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What is the TO schedule?

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

Key points to remember

  • Schedule TO is an SEC form that must be submitted by a party making a takeover bid that would result in ownership of more than 5% of a class of securities of a company.
  • A tender offer is a public solicitation addressed to all shareholders asking them to make their shares available for sale at a fixed price for a certain period of time to the issuer or an external interested party.
  • Appendix TO lists 13 mandatory items to be completed by the issuer before the tender offer can be approved by regulators.
  • Appendix TO helps protect security holders by requiring the issuer of the takeover bid to disclose key information regarding the terms of the offer and the identity of the bidders.
  • Securityholders are protected by other anti-fraud provisions related to the bidder’s obligation to provide each securityholder with the best price and to make the tender open to all qualified securityholders.

Understanding the TO schedule

A takeover bid is a public offer to buy some or all of the shares of a company by existing shareholders made either by the company itself or by an interested outside party. These offers are normally made at a premium to the current share price and have a specified deadline. Shares purchased under a tender offer become the property of the purchaser. From that moment, the buyer, like any other shareholder, has the right to hold or sell the shares at his discretion.

SEC rules require any company or person acquiring 5% of a company through a takeover bid to disclose information to the SEC, the target company, and the stock exchanges where the securities trade.Additional regulations regarding takeover bids are set forth in the Sarbanes-Oxley Act of 2002.

If the company is seeking to go private through a takeover bid, it must include SEC Form 13E-3 as part of the Schedule TO filing. This is a form that a publicly traded company or affiliate must file with the Securities and Exchange Commission when that company “goes private.” 

Annex TO Requirements

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

  1. Summary term sheet
  2. Company information
  3. Identity and background of the declarant
  4. Terms of the transaction
  5. Previous Contacts, Transactions, Negotiations and Agreements
  6. Objectives of the transaction and plans or proposals
  7. Source and amount of funds or other consideration
  8. Interest in the securities of the target company
  9. Persons/property, retained, employed, indemnified or used
  10. financial state
  11. Further information
  12. Exhibitions
  13. Information required by Annex 13E-3

Special Considerations

The SEC regulates takeover bids. Most tenders require bidders to file certain documents that disclose key details about the bidders and the terms of the bid. Many of the regulations are designed to protect securityholders.

For example, security holders benefit from a right of withdrawal, that is to say their right to withdraw their offer of securities within a certain period of time. The offeror must make the offer open to all holders of securities of the category of securities subject to the offer. In addition, the Offeror must provide each Securityholder with the best price. They cannot offer some holders one price and others a different price.

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

Schedule TO Example

On May 1, 2018, biotech company AbbVie Inc. launched a cash tender offer for its shares, involving up to $7.5 billion of its common stock at a price per share between 99 and 114 dollars. On this date, the company filed an Annex TO with the items listed above. AbbVie structured the tender offer like a Dutch auction, whereby the lowest price in the range allowing the company to buy up to $7.5 billion would be the final price of the ‘offer. The duration of the public offer has been set at approximately one month. Attachment TO contained all the information necessary 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 common shares at $103 per share. This represented approximately 4.6% of the outstanding shares.

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