Understanding Schedule 13E-4: Definition, Implications, and Case Studies

Schedule 13E-4, a term associated with the Securities Exchange Act of 1934, referred to a form that public companies were obligated to file with the Securities and Exchange Commission (SEC) when conducting tender offers for their own securities. This form, known as an issuer tender offer statement, imposed additional requirements on the issuer compared to regular tender offers. Schedule 13E-4 was replaced by Schedule TO-I in January 2000.

A tender offer occurs during public takeover bids of public companies, where a potential acquirer publicly states its intention to purchase some or all of the target company’s shareholders’ stock. Self-tender offers are similar but involve companies repurchasing their own stock, commonly to thwart hostile takeover attempts.

Public companies making tender or self-tender offers are mandated to report their intentions by filing forms with the SEC. Schedule 13E-4 specifically pertained to self-tender offers, requiring companies to disclose various information to prevent deception or fraud.

For instance, Herbalife filed Schedule TO-I in April 2018, announcing its intention to repurchase up to $600 million worth of its common shares at $98 to $108 per share. This caused an increase in the company’s share price. Similarly, AbbVie announced in May 2018 its plan to repurchase up to $7.5 billion of its common stock at prices ranging from $99 to $114 per share.

Schedule TO-I replaced Schedule 13E-4 in January 2000. While both forms are used for disclosing tender offers, Schedule TO-I introduces an introductory statement about the issuer’s financial condition and its role in the decision to conduct a self-tender offer. This addition enhances transparency and provides additional insights into the issuer’s motivations.

Yes, self-tender offers are relatively common, especially in situations where companies seek to repurchase their own shares as a defensive measure against hostile takeovers. By becoming its own majority shareholder, a target company can effectively fend off hostile takeover attempts.

Schedule 13E-4 mandated disclosure of various details related to the tender offer, including the subject company’s name, transaction value, filing fee amount, background of the filer, transaction terms, and fund sourcing information.

Self-tender offers can benefit shareholders in several ways. Firstly, they provide an opportunity for shareholders to sell their shares at a premium above the prevailing market price. Secondly, they allow shareholders to participate in the company’s decision to repurchase its own stock, potentially signaling confidence in the company’s future prospects. Lastly, by reducing the number of outstanding shares, self-tender offers can increase earnings per share for remaining shareholders.

Schedule TO-I maintains rigorous disclosure requirements similar to Schedule 13E-4 but adds an introductory statement about the issuer’s financial condition. This addition aims to provide shareholders and regulators with additional context regarding the company’s decision to conduct a self-tender offer. Failure to comply with the disclosure requirements of Schedule TO-I can result in regulatory sanctions and legal consequences for the company and its executives.