In early February 2013, Dell Inc. announced that it had agreed to a $24.4 billion leveraged buyout transaction with an investment group led by the company’s founder and CEO, Michael Dell and private equity firm, Silver Lake. Under the terms of the deal, Dell stockholders would receive $13.65 in cash per share, and following completion of the transaction, the company’s shares would be delisted. The proposed transaction implies a 37% premium over the average closing share price during the 90 days ending Jan. 11, 2013, and values the company at $24.4 billion, making it the largest leveraged buyout since the financial crisis.
About two years ago, the Securities and Exchange Commission adopted rules implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (.PDF) that require public companies subject to the SEC's proxy rules to conduct two non-binding shareholder-advisory votes at annual meetings:
- A vote to approve the compensation of the named executive officers as described in the proxy statement for the meeting (a “say-on-pay vote”); and
- A vote on whether the company's say-on-pay vote should be held annually, every second year, or every third year (a “say-on-frequency vote”).
Those votes were first required for most public companies beginning with an annual meeting held on or after January 21, 2011, but the requirement was delayed for smaller reporting companies. Effective for annual meetings held on or after January 21, 2013, however, smaller reporting companies will be required to conduct a say-on-pay vote and a say-on-frequency vote.
The Securities and Exchange Commission’s Conflict Minerals Rule, Rule 13p-1 (.PDF), mandated by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which added Section 13(p) to the Securities Exchange Act of 1934, was adopted on August 22, 2012, and became effective November 13, 2012. The Rule will require a number of public reporting companies to, among other things, file with the SEC a new annual report, Form SD. The initial Form SD is due by May 31, 2014, covering the 2013 calendar year. Although the Rule’s required initial report now seems quite distant, and although there is a lawsuit filed by the National Association of Manufacturers and others challenging the Rule (.PDF), the time that may be necessary for many companies to comply with the Rule's requirements, and the effort and cost of that compliance, suggests that companies should consider application of the Rule sooner rather than later.
In August 2011, we commented on proposals by the major national securities exchanges to impose additional listing requirements on companies completing a reverse merger with a shell company. The SEC announced earlier this month that it approved each of the rule changes, as amended, on an accelerated basis. It just became significantly harder for the shares of a reverse-merger shell company to become listed.
On September 14, 2011, the SEC issued guidance regarding the filing of Forms 8-K to report transactions by which companies listed on U.S. exchanges cease to be shell companies, such as reverse merger transactions. This type of guidance is the first of its kind, and arises in connection with proposed rule changes concerning going public through reverse mergers (as we discussed in August 2011), a method used by many Chinese companies criticized for fraud and accounting irregularities (as we discussed in June 2011, July 2011 and August 2011).
Soon it may just be a little harder to go public through a reverse merger transaction. The SEC published proposed rule changes from both the New York Stock Exchange (PDF) and NYSE Amex (PDF) on Aug. 4, 2011 that, if approved, may make you reconsider the reverse-merger route and probably makes the shell-company industry wince.