What is Schedule TO-T

Schedule TO-T must be filed with the SEC by any entity, other than the issuer itself, making a tender offer for certain equity securities registered pursuant to Section 14d or 13e of the 1934 Act. This schedule replaced Schedule 14D-1 in January, 2000.

BREAKING DOWN Schedule TO-T

Schedule TO-T, a third-party tender offer statement or third-party tender offer, must also be sent to certain other parties, such as the issuer of the security and any competing bidders for the company's securities. In addition, Regulation 14D sets forth certain other requirements that must be complied with in connection with a tender offer.

Third-Party Tender Offers

Companies usually use third-party tender offers in order to acquire other companies as part of a merger. By purchasing a controlling share of another company’s shares of stock directly from its stockholders, the acquiring company can take control of the company to be acquired, whether or not that company wants to be acquired. However, usually a third-party tender offer is performed as the first part of a two-step merger, because it is unlikely that all of a company’s shareholders will want to sell their stock pursuant to a third-party tender offer.

Two-Step Mergers

If the bidder, or acquiring company, owns 90 percent of the stock in the company to be acquired, they can perform a short form merger, which doesn’t require stockholder approval from the target company. Usually, this kind of merger is performed between a parent company and its subsidiary. It is unlikely that a company will be able to acquire 90 percent of another company’s stock through a tender offer.

It is much more common, however, for a buyer to perform a back-end merger, in which the buyer acquires a majority of stock during a tender offer, and then acquires the company as a whole by using its influence as majority stockholder to consent to the merger. The most common form of back-end merger is a reverse triangular merger, in which the target company continues as a subsidiary of the buyer. This kind of merger requires less paperwork in the form of third-party consents.

Information Included in a Schedule TO-T

Schedule TO-T includes a valuation of the merger transaction and calculates the filing fee based on Rule 0-11(a)(2) of the 1934 Act. It also includes any amendments to a TO statement initially filed with the SEC.