The
bidder must file its offer materials, prepared in accordance with
Canadian requirements, on Form 14D-1F [17 CFR 240.14d-102] with the
Commission. See Rule 14d-1(b)(1). MJDS also specifies certain forms
to be used by Canadian companies issuing securities to U.S. persons.
See, e.g., Forms F-8 [17 CFR 239.38], F-9 [17 CFR 239.39], F-10 [17
CFR 239.40], and F-80 [17 CFR 239.41]. Except for limited
solicitations of comment below, this release does not propose
changes to MJDS.
    \48\ For a general discussion of the cross-border exemptions and
a broad overview of how they operate, see Steven Davidoff & Brett
Carron, ``Getting U.S. Security Holders to the Party: The SEC's
Cross-Border Release Five Years On,'' 26.3 U. Pa. J. Int'l Econ. L.
455 (2005); and John Basnage, William Curtin III & Jeffrey Rubin,
``Cross-Border Tender Offers and Other Business Combination
Transactions and the U.S. Federal Securities Laws: An Overview,''
61.3 Business Lawyer 1071 (2006).
    \49\ Pursuant to Rule 30-1 of the SEC's Rules of General
Organization [17 CFR 200.30-1], the staff has delegated authority to
exempt individual bidders and issuers from application of our rules.
No-action and exemptive letters issued by the staff in connection
with cross-border transactions may be found on our Web site at
http://www.sec.gov/divisions/corpfin/cf-noaction.shtml and http://
www.sec.gov/divisions/marketreg/mr-noaction.shtml#rule14e5.
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    The rule revisions we propose today address recurring issues and
unintended consequences that have impeded the usefulness of the cross-
border exemptions. We believe the proposed changes will encourage more
offers to be extended into the United States. Generally speaking, the
proposed revisions represent an expansion and refinement of the current
exemptions, and in some areas, would codify relief previously granted
only on an individual basis. Our proposed codification of various staff
interpretive positions would make such relief available as a matter of
right, thereby reducing the burdens and costs for bidders and issuers
of extending cross-border offers to U.S. holders when conducting cross-
border transactions.
    In some instances, the changes we propose would address practical
problems that have limited the ability of bidders and issuers to rely
on the exemptions. For example, we hope the proposed changes relating
to the calculation of U.S. ownership of the target foreign private
issuer will provide greater certainty and ease of use for those seeking
to rely on the exemptions. In proposing these rule revisions, we hope
to better address the burdens on bidders and issuers who must comply
with two or more regulatory systems in the context of cross-border
transactions.\50\ As a result, we hope the revisions we propose today
will make bidders more likely to extend offers to U.S. holders.
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    \50\ Although the focus of the rule changes we propose is cross-
border business combinations, in some instances, we solicit comment
on whether certain of these changes should also apply to business
combinations where the target company is a U.S. issuer. We may adopt
these changes at the time we adopt changes to our cross-border
business combination rules. For example, we ask for comments on
whether domestic exchange offers not subject to Rule 13e-4 or
Regulation 14D should be permitted to commence early. We also
solicit comment on whether the rule changes we propose to facilitate
``mix and match'' tender offers and the relaxation of the our rules
relating to subsequent offering periods also should apply to tender
offers for domestic companies.
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    In this release, we also provide guidance on some of the
interpretive issues that have arisen during the years since the cross-
border exemptions were adopted. In some instances, we propose to codify
existing staff interpretive positions. We also discuss our views on
some of the interpretive matters addressed in the 1998 Cross-Border
Proposing Release and the Cross-Border Adopting Release. The rule
changes we propose today include:
     Refinement of the tests for calculating U.S. ownership of
the target company for purposes of determining eligibility to rely on
the cross-border exemptions in both negotiated and hostile
transactions, including changes to:
     [cir] Use the date of public announcement of the business
combination as the reference point for calculating U.S. ownership;
     [cir] Permit the offeror to calculate U.S. ownership as of a date
within a 60-day range before announcement;
     [cir] Specify when the offeror has reason to know certain
information about U.S. ownership that may affect its ability to rely on
the presumption of eligibility in non-negotiated tender offers;
     Expanding relief under Tier I for affiliated transactions
subject to Rule 13e-3 for transaction structures not covered under our
current cross-border exemptions, such as schemes of arrangement, cash
mergers, or compulsory acquisitions for cash;
     Extending the specific relief afforded under Tier II to
tender offers not subject to Sections 13(e) or 14(d) of the Exchange
Act;
     Expanding the relief afforded under Tier II in several
ways to eliminate recurring conflicts between U.S. and foreign law and
practice, including:
    [cir] Allowing more than one offer to be made abroad in conjunction
with a U.S. offer;
    [cir] Permitting bidders to include foreign security holders in the
U.S. offer and U.S. holders in the foreign offer(s);
    [cir] Allowing bidders to suspend back-end withdrawal rights while
tendered securities are counted;
    [cir] Allowing subsequent offering periods to extend beyond 20 U.S.
business days;
     [cir] Allowing securities tendered during the subsequent offering
period to be purchased within 14 business days from the date of tender;
     [cir] Allowing bidders to pay interest on securities tendered
during a subsequent offering period;
     [cir] Allowing separate offset and proration pools for securities
tendered during the initial and subsequent offering periods;
     Codifying existing exemptive orders with respect to the
application of Rule 14e-5 for Tier II tender offers;
     Expanding the availability of early commencement to offers
not subject to Section 13(e) or 14(d) of the Exchange Act;
     Requiring that all Form CBs and the Form F-Xs that
accompany them be filed electronically;
     Modifying the cover pages of certain tender offer
schedules and registration statements to list any cross-border
exemptions relied upon in conducting the relevant transactions; and
     Permitting foreign institutions to report on Schedule 13G
to the same extent as their U.S. counterparts, without individual no-
action relief.
    In addition to these proposed rule changes, we provide guidance or
solicit commenters' views on the following issues:
     The ability of bidders to terminate an initial offering
period or any

voluntary extension of that period before a scheduled expiration date;
     The ability of bidders in tender offers to waive or reduce
the minimum tender condition without providing withdrawal rights;
     The application of the all-holders provisions of our
tender offer rules to foreign target security holders;
     The ability of bidders to exclude U.S. target security
holders in cross-border tender offers; and
     The ability of bidders to use the vendor placement
procedure for exchange offers subject to Section 13(e) or 14(d) of the
Exchange Act.

II. Discussion

A. Eligibility Threshold--Determining U.S. Ownership

    Business combination transactions are extraordinary events for
target companies and their security holders. When U.S. persons hold a
significant percentage of a target's securities in a cross-border
business combination transaction, we believe U.S. tender offer and
other rules should provide certain basic protections in transactions
that will significantly impact their ownership interest in that target
company.\51\ When U.S. persons do not hold a significant stake in the
subject target class, we believe that by allowing the acquiror to
conduct the transaction in accordance with the applicable foreign law,
while including U.S. persons and treating them at least as favorably as
all other target holders, U.S. persons are better protected than they
would be if the acquiror chose to exclude them from the transaction so
that the transaction would not be subject to U.S. regulations.
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    \51\ We believe these protections are even more critical in
cross-border tender offers, where home country law may not allow
acquirors to eliminate minority security holders under the same
circumstances as in the United States. For example, in some foreign
jurisdictions, the ability of bidders to ``squeeze out'' target
security holders remaining after a tender offer may be more limited
than in the United States, where this generally will be accomplished
whenever the bidder purchases a majority of target shares. See
discussion in footnote 155 below. Therefore, a decision whether to
tender into an offer and the procedural protections associated with
that offer may be even more critical, because target security
holders who remain after the offer may not be cashed out in a back-
end merger, as would be typical in the United States.
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    When we adopted the cross-border exemptions, we established a
threshold eligibility test for use of the exemptions based on the
percentage of target shares held by U.S. persons.\52\ The current test,
based on the level of U.S. ownership in the target company, has worked
well conceptually. However, we have become aware of certain
difficulties that can make application of our threshold eligibility
test problematic in practice, including issues that can arise when
conducting both the look-through analysis for negotiated transactions
and the alternate test for non-negotiated deals, as discussed below. We
believe the recommended changes will enhance the utility of the cross-
border exemptions because they will make it easier for bidders and
issuers to determine whether they are eligible to rely on them.
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    \52\ For rights offerings, eligibility to rely on Rule 801 is
determined by the percentage of subject securities of the issuer
held by U.S. persons. See Securities Act Rule 800(h).
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1. Methods for Determining U.S. Ownership Under the Existing Cross-
Border Exemptions
a. Negotiated Transactions
    As discussed above, under our current rules, eligibility to rely on
the cross-border exemptions is determined in part by the percentage of
U.S. beneficial holders of the relevant class of target securities.\53\
U.S. ownership of the target company is determined by reference to the
target's non-affiliated float \54\ and holders of greater than ten
percent of the subject class are excluded from the calculation of U.S.
ownership.\55\ Any securities held by the acquiror in the business
combination transaction similarly are excluded from the
calculation.\56\
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    \53\ Note that in response to inquiries from U.S. bidders
regarding the availability of Securities Act Rules 801 and 802 when
there are no U.S. holders in the issuer (in a rights offering) or
subject company (in an exchange offer or other business
combination), or when an offer is not extended to U.S. holders, the
Division of Corporation Finance has taken the position that the
cross-border exemptions do not apply unless there is at least one
U.S. security holder of the subject class of securities. See Section
II.C. Question 1 in the Third Supplement to the Division of
Corporation Finance's Manual of Publicly Available Telephone
Interpretations (July 2001), at http://www.sec.gov/interps/
telephone/phonesupplement3.htm. This is consistent with the intent
of the exemptions: to facilitate the inclusion of U.S. security
holders of foreign private issuers in business combinations and
rights offerings.
    \54\ We use ``float'' to refer to the aggregate market value of
the subject securities held by non-affiliates. See generally, the
definition of ``Small Business Issuer'' in Securities Act Rule 405
[17 CFR 230.405] and the Note to that provision. We do not include
in that definition securities held by persons or entities that
individually own more than ten percent of the subject securities.
    \55\ See Instruction 2.ii. to Exchange Act Rules 13e-4(h)(8) and
(i), and 14d-1(c) and 14d-1(d). See also Securities Act Rule
800(h)(2).
    \56\ Id.
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    The rules specify the manner in which a bidder in a negotiated
transaction must determine which target securities are held by persons
resident in the United States.\57\ They require the acquiror to ``look
through'' securities held of record by nominees in specified
jurisdictions to identify those held for the accounts of persons
located in the United States.\58\ If after ``reasonable inquiry,'' the
acquiror is unable to obtain information about the location of the
security holders for whom a nominee holds, the rules allow the acquiror
to assume that the customers are residents of the jurisdiction in which
the nominee has its principal place of business.\59\ The relevant date
for determining U.S. ownership is the 30th day before a benchmark date
that varies with the type of transaction for which the exemption is
sought.\60\
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    \57\ See Instruction 2 to Exchange Act Rules 13e-4(h)(8) and
(i), and 14d-1(c) and (d); Securities Act Rule 800(h).
    \58\ See, e.g., Instruction 2.iii. to Exchange Act Rules 14d-
1(c) and 14d-1(d) (instructing the bidder to limit its inquiry as to
securities held in nominee form to nominees located in the United
States, the subject company's jurisdiction of incorporation and the
jurisdiction that is the primary trading market for the subject
securities, if different from the target's jurisdiction of
incorporation). We recently revised the rule pertaining to
termination of registration to include a definition of ``primary
trading market'' that may include trading in more than one foreign
market. See Exchange Act Rule 12h-6(f)(5) [17 CFR 240.12h-6(f)(5)].
This does not change the meaning of ``primary trading market'' as
used in the cross-border exemptions and in the instruction to the
definition of foreign private issuer in Exchange Act Rule 3b-4 and
Securities Act Rule 405 [17 CFR 230.405]. An acquiror's or issuer's
obligation to look through nominees in calculating U.S. ownership
continues to be limited to the jurisdiction of the single, principal
foreign trading market for the target's securities, if different
from the target's jurisdiction of incorporation.
    \59\ See Securities Act Rule 800(h)(3) and Instruction 2.iv. to
Exchange Act Rules 13e-4(h)(8) and (i), and 14d-1(c) and (d).
    \60\ See Instruction 2.i. to Exchange Act Rules 13e-4(h)(8) and
(i), and 14d-1(c) and (d) (specifying that U.S. ownership must be
calculated as of the 30th day before commencement of a tender
offer). For the Securities Act Rule 801 and 802 exemptions, see Rule
800(h) (stating that U.S. ownership must be calculated as of the
record date for a rights offering or as of the 30th day before the
commencement of an exchange offer or the solicitation for a business
combination other than a tender offer).
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b. Non-Negotiated Transactions
    In adopting the eligibility standard for negotiated transactions
described in the preceding section, we recognized that the required
look-through analysis would be more difficult for third-party offerors
in non-negotiated transactions because they would not have the
cooperation of the issuer.\61\ In particular, obtaining information
from nominees who hold for the account of others is difficult for
third-party acquirors and may have the effect of alerting the market to
a contemplated offer before the acquiror wishes to make

its intentions known. For that reason, the cross-border exemptions
include a presumption available for non-negotiated or ``hostile''
transactions.\62\ The ``hostile presumption'' allows a third-party
bidder in a non-negotiated tender or exchange offer to assume that U.S.
ownership in the target company is no more than ten percent or 40
percent, the thresholds for Tier I and Rule 802, and Tier II
respectively, so long as average daily trading volume in the United
States does not exceed ten percent or 40 percent of the average daily
trading volume worldwide over a twelve-month period ending 30 days
before commencement, and the bidder has no reason to know that actual
U.S. ownership is inconsistent with that figure (either based on the
issuer's informational filings with the Commission or foreign
regulators or based on the bidder's actual or imputed knowledge from
other sources).\63\
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    \61\ See discussion in the Cross-Border Adopting Release,
Section II.F.3.
    \62\ We distinguish a ``hostile'' tender offer from one made
pursuant to an agreement with the target company, which we refer to
as a negotiated or recommended transaction.
    \63\ See, e.g., Instruction 3.i.-iv. to Exchange Act Rules 14d-
1(c) and 14d-1(d) (stating that the presumption is available unless
the aggregate trading volume in the U.S. exceeds certain levels, or
the bidder knows or should know that actual levels of U.S ownership
exceed the ceiling for the applicable exemption). The instruction,
as currently written, refers to the Nasdaq market and the trading
volume of securities on the over-the-counter (OTC) market as
reported to the NASD, but since the adoption of Exchange Act Rules
14d-1(c) and 14d-1(d) and the corresponding instruction, the Nasdaq
market has become an exchange, the NASDAQ OMX Group, Inc.
Additionally, the trading volume of securities on the OTC market is
now reported to the Financial Industry Regulatory Authority, Inc.,
or FINRA, which was created through the consolidation of the NASD
and the member regulation, enforcement and arbitration functions of
the NYSE. We therefore propose a technical change to the rules to
reflect these changes.
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2. Current Eligibility Test for Negotiated Transactions
a. Concerns
    Although we believe the current tests for determining eligibility
to rely on the cross-border exemptions generally have worked well,
changes in several areas would be appropriate to address timing and
informational restrictions that have impeded the application of the
current exemptions. Many of these problems relate to the threshold
eligibility determination for negotiated transactions.
    In particular, the requirement that U.S. ownership be calculated as
of the 30th day before the commencement of a tender offer or exchange
offer, or before the solicitation for other kinds of business
combination transactions \64\ presents practical difficulties for
acquirors in certain jurisdictions. In some countries, the look-through
analysis we require for negotiated transactions takes longer than 30
days to perform.\65\ Numerous acquirors have advised us that in some
jurisdictions, it is not possible to calculate U.S. ownership as of a
set date in the past. In others, information about the location of
target security holders is only published at fixed intervals.\66\
Additionally, the exact date of commencement is not within the control
of the acquiror in some jurisdictions.\67\ In recognition of these
problems, issuers have sought guidance from the staff regarding the
date of calculating U.S. ownership for purposes of determining
eligibility to rely on the cross-border exemptions. The staff has
stated that, where the 30th day before commencement is impracticable
for reasons outside of the acquiror's control the acquiror may use the
date within the 30-day period before commencement that is as close as
possible to the 30th day.\68\ However, the staff continues to receive
inquiries from acquirors who cannot definitively use a date within the
30 days before commencement because of logistical problems in the time
needed to conduct the mandated look-through analysis, or because of the
regulatory review process.\69\ In the case of an exchange offer where
the acquiror will issue securities in exchange for target securities,
more than 30 days may be needed to prepare offering materials and
complete the regulatory review process.
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    \64\ See Securities Act Rule 800(h)(1), Instruction 2.i. to
Exchange Act Rules 13e-4(h)(8) and 13e-4(i), and Instruction 2.i. to
Rules 14d-1(c) and 14d-1(d).
    \65\ See, e.g., Serono S.A. (September 12, 2002) (``Serono
S.A.'') (stating that approximately six to eight weeks is necessary
to complete a look-through analysis to obtain information about the
level of U.S. beneficial ownership of a French company).
    \66\ See Section II.E. Question 8 in the Third Supplement to the
Division of Corporation Finance Manual of Publicly Available
Telephone Interpretations (July 2001), at http://www.sec.gov/
interps/telephone/phonesupplement3.htm.
    \67\ In some foreign jurisdictions, for example, a bidder is
obligated to commence an offer within a certain number of days of
receiving home country regulatory approval of its offer materials.
As noted above, bidders cannot always obtain information about U.S.
ownership as of a date in the past; rather, they can request that
information only as of a current date going forward 30 days to the
anticipated date of commencement. When the date of commencement is
uncertain, it becomes difficult for offerors to comply with our
rules.
    \68\ See Section II.E. Question 7 in the Third Supplement to the
Division of Corporation Finance Manual of Publicly Available
Telephone Interpretations (July 2001), at http://www.sec.gov/
interps/telephone/phonesupplement3.htm.
    \69\ For example, shares of listed French companies are not
certificated and the majority of such shares are held in bearer
form, meaning that the only ownership records for such shares are
maintained by Euroclear France, the French clearing system. It
generally takes more than 30 days to request and analyze the
position listing known as a ``TPI report.'' See, e.g., Alcan, Inc.
(October 7, 2003) (``Alcan'') and Equant N.V. (April 18, 2005)
(``Equant N.V.'') and footnote 65 above.
---------------------------------------------------------------------------

    The reference date for assessing U.S. ownership under the cross-
border exemptions also creates logistical problems in certain cases.
The current exemptions key the determination of U.S. ownership to the
date of commencement of the tender offer or the commencement of the
solicitation for other types of business combinations, or to the record
date for a rights offering.\70\ If the announcement of the transaction
predates the commencement by more than 30 days, an acquiror will not
know with certainty when it announces a transaction whether it will be
eligible to rely on the cross-border exemptions at all, or whether it
will be eligible for Tier I/Rule 802 or Tier II. The staff has been
advised that this is problematic in some foreign jurisdictions because
by law, the announcement must provide detailed information about the
transaction, including information about how U.S. target security
holders will be treated.\71\ Even where such information is not legally
required at the time of announcement, issuers may wish to inform target
security holders and the market at large of this information.
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    \70\ See Securities Act Rule 800(h)(1), Instruction 2.i. to
Exchange Act Rules 13e-4(h)(8) and (i), and Instruction 2 to
Exchange Act Rules 14d-1(c) and (d).
    \71\ The staff has been contacted by counsel for bidders in
certain European countries with concerns about calculating U.S.
ownership as of the date specified under current rules, where an
announcement of the transaction must be made more than 30 days
before commencement and under home country regulation the
announcement must include detailed information about the treatment
of U.S. target holders.
---------------------------------------------------------------------------

    In addition, keying the look-through analysis to commencement
creates a discrepancy for purposes of the exemption from Rule 14e-5.
Rule 14e-5 generally prohibits purchases of target securities outside
of a tender offer from the date of announcement of that offer through
its expiration.\72\ Tender offers conducted in reliance on the Tier I
exemption are exempt from the application of Rule 14e-5.\73\ However,
because Rule 14e-5 applies from the date of announcement of the tender
offer, a bidder will not necessarily know at the time of announcement
whether it will qualify for the cross-border exemptions as of the 30th
date before commencement.
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    \72\ Exchange Act Rule 14e-5 [17 CFR 240.14e-5]. We propose to
extend this exemption to encompass Tier II-eligible tender offers.
    \73\ Exchange Act Rule 14e-5(b)(10)(i).
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    Finally, from time to time the suggestion is made that excluding
holders of greater than ten percent of the

subject securities disproportionately elevates the levels of U.S.
ownership in target companies. In the 1998 Cross-Border Proposing
Release, we proposed to exclude from the calculation of U.S. ownership
securities owned by non-U.S. target holders who individually held more
than ten percent of the subject class, on the grounds that such large
investors were affiliates and the securities they held were not part of
the target's public float.\74\ When the exemptions were adopted, they
excluded securities held by both U.S. and non-U.S. persons holding
greater than ten percent of the target company's securities because of
commenters' concerns that excluding only large non-U.S. holders, as
originally proposed, would skew the U.S. ownership percentages
upward.\75\ We continue to receive feedback from various
constituencies, however, that exclusion of large holders results in
reduced eligibility to rely on the cross-border exemptions. We would be
interested in commenters' views on this requirement under our current
rules and whether it should be modified or eliminated.
---------------------------------------------------------------------------

    \74\ See 1998 Cross-Border Proposing Release, Section II.H.2.
    \75\ See Cross-Border Adopting Release, Section II.F.2.
---------------------------------------------------------------------------

Request for Comment
     Should we continue to exclude from the calculation of U.S.
ownership target securities held by the acquiror in the contemplated
transaction?
     Should we eliminate the requirement to exclude subject
securities held by greater than ten percent holders in calculating U.S.
ownership of the target company? Would U.S. interest in a transaction
more appropriately be measured by considering all of the outstanding
securities, without excluding large holders? Would changing the rule in
this manner result in extending the exemptions to circumstances where
U.S. investors could be adversely affected?
     Should we eliminate greater than ten percent holders only
where such holders are otherwise affiliated with the issuer?
     Are there problems in determining who is a greater than
ten percent holder that should be addressed in revised rules?
     If the requirement to exclude large holders is retained,
is a greater than ten percent holding the appropriate level for
exclusion? Should the percentage be higher, such as 15 or 20 percent?
     Is there any reason to eliminate the exclusion of greater
than ten percent holders only for non-U.S. holders and not for U.S.
holders, or vice-versa? What would the impact of such change be on the
number of companies eligible for Tier I or Tier II?
     Should we maintain the same tests, with the revisions
proposed, but raise the maximum U.S. ownership level for Tier I and
Rules 801 and 802 to 15 percent? What effect would this have on the
number of cross-border transactions eligible to be conducted under
these exemptions? Would expanding the availability of Tier I and Rules
801 and 802 be in the interests of U.S. investors?
b. Proposed Changes to the Eligibility Standard for Negotiated
Transactions
    We believe that by revising the eligibility tests for negotiated
cross-border business combination transactions as proposed, we would
eliminate many of the issues that have arisen. As discussed above, the
first problem with the current test is the requirement that U.S.
ownership be calculated as of a single, specified date. Accordingly, we
propose that acquirors be permitted to calculate U.S. ownership within
a specified 60-day range rather than using a single date.\76\ This
approach is consistent with the position taken by the staff
interpretively in considering timing issues in the cross-border
context.\77\ It also would provide greater flexibility where the timing
of a transaction is driven by market forces or a regulatory process
that is, to some extent, outside the control of the acquiror.
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    \76\ As discussed below, we also propose to change the reference
point for calculation of U.S. ownership from commencement to
announcement. We are not currently proposing a change to the
requirement to calculate as of the record date for rights offerings.
See Rule 800(h)(1).
    \77\ See, e.g., Section II.E. Questions 6, 7 and 8 in the Third
Supplement to the Division of Corporation Finance Manual of Publicly
Available Telephone Interpretations (July 2001), at http://
www.sec.gov/interps/telephone/phonesupplement3.htm.
---------------------------------------------------------------------------

    While we propose to provide greater flexibility as to the date on
which U.S. ownership in the target company may be assessed, we remain
concerned about the possibility that a date for calculation would
intentionally be chosen to present less than a representative picture
of the target security holder base. The instructions to the cross-
border exemptions make it clear that the exemptions are not available
for any transaction or series of transactions that technically comply
with our rules but are, in fact, part of a plan or scheme to evade them
in practice.\78\
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    \78\ See General Note 2 to Securities Act Rules 800, 801 and
802, Instruction 4 to Exchange Act Rules 13e-4(h)(8) and 13e-4(i),
and Instruction 5 to Exchange Act Rules 14d-1(c) and 14d-1(d).
---------------------------------------------------------------------------

    As discussed above, another logistical problem with the cross-
border exemptions centers on the use of commencement as the triggering
event for the calculation of U.S. ownership. We now propose to require
that U.S. ownership be calculated within a 60-day period before the
public announcement of the cross-border tender offer or business
combination transaction.\79\ For these purposes, public announcement
generally means the same as in Instruction 5 to Rule 14d-2(b)(2).\80\
By using announcement instead of commencement as the triggering event
for purposes of the calculation, we hope to enable acquirors planning
cross-border transactions to determine at an earlier point how they
will treat U.S. holders.
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    \79\ See proposed revisions to Securities Act Rule 80 0(h)(1),
Instruction 2.i. to Exchange Act Rules 13e-4(h)(8) and (i), and
Instruction 2.i. to Exchange Act Rules 14d-1(c) and (d).
    \80\ Instruction 5 to Exchange Act Rule 14d-2(b)(2) [17 CFR
240.14d-2(b)(2)] states that `` `public announcement' is any oral or
written communication by the bidder, or any person authorized to act
on the bidder's behalf, that is reasonably designed to, or has the
effect of, informing the public or security holders in general about
the tender offer.''
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    This change also would allow the application of the exemptions to
be based on the characteristics of the target security holder base
before it is influenced by the announcement of the transaction.\81\
Further, it would permit acquirors to meet home country requirements,
which may mandate that the acquiror include information about the
treatment of U.S. holders in the announcement of the transaction. In
addition, it would encourage bidders to provide the markets and target
security holders with valuable information at an earlier stage in the
transaction process, including alerting investors who may acquire the
target company's securities after the announcement whether they will
have the full protections of Regulations 14D and 14E.
---------------------------------------------------------------------------

    \81\ See Section II.E. Question 6 in the Third Supplement to the
Division of Corporation Finance Manual of Publicly Available
Telephone Interpretations (July 2001), at http://www.sec.gov/
interps/telephone/phonesupplement3.htm (discussing the rationale for
why the staff has permitted announcement to be used as the reference
point for calculating U.S. ownership in ``pre-conditional offers''
conducted under U.K. or Irish law).
---------------------------------------------------------------------------

    Where U.S. ownership levels do not permit the acquiror to rely on
the Tier I exemption or Rule 802, calculating the level before
announcement would provide more time to plan and put together the
necessary offering materials. For those who plan to rely on the Tier II
exemption, the proposed change would afford more time to determine and
seek any necessary

exemptive or no-action relief. In addition, because announcement also
is the triggering event for application of Rule 14e-5, this change
would further harmonize Tier I and Tier II relief as it relates to that
provision. However, we are aware that for some business combination
transactions, several weeks or months may elapse between the time of
announcement and commencement of the transaction, because of home
country regulatory review or other reasons. The target security holder
base, including the percentage of those securities held by U.S.
persons, may change significantly between announcement and
commencement. We do not propose to change the relevant date for
calculation of U.S. ownership for rights offerings. Issuers will
continue to calculate U.S. ownership as of the record date for a rights
offering.\82\ Because issuers control the record date for rights
offerings and generally have greater access to information about their
own security holders, the test for calculating U.S ownership for rights
offerings has not been the subject of requests for relief. Therefore,
we do not propose to change that test today.
---------------------------------------------------------------------------

    \82\ See Securities Act Rule 800(h)(1).
---------------------------------------------------------------------------

    The existing cross-border exemptions provide that where one
acquiror is eligible to rely on a particular cross-border exemption
based on the level of U.S. ownership in the target, a second acquiror
who makes an offer for the same target company may rely on the same
exemption.\83\ We do not propose to change this result with the rule
modifications we propose today. We believe it provides an important
safeguard to place competing transactions on an equal footing with
respect to calculation of U.S. ownership and eligibility to rely on
applicable cross-border exemptions.
---------------------------------------------------------------------------

    \83\ See, e.g., Exchange Act Rule 14d-1(d)(1)(ii). The second
bidder may choose not to rely on the same exemption as the first
bidder. See also Cross-Border Adopting Release, Section II.F.1.
---------------------------------------------------------------------------

Request for Comment
     Should we revise the date as of which U.S. ownership is
calculated for purposes of determining eligibility to rely on the
cross-border exemptions for business combination transactions, as
proposed?
     [cir] Should we revise the rules to provide for a range of dates
as proposed, or should we continue to specify a date certain for the
calculation? If we continue to specify a date certain, should we
specify a date earlier than the 30th day before commencement? For
example, should we specify the 30th day before announcement?
     Is a range of 60 days before announcement sufficient time
to allow bidders and issuers maximum flexibility while avoiding the
potential for manipulation of the calculation of U.S. ownership? Or
would 75 or 90 days be more appropriate?
     Is announcement the appropriate reference point for
determining eligibility to rely on the cross-border exemptions? Or
should we retain commencement as the reference point? Are there other
alternative reference points we should consider?
     Should we keep commencement as a reference point, but use
a range, such as within 60 days before commencement?
     Is it appropriate to use announcement as the reference
point, even where a significant period of time may elapse between
announcement and commencement, and the makeup of the target security
holder base may change in response to announcement or because of the
lapse of time? Should we establish a limit on the period of time which
may elapse between the reference point for calculation of U.S.
ownership and the commencement of the business combination transaction?
     Should we change the date as of which U.S. ownership is
calculated for rights offerings in the same or in a similar manner? If
so, please explain what issues may arise under the current test and
what changes should be made.
     If we adopt the proposed rule changes allowing bidders and
offerors to choose a date within a range for purposes of the
calculation of U.S. ownership, should we provide guidance on what dates
may not be chosen because of an event or events significantly affecting
the target security holder base? For example, if an event occurs that
the bidder or offeror knows significantly impacted the U.S. ownership
of the target securities within the relevant sixty-day range, but the
bidder or offeror did not cause or contribute to such event, should the
bidder or offeror be prohibited from using that date as the reference
point for the calculation of U.S. ownership?
3. The Current Test for Non-Negotiated or Hostile Tender Offers
a. Concerns
    Where a third-party tender offer is not made pursuant to an
agreement between the bidder and the target company, the current cross-
border exemptions allow a bidder to presume eligibility to rely on the
exemptions based on a test outlined in our rules, which focuses on
information readily available to the bidder.\84\ The hostile
presumption was adopted in recognition of the difficulties third
parties face in obtaining information about U.S. ownership without the
cooperation of the target company.\85\ Because issuers have greater
access to information about their own security holders, the hostile
presumption is not available for issuer tender offers.
---------------------------------------------------------------------------

    \84\ See Securities Act Rule 802(c) and Instruction 3 to
Exchange Act Rules 14d-1(c) and 14d-1(d).
    \85\ See Cross-Border Adopting Release, Section II.F.3.
---------------------------------------------------------------------------

    The eligibility standard for hostile transactions is based in part
on the trading volume of the target's securities in the United States,
as compared to worldwide trading volume, over a 12-month period.\86\
However, the presumption of U.S. ownership derived under the trading
volume element of the test is qualified by information about U.S.
ownership reported in the target's most recent annual report filed with
the Commission or its home country regulators.\87\ In addition, the
bidder cannot rely on the hostile presumption if it knows or has reason
to know that the actual level of U.S. ownership of the subject
securities exceeds the relevant thresholds for Tier I and Tier II.\88\
Knowledge or ``reason to know'' may come from sources other than
reports filed with the Commission or the target's home country
regulator and disqualifies the bidder from being able to rely on the
cross-border exemptions.
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    \86\ Securities Act Rule 802(c)(2) and Instruction 3.ii. to
Exchange Act Rules 14d-1(c) and 14d-1(d). Trading volume in the
hostile presumption is not calculated in the same way as the average
daily trading volume used for purposes of deregistration and the
threshold proposed for Rule 12g3-2(b). The trading volume in the
hostile presumption is calculated using a 12-calendar-month period
ending 30 days before commencement of the offer, although we propose
to change this calculation to a 12-calendar-month period ending no
later than 60 days before announcement of the offer, as discussed
below.
    \87\ Securities Act Rule 802(c)(3) and Instruction 3.iii. to
Exchange Act Rules 14d-1(c) and 14d-1(d).
    \88\ Securities Act Rule 802(c)(4) and Instruction 3.iv. to
Exchange Act Rules 14d-1(c) and 14d-1(d).
---------------------------------------------------------------------------

    These elements of the hostile presumption have resulted in certain
issues in practice. First, acquirors appear to be uncertain about what
constitutes ``reason to know'' with respect to the level of U.S.
ownership of the target, other than information reported in filings
with the Commission or the home country regulators. Acquirors have
expressed uncertainty about whether they have any obligation, and if
so, the extent of their obligation to seek out information about U.S.
ownership levels. Questions also arise as to the timing of that
knowledge. For example, because average daily trading

volume is calculated as of the 12-calendar-month period ending 30 days
before commencement,\89\ acquirors often are unsure of whether their
actual or imputed knowledge of U.S. ownership similarly should be as of
that date.
---------------------------------------------------------------------------

    \89\ Securities Act Rule 802(c)(2) and Instruction 3.ii. to
Exchange Act Rules 14d-1(c) and 14d-1(d).
---------------------------------------------------------------------------

    It also is possible that targets may use the reporting and
knowledge elements of the hostile presumption defensively. For example,
targets that learn of a possible hostile offer could file reports
preemptively with the Commission stating a percentage of U.S. ownership
that precludes the hostile bidder's reliance on certain exemptions, or
they may contact the bidder's counsel directly to assert levels of U.S.
ownership that disqualify the bidder from relying on Tier I and Rule
802 in particular.\90\ In the latter case, bidders have asked whether
such an assertion as to U.S. ownership must be substantiated (and if
so, how) in order to preclude reliance on the hostile presumption. Even
when a target has filed a periodic report with the Commission
indicating a certain percentage of U.S. ownership as a defensive
measure, we have seen targets reduce those ownership figures when the
transaction becomes recommended. These types of situations create a
level of uncertainty for unsolicited bidders that may make it difficult
to apply the presumption of U.S. ownership in unsolicited offers.
---------------------------------------------------------------------------

    \90\ It also is possible that a target may attempt to provide
information preemptively before announcement of a hostile bid, but
we believe this may happen less frequently when the determination of
U.S. ownership is made as of a date before announcement, because the
negotiations may begin in a friendly manner.
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b. Proposed Changes to the Presumption for Non-Negotiated Transactions
    Today we propose changes to the hostile presumption for determining
eligibility to rely on the cross-border exemptions. First, we propose
to clarify the ``reason to know'' element of that test.\91\ In the
years since the adoption of the cross-border exemptions, bidders
frequently have asked what constitutes ``reason to know'' information
about U.S. ownership for purposes of the hostile presumption. We
propose to amend our rules to specify that an acquiror has reason to
know information that is publicly available. This would include
information appearing in reports compiled by independent information
service providers that generally are available to the public. However,
neither our current rules nor the changes we propose today
affirmatively would require an acquiror seeking to rely on the hostile
presumption to engage such a third-party service at its own expense.
---------------------------------------------------------------------------

    \91\ Securities Act Rule 802(c)(4) and Instruction 3.iv. to
Exchange Act Rules 14d-1(c) and 14d-1(d).
---------------------------------------------------------------------------

    The proposed rule also would make it clear that acquirors are
presumed to know information about beneficial ownership reflected in
filings by third parties with the Commission, such as beneficial
ownership reports on Schedule 13D, 13F \92\ or 13G. Similarly,
acquirors are presumed to know about similar reports filed by third
parties in the target's home country and in the country of its primary
trading market, if different. Acquirors may not ignore credible
information about target securities held by U.S. persons from non-
public sources, such as from investment bankers or other market
participants, including the target company, from whom they receive
information. As discussed below, however, such information would have
to be available before announcement to disqualify the acquiror from
relying on the hostile presumption.
---------------------------------------------------------------------------

    \92\ 17 CFR 249.325.
---------------------------------------------------------------------------

    We also propose to specify the time periods applicable to the
hostile presumption. For purposes of the element of that test relating
to the average daily trading volume calculation, we propose to modify
the instruction to our rules to mandate a calculation over a twelve-
calendar month period ending no later than 60 days before
announcement.\93\ This time period for calculation is the same as the
period we are proposing for negotiated transactions. We believe it is
appropriate that the time periods for measuring levels of U.S.
ownership be comparable for both hostile and negotiated transactions.
---------------------------------------------------------------------------

    \93\ See proposed revisions to Securities Act Rule 802(c)(2) and
Instruction 2.ii. to Exchange Act Rules 14d-1(c) and (d).
---------------------------------------------------------------------------

    We also propose to add a timing element to the other components of
the hostile presumption test. These changes to the instructions and to
the rules would provide that the acquiror's knowledge or ``reason to
know'' refers to knowledge as of the date of announcement. As proposed,
our rules would allow an acquiror to ignore conflicting information
received after announcement.\94\ These changes are intended to address
our concern that some target companies may be manipulating their
disclosure of U.S. ownership with respect to unsolicited offers. They
also would eliminate uncertainties created by changes in the target's
security holder base that may be caused by the announcement of the
offer.
---------------------------------------------------------------------------

    \94\ See proposed Securities Act Rule 802(c)(3) and (4) and
Instructions 3.iii. and iv. to Exchange Act Rules 14d-1(c) and (d).
---------------------------------------------------------------------------

Request for Comment
     Is it helpful to specify in the rule, as proposed,
examples of information that the acquiror has reason to know, or should
the rule remain more general?
     Would the clarifications we propose to the reason to know
element of the test prevent the abuse of U.S. ownership information by
targets? Are there currently sufficient safeguards to prevent misuse of
this information?
     For purposes of the hostile presumption, should we change
the date for comparison of the average daily trading volume of the
target securities to a twelve-month period ending no later than 60 days
before announcement, as proposed?
     [cir] Should we limit the knowledge or reason to know element of
the test to the same time, as proposed, so that acquirors will not be
disqualified from relying on the presumption if they learn of
conflicting U.S. ownership information after the date of announcement?
Or should we require acquirors to take into account any information
they learn at any time before commencement?
     [cir] Would the proposed cut-off date for the actual knowledge
test be disadvantageous for U.S. investors in the target company?
     [cir] Where the target asserts levels of U.S. ownership that are
inconsistent with reliance on an applicable presumption in the context
of a hostile transaction, should the rules provide any guidance on the
extent to which such assertions must be substantiated? Should we allow
acquirors to ignore such assertions by the target, absent adequate
substantiation or in the face of conflicting information known to the
acquiror?
     [cir] If the rule changes are adopted as proposed, should we make
corresponding changes to the date of comparison in the ``actual
knowledge'' element of the test for the MJDS with Canada? \95\
---------------------------------------------------------------------------

    \95\ See Exchange Act Rule 14d-1(b).
---------------------------------------------------------------------------

     Should we decline to make any changes in the reason to
know element of the hostile presumption, leaving acquirors to assess
the facts and circumstances in a specific situation on a case-by-case
basis?
4. Possible New Eligibility Standards for Negotiated and Hostile
Transactions
    Instead of adopting the proposed changes to our current eligibility
standards for hostile and negotiated cross-border business combinations

discussed above, we could adopt a different approach based on different
measures of U.S. investor interest in target securities. For example,
for negotiated transactions, we could consider a test based on twelve-
month ADTV in the United States as compared to worldwide trading volume
over the same period. Alternatively, we could consider a test based on
the percentage of shares that are held in the form of ADRs. It is
possible that there are other, more suitable tests that we have yet to
identify. We could adopt an alternate test for business combination
transactions only, or we could adopt it for both business combinations
and rights offerings.
    As discussed above, the existing hostile presumption available for
non-negotiated business combination transactions contains an element
based on a comparison of U.S. and worldwide ADTV,\96\ and we have
recently used this test as a reference in other areas.\97\ Based on an
analysis performed by the staff comparing U.S. beneficial ownership
figures yielded by the look-through analysis mandated by our current
rules to the figures that would result by using an ADTV-based measure,
it appears that trading volume may not reflect beneficial holdings of
U.S. investors in a target company. To perform this analysis, the staff
considered negotiated business combination transactions conducted under
the existing cross-border exemptions using the current look-through
analysis and compared the resulting percentages of U.S. beneficial
ownership with the figures that would have resulted using the ratio of
U.S. to worldwide ADTV. Based upon the transactions considered, the
analysis suggests that the correlation between the ADTV-based measure
and the percentage of target securities beneficially held by U.S.
persons is low.
---------------------------------------------------------------------------

    \96\ See Securities Act Rule 802(c) and Instructions 3.i.-iv. to
Exchange Act Rules 14d-1(c) and 14d-1(d).
    \97\ See footnotes 45 and 46 above.
---------------------------------------------------------------------------

    Using such a test may result in target companies with significant
U.S. ownership qualifying for the Tier I and Rules 801 and 802
exemptions. Where a bidder, including a U.S. company, is eligible to
rely on the Tier I cross-border exemptions, it may issue securities
without registration under Securities Act Rule 802. We are concerned
that use of an ADTV test for eligibility to rely on the cross-border
exemptions would allow bidders, including U.S. bidders, to issue
significant amounts of bidder securities to U.S. holders, without the
protections of registration. For cash tender offers and other kinds of
business combination transactions, we do not believe the requirements
of the U.S. tender offer and other rules applicable to business
combinations are onerous. Unlike continuing Exchange Act registration
and reporting requirements, these rules apply to a single, discrete
transaction and, in many instances, are specifically tailored to
address potential conflicts with foreign law and practice.
    We are concerned that extraordinary events in the life of a
corporation, such as tender or exchange offers or other kinds of
business combination transactions, may pose unique opportunities and
risks to security holders that are not present in the context of
deregistration, where we have adopted an ADTV test for measuring U.S.
interest in a transaction, or exemption from Exchange Act Section 12(g)
registration under Rule 12g3-2(b), where we have proposed an ADTV test.
In a tender or exchange offer, where the bidder may present its offer
directly to target security holders even where the target company
itself does not support the offer, the disclosure and procedural
protections of our rules provide critical safeguards for U.S.
investors. Unlike capital-raising transactions, the interests of all
target security holders, including U.S. holders, are affected by
business combinations, whether or not they are permitted to participate
in them. As noted above, the requirement to comply with U.S. rules for
a business combination transaction is generally less burdensome than
the continuous reporting requirements under the Exchange Act. For these
reasons, we have historically viewed a test based on U.S. beneficial
ownership of target securities as the approach that best aligns U.S.
investor interests with application of our rules. Therefore, we are not
proposing the use of an ADTV test to determine eligibility to rely on
the cross-border exemptions.
    Similarly, we are not currently proposing a test based solely on a
measure of the percentage of target securities held in ADR form. When
the current cross-border exemptions were proposed, we considered an
eligibility standard that presumed that target securities held in ADR
form were beneficially held by U.S. persons.\98\ Commenters were
critical of any presumption that securities held in ADR form were held
only by U.S. persons.\99\ An ADR-based test need not rest on a
presumption that securities held in ADR form are held by U.S. persons;
rather, ADRs could, in general, be considered a proxy for U.S.
beneficial ownership, or for a component (e.g., direct retail) of U.S.
beneficial ownership. Since some foreign target securities are traded
in direct share form in the United States, any test based on securities
held in ADR form would be inapplicable to those companies.
---------------------------------------------------------------------------

    \98\ See 1998 Cross-Border Proposing Release, Section II.H.1.
    \99\ See Cross-Border Adopting Release, Section II.F.1.
---------------------------------------------------------------------------

    We believe that information about the percentage of target shares
held in ADR form is not currently readily accessible to third-party
bidders in non-negotiated offers. The information might become
available through the introduction of registrant disclosure
requirements, however. In the case of such disclosure, an ADR-based
test could provide a solution for both hostile and negotiated
transactions. A weakness of the ADR-based measure is that, as discussed
above, because some foreign target securities are traded in direct
share form in the United States, any test based on securities held in
ADR form would be inapplicable to those companies. We also would need
to consider the relevant time period for which we would look at the
percentage of target securities held in ADR form if such a test were to
be considered, and whether ADRs held by the acquiror and large holders
would continue to be excluded from the calculation of U.S. ownership
under such a test. If we did not exclude ADRs held by the bidder, the
bidder could potentially influence the percentage of such securities
held by U.S. persons by changing the form of its securities held from
ADRs into the underlying securities. We are interested in obtaining
comments as to whether an ADTV test or a test based on target
securities held in ADR form would be appropriate.
Request for Comment
     Is our continued focus on the percentage of target
securities beneficially held by U.S. persons as the relevant test for
measuring U.S. interest appropriate and in the best interests of U.S.
investors?
    [cir] If we change the rules as proposed, would this alleviate
sufficiently the practical difficulties with the calculation of U.S.
ownership, so that our rules will be more workable and will better
encourage and facilitate the inclusion of U.S. security holders in
cross-border transactions? Or would there still be a reason to move
from the current focus on the percentage of securities held by U.S.
investors to another standard?
    [cir] Are there other practical difficulties involving the
beneficial ownership

standard that we have not addressed and that it would be helpful to
address?
     Should we propose a different test for Tier I and Tier II
eligibility, based on U.S. ADTV compared to worldwide ADTV over a
twelve-month period?
    [cir] Using U.S. ADTV compared to worldwide ADTV would likely
result in many more transactions being eligible for Tier I, and some
additional transactions being eligible for Tier II if we maintain the
existing ten percent and 40 percent thresholds. Should the thresholds
be adjusted so that the transactions eligible for the cross-border
exemptions are equivalent, in terms of number of transactions eligible,
before and after changing the eligibility test? If ADTV levels in the
United States are very low even where beneficial ownership is high,
should we adjust the thresholds to account for this situation? For
example, should we lower the Tier I threshold to five percent? One
percent? Less than one percent? If we do this, should we also adjust
the thresholds in the hostile presumption correspondingly? What would
be the appropriate adjustments for Tier II?
    [cir] Are there reasons for or against adopting an ADTV test? For
example, would an ADTV test be an adequate measure for gauging U.S.
retail versus institutional ownership of the target securities?
    [cir] Should we qualify the ADTV test based on other factors, such
as an acquiror's actual knowledge or U.S. ownership as reported by the
target?
    [cir] If we adopt an ADTV test, should we adopt the concept of
``primary trading market'' as defined in Exchange Act Rule 12h-
6(f)(5)?\100\ That is, should we establish the requirement that the
issuer maintain a listing for the subject securities on one or no more
than two exchanges in a foreign jurisdiction that, alone or together,
constitute 55 percent of the trading in the subject securities over a
specified period as a comparison point for U.S. trading volume? Should
we adopt the concept that the ``primary trading market'' for the
subject securities may encompass one or no more than two foreign
markets, and if more than one market, the requirement that the
aggregate trading volume in one of those two foreign markets must be
greater than the trading volume in the U.S., as specified in Rule 12h-
6(f)(5)?
---------------------------------------------------------------------------

    \100\ See footnote 58 above.
---------------------------------------------------------------------------

     Should we propose a different test for Tier I and Tier II
eligibility, based on the percentage of shares held in ADR form?
    [cir] Is the percentage of shares held in ADR form an effective
proxy for U.S. investor ownership? For U.S. institutional ownership?
For U.S. direct retail investor ownership?
    [cir] Are there reasons why U.S. persons may choose to hold target
securities in direct share form instead of holding ADRs?
    [cir] Under a test based on the percentage of shares held in ADR
form, should Tier I and Tier II eligibility thresholds remain constant
at their current values (10 percent and 40 percent), or should they
change? What criteria should we use, and what evidence should we
consult in establishing eligibility thresholds for Tier I and Tier II?
    [cir] If we adopt such a test, as of what date should we measure
the securities held in ADR form? Should we exclude from the calculation
ADRs held by certain persons, such as the bidder, as we do under our
current test for some kinds of business combination transactions?
    [cir] How should we handle securities of foreign private issuers
that trade in direct share form?
    [cir] If we adopt a test based on the percentage of shares held in
ADR form, should we amend Form 20-F to require reporting of sponsored
ADRs outstanding, so that targets, acquirors and their investors
understand eligibility status? How costly or difficult would it be for
the issuer to obtain information about the number of sponsored ADRs
outstanding? If this information were reported only once each year in
the Form 20-F, would the information be current enough for use in
cross-border transactions that might occur months later?
    [cir] Are there reasons for or against adopting a test based on the
percentage of shares held in ADR form?
     ADTV- and ADR-based standards may effectively place
companies with no U.S.-traded securities in Tier I. What implications
would this have for investor protection?
    [cir] If we move toward a different standard for determining U.S.
interest, should this new standard apply only to companies with
securities traded in the U.S., with the beneficial ownership standard
continuing to apply to companies with no securities traded in the U.S.?
Alternatively, for securities not traded in U.S. markets, do U.S.
investors adequately understand the distinct risks of ownership?
     If we make any changes to the standard for determining
Tier I and Tier II eligibility, should we also change the standard for
the hostile presumption? Should we adopt this alternative standard for
business combination transactions only, or should we adopt it for both
business combinations and rights offerings?
     If we change the standard, should we also change the
standard for the tender offer rules in Rule 14d-1(b) under the MJDS
with Canada?
     Should we propose a different eligibility test(s) for
determining eligibility to rely on the cross-border exemptions? What
general criteria are important in selecting a measure for U.S. investor
interest, for the purposes of this rule? Several potential criteria are
(i) the ease of public access to information related to the measure;
(ii) the difficulty of manipulation of the measure; and (iii) the
alignment of the measure with the percentage of target securities
beneficially held by U.S. investors. Are these criteria appropriate?
Are there others we should consider?

B. Proposed Changes to Tier I Exemptions

1. Expanded Exemption From Rule 13e-3
    Rule 13e-3 establishes specific filing and disclosure requirements
for certain kinds of affiliated transactions, because of the conflicts
of interest inherent in such situations.\101\ Rule 13e-3 applies to
these kinds of transactions by issuers or their affiliates, where the
transactions would have a ``going private'' effect.\102\
    Cross-border transactions conducted by the issuer or its affiliates
under Exchange Act Rules 13e-4(h)(8), 14d-1(c) and Securities Act Rule
802 are exempt from the requirements of Rule 13e-3.\103\ The scope of
the current Tier I exemption from Rule 13e-3 does not apply to some
transaction structures commonly used abroad. These include schemes of
arrangement,\104\ cash mergers, compulsory acquisitions for

cash,\105\ and other types of transactions. We do not believe there is
a reason for excluding these kinds of transactions from the exemption
from Rule 13e-3, assuming they would otherwise qualify for Tier I. We
believe the form of the transaction structure should not prevent an
otherwise-eligible issuer or affiliate from relying on the Tier I
exemption from Rule 13e-3. We therefore propose to expand the scope of
the Tier I exemption from Rule 13e-3 to remove any restriction on the
category of transactions covered.
---------------------------------------------------------------------------

    \101\ The kinds of transactions covered by Exchange Act Rule
13e-3 include tender offers, purchases of securities, mergers,
reorganizations, reclassifications and sales of substantially all
the assets of a company. See Rule 13e-3(a)(3)(i)(A)-(C). Rule 13e-3
requires that a Schedule 13E-3 be filed for these kinds of
transactions. See Exchange Act Rule 13e-3(d)(1).
    \102\ Exchange Act Rule 13e-3(a)(3)(ii) lists the effects that
will cause the rule to apply to a specified transaction: (A) Causing
any class of equity securities of an issuer which is subject to
section 12(g) or section 15(d) of the Act to be held of record by
less than 300 persons; or (B) causing any class of equity securities
of the issuer which is listed on an exchange or quoted on an
interdealer quotation system to no longer be so listed or quoted.
For foreign private issuers engaged in transactions that would have
a going private effect under our rules, we interpret Rule 13e-3 to
apply where the transaction results in fewer than 300 security
holders of record in the United States. See Foreign Issuer Reporting
Enhancements, Release No. 33-8900 (February 29, 2008).
    \103\ Exchange Act Rule 13e-3(g)(6).
    \104\ We use this term to refer to a court-approved business
combination transaction. See, e.g., U.K. Companies Act, Parts 26 and
27.
    \105\ By ``compulsory acquisition,'' we mean a transaction where
an acquiror purchases the specified minimum percentage of target
securities set by applicable law or the governing instruments of the
target company, thereby allowing it to acquire any remaining target
securities it does not own without the consent of the holders. A
compulsory acquisition may occur after a tender offer for all target
securities. A compulsory acquisition of target securities remaining
after a tender offer will sometimes be exempt from the application
of Exchange Act Rule 13e-3 under existing rules. See Exchange Act
Rule 13e-3(g)(1).
---------------------------------------------------------------------------

    The heightened disclosure requirements of Rule 13e-3 may represent
a significant disincentive for acquirors to include U.S. security
holders in cross-border transactions that do not currently fit within
the Rule 13e-3(g)(6) exemption, particularly where U.S. holders make up
no more than ten percent of the target shareholder base. In several
instances, the staff has granted individual no-action requests for
transaction structures not covered within the scope of current Rule
13e-3(g)(6), but which otherwise met the conditions for reliance on
that exemption.\106\ The revised rule we propose today is consistent
with the staff's approach in these no-action letters.
    We believe exempting acquirors from the application of Rule 13e-3
in Tier I-eligible transactions is consistent with our goal of
facilitating the inclusion of U.S. investors in primarily foreign
transactions. Therefore, we propose to eliminate the restriction on the
kinds of cross-border transactions that qualify for the Tier I
exemption from Rule 13e-3. The proposed rule would include within the
exemption any kind of transaction that would otherwise meet the
conditions for Tier I or Rule 802 eligibility.\107\ By omitting
reference to specific kinds of transaction structures, we hope the
revised exemption will focus on substance rather than form.
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    \106\ See, e.g., SUNDAY Communications Ltd. (November 1, 2006)
(involving a scheme of arrangement); SUNDAY Communications Ltd.
(November 7, 2005) (involving a privatization scheme); and Equant
N.V. (involving a synthetic merger).
    \107\ In order to qualify for the Tier I exemption, an offer
must meet the following requirements of Exchange Act Rules 13e-
4(h)(8) and 14d-1(c): (i) The acquiree must be a foreign private
issuer as defined in Rule 3b-4 of the Exchange Act; (ii) U.S.
holders of the acquiree must hold ten percent or less of the
securities subject to the offer; (iii) the acquiror must submit an
English language translation of the offering materials to the SEC
under cover of Form CB and, in the case of an acquiror who is a
foreign private issuer, submit to service of process on Form F-X;
(iv) U.S. holders must be treated on terms at least as favorable as
those offered to any other security holders of the acquiree; and (v)
U.S. holders of the acquiree must be provided the offering circular
or other offering materials, in English, on a comparable basis as
non-U.S. acquiree security holders. See also Securities Act Rule
802(a).
---------------------------------------------------------------------------

Request for Comment
     Should the proposed expansion of the Tier I exemption from
Rule 13e-3 specify the particular types of affiliated transaction
structures that will be exempt from Rule 13e-3, as the current rule
does?
     If so, what kinds of transactions should be covered?
     Is it preferable to phrase the exemption more generally,
as proposed, to avoid limiting the focus on the transaction structure?
Are there any kinds of affiliated transactions that should not be
included in the exemption?
2. Technical Changes to Rule 802
    We are proposing a technical change to Rule 802 to clarify the
application of Rules 802(a)(2) and (3). When read in context, it is
clear that the term ``issuer'' in those rules is intended to refer to
the ``offeror'' in an exchange offer. We believe it is appropriate to
revise those rules to use the term ``offeror'' instead. This is
consistent with the reference to ``offeror'' in Rule 802(c)(4). These
revisions are not intended to change the scope or operation of the
existing rule.
    In some foreign jurisdictions, local rule or practice dictates that
the offeror and the target company jointly prepare a single offer
document that is disseminated to target holders. In other
jurisdictions, the offeror may prepare the offer materials but they are
disseminated by the target company. Our rule change is not intended to
change the obligation of the offeror to submit the Form CB with
attached offer materials, even where the offer document is technically
distributed by another party to the transaction on its behalf.

C. Proposed Changes to Tier II Exemptions

    As discussed above, the Tier II cross-border exemptions currently
provide targeted relief from specific U.S. tender offer rules, where
U.S. persons hold more than ten percent but no more than 40 percent of
the relevant class of target securities.\108\ The Tier II exemptions
address certain common procedural and practical problems associated
with conducting offers in accordance with two or more different
regulatory regimes. This relief is limited in scope, in recognition of
the substantial U.S. interest in such transactions.
---------------------------------------------------------------------------

    \108\ Exchange Act Rules 13e-4(i) and 14d-1(d).
---------------------------------------------------------------------------

    Unlike the Tier I exemptions and the Rule 801 and 802 exemptions,
the Tier II exemptions do not exempt third-party bidders or issuers
from applicable U.S. filing, disclosure, dissemination and procedural
requirements for tender offers or going-private transactions subject to
Rule 13e-3. In addition, no exemption is provided from the filing and
disclosure requirements of Schedules TO and 13E-3. Accordingly, no Form
CB is required for Tier II cross-border tender offers. Unlike
Securities Act Rules 801 and 802, the Tier II exemptions do not provide
relief from the registration requirements of Section 5 of the
Securities Act.
    Since the adoption of the cross-border exemptions, we have become
aware of specific areas in which the Tier II exemptions do not function
as smoothly as intended. We also have identified other instances of
conflict between U.S. and foreign regulation or practice which we
believe warrant expanded relief. The no-action and exemptive letters
issued for Tier II cross-border transactions since the adoption of the
exemptions reveal a number of common areas in which further regulatory
relief may be appropriate. By broadening the relief provided for Tier
II-eligible transactions as we propose today, we hope to obviate the
need for many of these individual requests for relief in the future.
This expanded relief is specifically targeted and narrowly tailored,
and as a result, we believe it maintains an appropriate balance between
investor protection and the promotion of cross-border transactions,
particularly in transactions involving target companies with
significant levels of U.S. ownership.
Request for Comment
     In addition to the proposed revisions described below, are
there other areas in which Tier II should be expanded to better address
the needs of bidders and U.S. target security holders in cross-border
tender offers?
     Are there areas in which the existing Tier II exemptions
or the revisions we propose should be limited or modified?

1. Extend Tier II Relief Where Target Securities Are Not Subject to
Rule 13e-4 or Regulation 14D
    The Tier II exemptions apply to transactions governed by Regulation
14D and Rule 13e-4 under the Exchange Act.\109\ As currently written,
it is unclear whether the Tier II exemptions are available when a
tender offer is not subject to those rules, i.e., when the tender offer
is governed by Regulation 14E \110\ only. We believe the Tier II
exemptions should be available if the conditions specified in our rules
are satisfied, and therefore we propose to amend the rules accordingly
to clarify that the Tier II exemptions are available regardless of
whether the target securities are subject to Rule 13e-4 or Regulation
14D.
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    \109\ Rule 13e-4 and Regulation 14D apply only to tender offers
for equity securities. Regulation 14D applies only where the equity
security that is the subject of the tender offer is registered under
Section 12 of the Exchange Act, and where the bidder makes a partial
offer for less than all of the outstanding securities of the subject
class, where the bidder could own more than 5 percent of those
securities when purchases in the tender offer are aggregated with
its existing ownership of those securities. Rule 13e-4 applies to an
issuer tender offer where the subject securities are not themselves
registered under Section 12, but where the issuer has another class
of securities that are so registered.
    \110\ Exchange Act Rule 14d-1(a) defines the scope of Regulation
14E and currently includes within the scope of that regulation only
Exchange Act Rules 14e-1 and 14e-2. Exchange Act Rule 14d-1(a) was
not amended to reflect the increased scope of Regulation 14E,
beginning with the adoption of Exchange Act Rule 14e-3 in 1980. See
Tender Offers, Release No. 34-17120 (September 4, 1980) [45 FR
60410]. Today we propose a change to the definition of Regulation
14E in Rule 14d-1(a), to encompass Exchange Act Rules 14e-1 through
14e-8.\
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    Since the adoption of the Tier II cross-border exemptions, the
staff has periodically received inquiries from offerors in tender
offers that would have qualified for the Tier II cross-border
exemptions, but for the fact that the tender offer was not subject to
Rule 13e-4 or Regulation 14D. The staff has taken the position that
bidders otherwise meeting the conditions for reliance on the Tier II
cross-border exemptions may rely on that relief in making tender offers
for a subject class of securities not subject to Rule 13e-4 or
Regulation 14D, to the extent applicable. Today we propose to codify
this position by changing the language of the Tier II exemptions to
specifically expand the scope of the exemptions to these kinds of
offers.\111\
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    \111\ See proposed Exchange Act Rules 13e-4(i) and 14d-1(d).
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    Some of the relief afforded under the Tier II exemptions will not
be necessary in the case of offers not subject to Rule 13e-4 or
Regulation 14D. For example, because our ``all-holders'' requirement
\112\ does not apply to such offers, the Tier II provision permitting
the use of the dual offer structure \113\ may be unnecessary. However,
where the relief provided in Tier II is needed, we see no reason to
restrict its application only to tender offers subject to Rule 13e-4 or
Regulation 14D.
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    \112\ See Exchange Act Rules 13e-4(f)(8) and 14d-10(a) [17 CFR
240.14d-10(a)].
    \113\ Exchange Act Rules 13e-4(i)(2)(ii) and 14d-1(d)(2)(ii).
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Request for Comment
     Is the proposed expansion of the application of the Tier
II exemptions to tender offers not subject to Rule 13e-4 or Regulation
14D appropriate?
     Should we condition the proposed extension of the relief
provided under Tier II on any other factors besides general eligibility
to rely on the Tier II exemptions?
     Are there other areas in which we should provide targeted
relief (other than those currently proposed for Tier II offers) for
tender offers not subject to Rule 13e-4 or Regulation 14D?
2. Expand Tier II Relief for Dual or Multiple Offers
a. Offeror May Make More Than One Non-U.S. Offer
    U.S. tender offer rules require that when a bidder makes a tender
offer that is subject to Section 13(e) or 14(d) of the Exchange Act,
that tender offer must be open to all target security holders of that
class.\114\ The Tier II cross-border exemptions currently contain a
provision permitting a bidder conducting a tender offer to separate
that offer into two separate offers--one U.S. and one foreign--for the
same class of securities.\115\ This exemption for dual offers provides
bidders with maximum flexibility to comply with two sets of regulatory
regimes and to accommodate frequent conflicts in tender offer practice
between U.S. and foreign jurisdictions. By permitting the use of two
separate but concurrent offers--one made in compliance with U.S. rules
and the other conducted in accordance with foreign law or practice--the
dual offer provision facilitates cross-border tender offers.
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    \114\ Exchange Act Rules 13e-4(f)(8) and 14d-10(a)(1).
    \115\ Exchange Act Rules 13e-4(i)(2)(ii) and 14d-1(d)(2)(ii).
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    In practice, however, issues have arisen because of the language of
the dual offer provision contained in the Tier II exemptions. First,
the text of the exemption specifically permits only two offers for the
target class of securities.\116\ Bidders may be required to (or may
wish to) make more than one offer outside of the United States. This
may be the case, for example, where the primary trading market for the
target's securities differs from the target's country of
incorporation.\117\
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    \116\ Id.
    \117\ See, e.g., Mittal Steel Company N.V. (June 22, 2006)
(``Mittal''). This letter states that it may be relied upon by any
similarly-situated offeror or affiliate meeting the conditions
outlined in the letter.
---------------------------------------------------------------------------

    We see no reason to limit a bidder to only two offers for target
securities. Where a bidder is subject to more than one foreign
regulatory scheme, greater potential for regulatory conflicts may
exist. We note that companies have, upon request, received relief
permitting multiple foreign offers.\118\ We propose to eliminate the
restriction on the number of non-U.S. offers a bidder may make in a
cross-border tender offer by changing the references to ``dual offers''
to refer instead to ``multiple offers.'' \119\
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    \118\ See, e.g., Alcan; Asia Satellite Telecommunications
Holdings Limited (May 25, 2007); BCP Crystal Acquisition GmbH & Co
(February 3, 2004) (``BCP'') and Mittal (providing relief for
purchases outside of a U.S. offer for a tender offer that included
more than one offer conducted outside of the United States).
    \119\ See proposed Exchange Act Rules 13e-4(i)(2)(ii) and 14d-
1(d)(2)(ii).
---------------------------------------------------------------------------

b. U.S. Offer May Include Non-U.S. Persons and Foreign Offer(s) May
Include U.S. Persons
    The existing Tier II dual offer exemption provides that the U.S.
offer can be open only to security holders resident in the United
States.\120\ This limitation creates a problem because bidders
frequently seek to include all holders of ADRs, not only U.S. holders,
in the U.S. offer. In many instances, the target's home country
regulations do not apply, by their terms, to ADRs.\121\ Similarly, the
existing Tier II dual offer provision mandates that the foreign offer
be available only to non-U.S. holders.\122\ The prohibition against
permitting U.S. holders from participating in the foreign offer may
conflict with the law of the target's home country if those rules do
not permit the exclusion of any security holders, including those in
the United States.\123\
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    \120\ Exchange Act Rules 13e-4(i)(2)(ii) and 14d-1(d)(2)(ii).
    \121\ See, e.g., Portugal Telecom, SGPS, S.A. (December 19,
2006) (``Portugal Telecom'') (noting that the provisions of the
Portuguese Securities Code and the rules and regulations of the
Portuguese Comiss[atilde]o de Mercado de Valores Mobili[aacute]rios
did not apply to the offer for ADSs of the target company listed on
the New York Stock Exchange).
    \122\ Exchange Act Rules 13e-4(i)(2)(ii) and 14d-1(d)(2)(ii).
    \123\ See, e.g., Gas Natural SDG, S.A. (March 6, 2006)
(involving Spanish law).

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    Companies frequently are forced to seek individual relief from the
staff to address these issues.\124\ The staff often has granted relief
to permit a U.S. offer in a dual offer structure to include all holders
of ADRs, including foreign holders.\125\ We propose to change our rules
so that acquirors will no longer need to seek individual relief to
structure their offers in this manner. We are not aware of a
transaction for which acquirors have sought to extend the U.S. offer to
foreign target holders who do not hold in ADR form. Therefore, we are
not proposing to allow these holders to participate in U.S. offers.
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    \124\ See Harmony Gold Mining Company Limited (November 19,
2004) (``Harmony Gold 2004''); Discount Investment Corporation Ltd.
(June 14, 2004); Alcan; Serono S.A.; and Southern Cross (March 5,
2002).
    \125\ See e.g., Royal Bank of Scotland Group plc (July 23, 2007)
(``Royal Bank''); E.ON Aktiengesellschaft (December 6, 2006)
(``E.ON''); Koninklijke Ahold N.V. (September 10, 2002).
---------------------------------------------------------------------------

    We also propose to change our rules to allow U.S. holders to
participate in non-U.S. offers where required under foreign law and
where U.S. holders are provided with adequate disclosure about the
implications of participating in the foreign offer. When relief has
been granted to permit the inclusion of U.S. persons in a non-U.S.
offer, it has been conditioned on appropriate disclosure in the offer
materials concerning the risks for U.S. holders of participating in the
foreign offer.\126\ Relief also has been conditioned on the existence
of an express legal requirement in the foreign target company's home
jurisdiction to include U.S. target holders.\127\
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    \126\ See, e.g., Endesa, S.A. (July 3, 2007) (``Endesa'').
    \127\ Id.
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    Today we propose to change our rules to address these issues by
revising the equal treatment provisions in Exchange Act Rules 13e-
4(i)(2)(ii) and 14d-1(d)(2)(ii) to allow a U.S. offer to be made to
U.S. target holders and all holders of American Depositary Receipts
representing interests in the subject securities. The U.S. offer must
be made on terms at least as favorable as those offered any other
holder of the subject securities. We note that the proposed changes are
not intended to enable an offer to be made only to holders of ADRs or
only to holders of the underlying securities, where the target shares
are registered under Section 12 or where Rule 13e-4 otherwise applies.
We view ADRs and the underlying securities as a single class for
purposes of our tender offer and beneficial ownership reporting
rules.\128\
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    \128\ See American Depositary Receipts, Release No. 33-6894 (May
23, 1991) [56 FR 24420], Section II.D.2 (explaining that, for
purposes of determining beneficial ownership reporting requirements
under Section 13 of the Exchange Act, ADRs and the underlying
securities are to be considered a single class). The staff takes the
same view that they are one class for purposes of the tender offer
rules.
---------------------------------------------------------------------------

    In addition, revised Rules 13e-4(i)(2)(ii) and 14d-1(d)(2)(ii)
would provide that one or more foreign offers may be conducted in
conjunction with a U.S. offer for the same subject securities. U.S.
persons may be included in the foreign offer(s) only where the laws of
the jurisdiction governing such foreign offer(s) expressly preclude the
exclusion of U.S. persons from the foreign offer(s) and where the offer
materials distributed to U.S. persons fully and adequately disclose the
risks of participating in the foreign offer(s).
c. Proration and the Use of the Dual or Multiple Offer Structure
    When a bidder makes a partial tender offer \129\ subject to Section
13(e) or 14(d) of the Exchange Act, our rules require tendered
securities to be purchased on a pro rata basis if the offer is
oversubscribed.\130\ This is to assure equal treatment of security
holders who have tendered their securities.
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    \129\ A ``partial tender offer'' is a tender offer where the
bidder is offering to purchase less than all of the outstanding
securities of that the subject class.
    \130\ See Section 14(d)(6) of the Exchange Act [15 U.S.C.
78n(d)(6)], and Rules 13e-4(f)(3) and 14d-8 [17 CFR 240.14d-8].
---------------------------------------------------------------------------

    We are not proposing a change to this requirement. We are
clarifying that bidders relying on the dual offer provision in the Tier
II exemptions to conduct separate U.S. and non-U.S. offers for less
than all of a class of target securities must use a single proration
``pool,'' in accordance with the existing requirements of our
rules.\131\ This is not a change in how the staff has interpreted
existing proration rules; however, it has come to our attention that in
the past, certain bidders may have separately pro rated tenders made
into the U.S. and foreign offers.\132\ In this release, we clarify that
where a bidder makes a partial tender offer for less than all
outstanding target securities of a given class, and relies on the
provision in Tier II allowing the use of a dual or multiple (as
proposed) offer structure, the securities tendered into the U.S. and
non-U.S. offers must be pro rated on an aggregate basis in order to
comply with proration rules. Otherwise, if different proration factors
were used, U.S. security holders could be disadvantaged as compared to
target holders tendering into a foreign offer.
---------------------------------------------------------------------------

    \131\ Id.
    \132\ See AES Corporation (October 22, 2001) (advising against
this practice in the context of a partial cross-border tender
offer).
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Request for Comment
     Should we permit the use of multiple offers outside of the
United States for Tier-II eligible tender offers?
     Should we allow all non-U.S. holders to be included in a
U.S. offer, or only non-U.S. holders of ADRs, as proposed?
     Should we allow U.S. holders to be included in the foreign
offer(s) open to target security holders outside of the United States?
     [cir] Should we permit this, as proposed, only when applicable
foreign law does not allow exclusion of U.S. holders from the foreign
offer, even where a concurrent U.S. offer is available to them?
     [cir] Is the requirement that the implications of participating in
the foreign offer(s) be disclosed in the U.S. offering materials
adequate to protect U.S. investors?
     [cir] Should we impose additional conditions on the ability of
offerors to include U.S. target holders in the foreign offer(s)?
     Are there situations where bidders in cross-border tender
offers should be permitted to separately pro rate securities tendered
into U.S. and foreign offers?
3. Termination of Withdrawal Rights While Tendered Securities Are
Counted
    We are proposing rule revisions to eliminate issues relating to the
``back-end'' withdrawal rights required under Section 14(d)(5) of the
Exchange Act and Rule 13e-4(f)(2)(ii) for tender offers conducted under
the Tier II cross-border exemptions. Under today's proposed changes,
new provisions would be added to the Tier II exemptions permitting the
suspension of back-end withdrawal rights during the time after the
initial offering period, when tendered securities are being counted and
before they are accepted for payment.\133\ Both of the back-end
withdrawal rights provisions require bidders to provide withdrawal
rights after a set date, measured from the commencement of a tender
offer.\134\

Thus, even where a tender offer has technically closed and tenders are
no longer being accepted, back-end withdrawal rights may exist until
the offeror accepts tendered shares for payment.\135\
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    \133\ See proposed Exchange Act Rules 13e-4(i)(2)(v) and 14d-
1(d)(2)(viii).
    \134\ Section 14(d)(5) of the Exchange Act [15 U.S.C 78n(d)(5)]
states that ``[s]ecurities deposited pursuant to a tender offer * *
* may be withdrawn by or on behalf of the depositor at any time
until the expiration of seven days after the time definitive copies
of the offer * * * are first published or sent or given to security
holders, and at any time after sixty days from the date of the
original tender offer * * *, except as the Commission may otherwise
prescribe by rules, regulations, or order as necessary or
appropriate in the public interest or for the protection of
investors.'' Exchange Act Rule 13e-4(f)(2)(ii) includes a similar
mandate for issuer tender offers: ``The issuer or affiliate making
the issuer tender offer shall permit securities tendered pursuant to
the issuer tender offer to be withdrawn * * * if not yet accepted
for payment, after the expiration of forty business days from the
commencement of the issuer tender offer.'' Where the tender offer is
subject to Rule 13e-4 and Regulation 14D, bidders also must provide
withdrawal rights during the ``initial offering period.'' We do not
propose to modify this requirement.
    \135\ Whether back-end withdrawal rights arise also will depend
on the length of the tender offer period; if the initial offering
period and the payment process are completed before such rights
arise, back-end withdrawal rights will not be triggered.
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    Section 14(d)(5) of the Exchange Act grants us the authority to
modify the back-end withdrawal rights afforded under that
provision.\136\ We exercised this authority in adopting Rule 14d-11,
which permits the use of a ``subsequent offering period'' during which
securities may be tendered but not withdrawn.\137\ Practical
considerations influenced our willingness to modify the withdrawal
rights provisions of Section 14(d)(5) for subsequent offering periods.
Permitting withdrawal rights during a subsequent offering period, when
tendered shares are required to be purchased on a ``rolling'' or as
tendered basis,\138\ would interfere with the payment process.
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    \136\ See footnote 134 above.
    \137\ Exchange Act Rule 14d-7(a)(2) [17 CFR 240.14d-7(a)(2)].
    \138\ Exchange Act Rule 14d-11(c) [17 CFR 240.14d-11(c)].
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    The Tier II cross-border exemptions provide that a bidder need not
extend withdrawal rights from the close of the initial offering period
and before the commencement of the subsequent offering period, where
the bidder announces the results of the initial offering period and
pays for tendered securities in accordance with home country law or
practice, so long as the subsequent offering period begins immediately
thereafter.\139\ Due to similar practical considerations, we propose to
extend this suspension of the back-end withdrawal rights provisions for
all tender offers conducted under Tier II during the counting of
tendered securities. This would allow withdrawal rights to be
terminated at the end of an offer and during the counting process for
bidders that do not provide a subsequent offering period.\140\
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    \139\ Exchange Act Rule 14d-1(d)(2)(v).
    \140\ For example, the subsequent offering period structure is
available for third-party offerors subject to Regulation 14D, but
not for issuer tender offers subject to Exchange Act Rule 13e-4.
Applicable foreign law may also impact a third-party offeror's
ability to provide a subsequent offering period.
---------------------------------------------------------------------------

    Differences in the tender, acceptance and payment procedures
between U.S. and foreign offers necessitate this relief. In a U.S.
offer, tendering security holders generally tender their shares to a
single exchange agent employed by the bidder.\141\ Thus, bidders
generally are in a position to know at any point in the offering period
the number of securities tendered. Because bidders know how many target
securities have been tendered into the offer at the expiration,
acceptance of tendered securities in a U.S. offer can occur almost
immediately after the expiration of an offer.\142\ Therefore, bidders
in domestic offers are able to terminate the back-end withdrawal rights
almost immediately after expiration by accepting securities tendered
(assuming all offer conditions have been satisfied or waived). Bidders
can begin the payment process promptly after expiration of the offer,
consistent with their obligations under U.S. law to pay promptly.\143\
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    \141\ Tenders may be made through nominees, such as broker-
dealers, who hold the target securities in ``street name,'' or
directly by the ultimate beneficial holder of the target securities.
    \142\ See Exchange Act Rule 14e-1 [17 CFR 240.14e-1] (stating
that a bidder must promptly pay for or return tendered securities