|Division of Corporation Finance Permits Notice and Access in Certain M&A Transactions|
The Division of Corporation Finance of the Securities and Exchange Commission recently issued a letter that for the first time granted no-action relief for the use of notice and access for a proxy statement in a M&A transaction. The no-action letter, SAIC, Inc. (avail. Apr. 27, 2012), involved the upcoming merger of a holding company into its operating subsidiary to eliminate the holding-company structure. The Division has routinely granted no-action relief from various securities law provisions in similar circumstances. For example, the Division has routinely permitted a post-merger company to take into account the pre-merger company’s SEC reporting history in determining its eligibility to use Form S-3.
In SAIC, the Division addressed many of the same provisions of the securities laws that it had addressed in the past, but it also addressed Rule 14a-16, the notice and access rule. This rule allows proxy statements to be distributed electronically by mailing only a Notice of Internet Availability to shareholders. However, Rule 14a-16(m) states that it generally is not available for proxy solicitations that are made in connection with business combination transactions. In SAIC, the company argued that, unlike other types of business combinations, the transaction at hand would involve “no change in the nature of the investment” and that it was “a straightforward corporate action for which the Rule 14a-16 method of delivering proxy material would be completely appropriate.” The Division agreed, stating that the holding company “may comply with the form and manner of delivery of proxy materials described in Rule 14a-16 of the Exchange Act with respect to the proxy materials used to solicit proxies for the approval of the [m]erger by the stockholders of [the holding company].” Thus, it appears that going forward, when a merger transaction does not involve a substantial change to the company’s assets and liabilities (which is often the case with internal reorganizations and restructuring transactions), companies should evaluate whether the notice and access provisions of Rule 14a-16 are available.