SEC Ends Key Anti-Takeover Defense Move

The Securities and Exchange Commission on Tuesday snuffed a potentially major corporate anti-takeover defense by adopting a rule forbidding the exclusion of any securities holders from tender offers.

The so-called all-holders rule passed by the SEC would forbid exclusionary offers made by companies for their own stock, a tactic used by Los Angeles-based Unocal last year in successfully fighting a hostile takeover bid by Texas oilman T. Boone Pickens Jr.

Despite assurances from SEC corporate finance division director Linda Quinn that the rule merely makes plain what has been SEC policy all along, the five-member commission debated the issue for several hours before a bare majority of three voted in favor of the entire package.

The rule also requires that all securities holders to whom a tender offer is made must be paid the same price for their shares, that a tender offer must remain open for 10 business days following an announcement of a rise or fall in the offered price or amount of securities to be bought and that holder withdrawal rights extend throughout the offer period.

Partial Objection

Two commissioners, however, voted only partial approval for the proposal.

Commissioner Aulana Peters voted against the requirement that a tender offer must be open to all holders of a class of securities but approved the other provisions.

Peters, citing the exclusionary offer made by Unocal as the only exception to the otherwise uniform tender offers that have been made over the past several years, said the rule would be an unnecessary burden.

Commissioner Edward Fleischman said he favored the requirement that all holders be included in tender offers made by third parties but not when an offer is being made by the company that issued the securities.

He voted in favor of the other provisions.

Commissioners Charles Cox and Joseph Grundfest joined SEC Chairman John S. R. Shad in voting in favor of the entire package.