DealLawyers.com Blog

Since the Securities Act Reforms were adopted in July, I’ve gotten several questions on if/how the new rules apply to business combinations (for the most part, the Reforms do not affect business combintions). The following bullets address the top concerns I have noted:

– The new “access equals delivery” model for prospectus delivery does not extend to business combinations. The SEC thought that “[b]usiness combination transactions and exchange offers also differ from other types of offerings registered under the Securities Act because the proxy rules and tender offer rules in conjunction with state law impose informational and delivery requirements in those transactions. The information contained in the final prospectus, therefore, will be delivered regardless of the Securities Act’s requirements.”

– WKSIs will not be able to use the automatic shelf registration procedure to register an offering of securities in connection with a business combination.

– The Securities Act Reforms do not affect the way business combination communications are regulated (Rules 165/166 and the related 425). In the release, the Commission clarified the interplay between new Rule 433 and the rules applicable in business combination transactions where there is a capital formation transaction occurring at the same time as a business combination transaction, whether or not related: “Rule 165 … is not available for a communication whose primary purpose or effect relates to a capital formation transaction. The rules we are adopting today applicable to registered capital formation transactions generally will apply to registered capital formation transactions even if they have some connection to or are proximate in time to a business combination transaction. As a result, if an issuer undertakes a registered capital formation transaction that is related to, or takes place at around the same time as, a business combination transaction, then the issuer can, if the conditions to the applicable rules are satisfied, rely on the rules we adopt today that apply to the registered capital formation transaction and Rules 165 and 166 for the business combination transaction. This is true whether the two transactions are connected … or independent of each other. If a communication relates to both a capital formation and business combination transaction, then the communication may be subject to both Rules 425 and 433. We have revised the filing condition of Rule 433 to provide that the filing condition of the Rule will be satisfied if a filing is made pursuant to Rule 425 and the Rule 425 filing includes the Rule 433 legend and indicates on the cover page the registration statement number for the capital formation transaction and that it also is being filed pursuant to Rule 433.”

– Shell companies that are related to a business combination are excluded from the restrictions otherwise applicable to shell companies.