SEC Grants Relief from Tender Offer Requirements in "Reverse Morris Trust" Transaction

The SEC Division of Corporate Finance granted no-action relief to mass media company CBS Corporation ("CBS") from certain tender offer requirements under Exchange Act Rules 13e-4(d)(1), 13e-4(e)(3), 13e-4(f)(1)(ii) and 14e-1(b).

The relief permits CBS to engage in an exchange offer to separate CBS Radio, a wholly owned subsidiary of CBS, from CBS's other businesses. CBS Radio will also enter into a merger agreement with Entercom Communications Corp. and its wholly owned subsidiary, Constitution Merger Sub Corp. ("Merger Sub"). Merger Sub will then merge into CBS Radio, and CBS Radio will continue as a subsidiary of Entercom. The exchange offer will be issued as part of a "Reverse Morris Trust" transaction – a transaction where a spin-off company is combined with an acquisitive reorganization (e.g., a statutory merger) to allow a tax-free transfer of the subsidiary. The transaction will use a similar pricing mechanism to several other transactions that received no-action relief from the Division (see no-action letters for Procter & Gamble (September 1, 2016), Lockheed Martin (July 11, 2016), Baxter International Inc. (April 21, 2016), General Electric (October 19, 2015), Bristol-Myers Squibb (November 16, 2009), Procter & Gamble (October 8, 2008)). In addition to the aforementioned letters, CBS noted, the Division has provided relief to allow for "modified Dutch auction" tender offers (see previous coverage).

In addition to granting CBS exemptive relief for the relevant transaction, the Division recognized that there have been extensive amounts of no-action letters issued in relation to exchange offers that are part of Reverse Morris Trust transactions and that utilize similar pricing mechanisms. As such, the Division said that issuers seeking to conduct such exchange offers in the future will not need to seek no-action relief.