DealLawyers.com Blog

On Friday, November 19th the ABA Subcommittee on Proxy Statements and Business Combinations chaired by Dennis Garris (partner at Alston & Bird), met in Washington DC. At this meeting senior members of the SEC staff, including Brian Breheny, Chief of the Office of Mergers & Acquisitions (OM&A), and Nick Panos, Special Counsel in OM&A, addressed several topics of interest to M&A practitioners.

One issue that may come as a surprise to many is the staff’s position that materials prepared by an investment bank as “pitch materials” and provided to a company that is considering a potential transaction may be deemed a “report, opinion or appraisal” under Item 1015 of Reg MA (formerly known as Item 9 reports), that must be summarized in the company’s SEC filings relating to such transaction, even where the investment bank is not retained by the company to advise on the transaction and does not receive any fees or other compensation in connection with the transaction.

The key to the staff’s decision rests with the degree to which the materials contain substantive analysis and the extent to which the Company’s Board considers and relies upon the materials in its deliberations with respect to the proposed transaction. In the situation discussed by the staff, although the bankers argued that the materials were “pitch materials,” the staff deemed the materials a report since the materials consisted of multiple presentations to the Board over an extended period of time and included specific analyses and recommendations that contributed valuable information used to structure the transaction presented to security holders. The staff also reminded the audience that when there are material differences between preliminary and final versions of an Item 1015 report, each version will be viewed as a separate report that must be summarized in the company’s SEC filings.

Also of interest is the staff’s continued position that insurgents who solicit proxies by sending management’s proxy card to security holders and request that such cards be returned to management may continue to rely on the exemption in Rule 14a-2(b)(1) under the Securities Exchange Act despite the Second Circuit’s recent decision to the contrary in MONY Group, Inc. v. Highfields Capital Management, 368 F.3rd 138 (2nd Cir. 2004). While staff is adhering to its long-standing position that such activities are exempt solicitations and insurgents need not file their own proxy statements, they are advising callers who seek guidance on this issue that the Second Circuit takes a different view.

Lastly, it was noted that Mara Ransom, Special Counsel in OM&A, is currently working on a rulemaking project that will hopefully resolve some of the conflicting case law on the “best-price” provisions in Rule 14d-10 under the Securities Exchange Act. As many of you know the Seventh and Ninth Circuits have split, with each adopting different tests as to when severance payments, golden parachutes and similar compensation arrangements in business combination transactions run afoul of the best-price rule. Brian Breheny expects to have something published by early next year. We are hopeful!