What Is Schedule TO?

Schedule TO is a regulatory filing with the Securities and Exchange Commission (SEC) required of a party that makes a tender offer under the Securities Exchange Act of 1934 that would result in more than 5% ownership of a class of the company's securities. The tender offer statement is governed by section 14(d)(1) or 13(e)(1) of the Securities Exchange Act.

Key Takeaways

  • Schedule TO is an SEC form that must be submitted by a party making a tender offer that would result in more than a 5% ownership of a class of a company's securities.
  • A tender offer is a public solicitation to all shareholders requesting that they make available their stock for sale at a specific price during a certain time back to the issuer or an outside interested party.
  • Schedule TO lists 13 required items to be filled out by the issuer before the tender offer can be approved by regulators.
  • Schedule TO helps protect security holders by requiring the issuer of the tender bid to disclose key information regarding the terms of the offer and the identity of the bidders.
  • Security holders are protected by other anti-fraud provisions related to the bidder's duty to provide each security holder with the best price and to make the tender open to all qualified security holders.

Understanding Schedule TO

A tender offer is a public offer to buy some or all of the shares in a corporation from the existing shareholders made by either the company itself or by an interested outside party. These offers are normally made at a premium to the current price of the stock and have a specified deadline. The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, like any other shareholder, has the right to hold or sell the shares at their discretion.

SEC rules require any corporation or individual acquiring 5% of a company via a tender offer to disclose information to the SEC, the target company, and the exchanges where the securities are listed for trading. Additional regulations involving tender offers are spelled out in the Sarbanes-Oxley Act of 2002.

If the company seeks to go private by way of a tender offer, it must include SEC Form 13E-3 as part of the Schedule TO filing. This is a form that a publicly-traded company or an affiliate must file with the Securities and Exchange Commission when that company "goes private." 

Requirements of Schedule TO

There are 13 items the filer must address on the tender offer statement:

  1. Summary Term Sheet
  2. Subject Company Information
  3. Identity and Background of Filing Person
  4. Terms of the Transaction
  5. Past Contacts, Transactions, Negotiations, and Agreements
  6. Purposes of the Transaction and Plans or Proposals
  7. Source and Amount of Funds or Other Consideration
  8. Interest in Securities of the Subject Company
  9. Persons/Assets, Retained, Employed, Compensated, or Used
  10. Financial Statements
  11. Additional Information
  12. Exhibits
  13. Information Required by Schedule 13E-3

Special Considerations

The SEC regulates tender offers. Most tender offers require bidders to file certain documents that disclose key details about the bidders and the terms of the offer. Many of the regulations are designed to provide protection to the security holders.

For example, security holders are given withdrawal rights, which is their right to withdraw their tender of securities within a certain time period. The bidder must make the tender open to all security holders of the class of securities subject to the offer. Additionally, the bidder must provide each security holder with the best price. They cannot offer some holders one price and others a different price.

All tender offers are subject to provisions that protect the public and security holders from fraud. This includes mini-tender offers, which are tender offers designed to result in an ownership position of five percent or less of the outstanding shares.

Schedule TO Example

On May 1, 2018, the biotech company AbbVie Inc. commenced a tender offer to purchase its shares for cash, involving up to $7.5 billion of its common stock at a price per share between $99 and $114. On that date, the company filed Schedule TO with the elements listed above. AbbVie structured the tender offer as a dutch auction, whereby the lowest price within the range that allowed the company to purchase up to $7.5 billion would be the final tender price. The tender offer period was set at approximately one month. Schedule TO contained all the necessary disclosures for shareholders to decide whether to sell shares back to AbbVie.

On June 4, 2018, AbbVie announced the results of its tender offer. The company purchased approximately 72.8 million shares of its common stock at $103 per share. This represented about 4.6% of the shares outstanding.