To the Council of Delegates:
The Corporation Law Committee recommends that the Ohio "control bid" statute (Section 1707.041, O.R.C.) be amended. The review of tender offer materials accorded the Ohio Division of Securities by current law does not provide the Division an opportunity to review amendments to offers, some of which can be material. Modifications to an offer, including changes in the form of consideration, increases in price that raise issues regarding the adequacy of funding, and other material changes, may merit further review by, and additional comments from, the Division.
At present, if tender offer amendments filed with the Division raise serious concerns, the Division’s only alternative is to seek an injunction under Sections 1707.042 and 1707.26, O.R.C.
The proposed amendment would add a new paragraph (5) to sub-Section 1707.041 (A), requiring an offerer to file certain relevant information with the Division of Securities, with a copy to the target company, if the offeror makes a material amendment to its bid. Such filing must be made, under the proposal, not later than the date on which the revised offer is made in Ohio. If the Division finds that full and fair disclosure has not been made by the offeror, it may issue a suspension order within three calendar days thereafter. The proposed amendment describes the conduct of the hearing, following which the Division must make a determination within three calendar days (thereby remaining within a 10-day federal requirement and avoiding federal preemption). If there is a determination by the Division that the information is deficient or that there has been a material violation of Chapter 1707, the Division will maintain the suspension, subject to the rights of the offeror to cure the problem.
The Ohio Division of Securities also supports this proposed amendment.
Gary P. Kreider, Cincinnati
Proposed R.C. 1707.041(A)(5)
(5)(a) If an offeror increases or decreases the percentage of the class of securities being sought, the consideration offered, or the dealer’s soliciting fee in connection with a control bid for any securities of a subject company pursuant to a tender offer or request or invitation for tenders, or makes any other change in the terms or conditions of the tender offer or request or invitation for tenders that would require the offeror to hold the tender offer or request or invitation for tenders open for at least ten business days from the date that notice of the change is first published or sent to security holders in this state, the offeror shall file with the division of securities:
(i) all material information, including all information sent or otherwise provided to offerees in this state, pertaining to the increase, decrease, or other change; and
(ii)all material information required to update the information filed with the division pursuant to division (A)(2) of this section.
The information shall be filed with the division not later than the date on which the information regarding the increase or decrease is first published or sent to offerees in this state. The offeror shall deliver a copy of the information, by personal service, to the subject company at its principal office not later than the time of the filing with the division.
(b) Within three calendar days of the date of filing by an offeror of the information specified in division (A)(5)(a) of this section, the division may by order summarily suspend the continuation of the control bid if the division determines that all of the information specified has not been provided by the offeror, or that the information provided to offerees does not provide full disclosure to offerees of all material information concerning the increase or decrease. Such a suspension shall remain in effect only until the determination following a hearing held pursuant to division (A)(5)(c) of this section.
(c) A hearing shall be scheduled and held by the division with respect to each suspension imposed under division (A)(5)(b) of this section. The hearing shall be held within three calendar days of the date on which the suspension is imposed. Chapter 119. of the Revised Code does not apply to a hearing held under this division. The division may allow any interested party to appear at and participate in the hearing in a manner considered appropriate by the division. The determination of the division made following the hearing shall be made within three calendar days after the hearing has been completed, and no later than nine calendar days after the date on which the information regarding the increase or decrease is first published or sent to offerees in this state. The division, by rule or order, may prescribe time limits for conducting the hearing and for the making of the determination that are shorter than those specified in this division. If, based upon the hearing, the division determines that all of the information required to be provided by division (A)(5)(a) of this section has not been provided by the offeror, that the information provided to offerees does not provide full disclosure to offerees of all material information concerning the increase or decrease, or that the control bid is in material violation of any provision of this chapter, the division shall maintain the suspension of the continuation of the control bid, subject to the right of the offeror to correct disclosure and other deficiencies identified by the division and to reinstitute the control bid by filing new or amended information pursuant to this section.