In a previous installment, we advised our client Kenny Rogers on the legal framework of launching a tender offer for Anglo Freedonian Mining SA, a foreign private issuer trading in London. The long arm of the US securities law regulates cross-border tender offers, although the Tier I and Tier II exemptions in Rules 14d-1(c) and (d) of the Exchange Act grant broad exemptive relief from many of these provisions.

We have already explained to Kenny how to qualify for the Tier I and Tier II exemptions. In this installment, we explain the nuts and bolts of a Tier I tender offer.

A Tier I‑eligible tender offer is exempt from:

• Exchange Act Sections 14(d)(1) through 14(d)(7) and Exchange Act Regulation 14D (Rules 14d-1 through 14d-10), which provide the principal substantive Rules regulating third-party tender offers for SEC registered equity securities;
• the filing requirements of Schedule TO and Schedule 14D-9;
• Rule 14e-1 and Rule 14e-2 of Regulation 14E, which complement Regulation 14D with certain additional requirements for all tender offers; and
• Rule 13e-3 and Rule 13e-4, which address going private transactions and issuer tender offers.

Rule 14e-5 prohibits a bidder from purchasing the target security outside the tender or exchange offer. However, a Tier I tender offer meeting the following additional requirements is exempt from Rule 14e-5:

• the offering documentation provided to US shareholders prominently discloses the possibility of purchases outside the tender offer and the manner in which any information about such purchases will be disclosed;
• the offering documents disclose the manner in which any information about any such purchases will be disclosed;
• the bidder discloses in the United States information regarding these purchases in a manner comparable to the disclosure it makes in the foreign country; and
• the purchases comply with the foreign country’s tender offer laws.

Tier I tender offers are still subject to the anti-fraud provisions of Exchange Act Section 14(e). In addition, under Rule 14d-1(c)(2), a bidder must permit US holders to participate in the offer on terms at least as favorable as those offered any other holder of the target’s common stock. There are three exceptions to this requirement which may be applicable here.

• US Shareholders May Be Offered Only Cash as Consideration. A cash-only offer to US shareholders is permissible even if non-US shareholders are offered consideration consisting in whole or in part of securities of the bidder. However, the bidder must have a reasonable basis to believe that the cash is “substantially equivalent” to the value of the consideration offered to non-US shareholders, and must meet certain additional conditions.
• Blue Sky Exemption. If the bidder offers securities registered under the Securities Act, it need not extend the offer to holders in those US states that prohibits the offer (after the bidder has made a “good faith effort” to register or qualify the offer in that state), except that the bidder must offer the same cash alternative to holders in that state that it has offered to holders in any other state. Similarly, if the bidder offers securities exempt from registration under Securities Act Rule 802, it need not extend the offer to holders in those US states that require registration or qualification, except that the bidder must offer the same cash alternative to holders in that state that it has offered to holders in any other state.
• Loan Notes. If the bidder offers loan notes solely to give sellers tax advantages not available in the United States, and those notes are neither listed on an organized securities market nor registered under the Securities Act, the loan notes need not be offered to US shareholders.

Under Rule 14d-1(c)(3), in Tier I tender offers:

• Comparable Basis. The bidder must disseminate any informational document to US shareholders, in English, on a “comparable basis” to that provided to security holders in the home jurisdiction.
• Publication. If the bidder disseminates by publication in the foreign country, it must publish the information in a manner “reasonably calculated” to inform US shareholders of the offer.
• Filing Requirements.Form CB. In the case of a tender offer that otherwise would be subject to Regulation 14D (generally, an offer for equity securities registered under the Exchange Act), or an issuer self-tender offer subject to Rule 13e-4, the bidder must furnish an English-language translation of the offering materials to the SEC under cover of Form CB by the first business day after publication or dissemination.
• Form F-X. If the bidder is a foreign company, it must file Form F-X with the SEC. Form F-X appoints an agent for service of process in the US.

Stay turned for an installment on the scope of the Tier II exemption for cross-border tender offers.