New SEC C&DIs Impacting Mergers And Acquisitions – Corporate/Commercial Law

United States:

New SEC C&DI’s Impacting Mergers And Acquisitions

29 March 2022

Mayer Brown

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On March 22, 2022, the staff (Staff) of the US Securities and Exchange Commission (SEC) issued six compliance and disclosure interpretations (C&DIs) impacting mergers and acquisitions. Two of the new C&DIs relate to Item 1.01 of Form 8-K. Three of the C&DIs interpret proxy solicitation requirements. One addresses a tender offer issue relating to special purpose acquisition companies (SPACs).

Shape 8-K

C&DI #102.04 specifies that the amount and nature of consideration, committed financing arrangements, material terms regarding the securities ownership or management structure of the combined or surviving company, material closing conditions, and anticipated timeframes for SEC filings and closings are generally considered material and should be disclosed pursuant to an Item 1.01 of Form 8-K. This C&DI also indicates that the Form 8-K must also include all other material information that is necessary to make the required disclosure, in light of the circumstances under which it is made, not misleading, including whether a material term of the agreement has not yet been determined by the parties and the nature of the target company’s business, including, at a minimum, whether it has existing operations or has generated revenues, as well as any information disclosed by the target company in announcing the business combination transaction.

C&DI #102.05 encourages companies, as a best practice, to file the business combination agreement as an exhibit to an Item 1.01 Form 8-K. This C&DI also specifies that, as a best practice, companies should provide an explanation in the Form 8-K if they are unable to prepare the agreement in the proper EDGAR format and file the agreement as an exhibit to the Form 8-K.

Proxy Solicitations

C&DI #101.02 provides that a target company that does not plan to solicit its own shareholders could be engaged in a solicitation of the acquirer’s shareholders if its public communications promote the proposed transaction or may be reasonably expected to influence the voting decisions of the acquirer’s shareholders. This would be subject to the target company to liability under, and filing and information requirements of, the Securities Exchange Act of 1934 (Exchange Act).

C&DI #132.01 indicates that the Staff will not object if a target company that is not soliciting its own shareholders relies on Exchange Act Rule 14a-12 to communicate publicly about the proposed business combination transaction if conditions specified in this C&DI are met.

C&DI #132.02 permits an acquirer to make public communications regarding a proposed business combination transaction in reliance on Exchange Act Rule 14a-12 where the acquirer will not file a definitive proxy statement for the transaction but the target company will, as long as conditions specified in this C&DI are met.

tender offers

C&DI #166.01 states that to the extent that a SPAC redemption offer constitutes a tender offer, the Exchange Act Rule 14e-5 prohibition of purchases outside of a tender offer applies to the purchases of SPAC securities by the SPAC sponsor or its affiliates outside of the redemption offer. However, the Staff will not object to purchases by the SPAC sponsor or its affiliates outside of the redemption offer as long as conditions specified in this C&DI are satisfied.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed.

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