## Facts

- A hostile bidder commenced a cash tender offer for a controlling block of a public retailer’s common stock at a price above the pre-offer trading price, with a planned second-step merger if successful.
- The bidder filed the required tender-offer disclosures and offered standard tender-offer mechanics, including an open period, withdrawal rights, and pro rata acceptance if oversubscribed.
- During the takeover contest, trading volume increased significantly and shares became concentrated among risk arbitrageurs as the market price approached the bid price.
- The target company’s board publicly opposed the bid as inadequate and announced defensive measures, including a large investment transaction that would add voting power aligned generally with board recommendations.
- The target also publicly announced an open-market stock repurchase program that would operate for an indefinite period, tied to the pendency of the hostile bid, and contemplated potentially substantial repurchases.
- The securities regulator sued to enjoin the repurchase program, alleging it was an “issuer tender offer” subject to Exchange Act § 13(e)(1) and Rule 13e-4, and that the issuer was not complying with those requirements.
- The district court denied a preliminary injunction, concluding the repurchase program was not a tender offer; the regulator appealed.

## Issues

1. Whether the issuer’s publicly announced, large-scale open-market repurchase program constituted an “issuer tender offer” under Exchange Act § 13(e)(1) and Rule 13e-4.
2. Whether the district court abused its discretion in denying preliminary injunctive relief based on the regulator’s failure to show a likelihood of success on the merits.

## Decision

- The court of appeals affirmed the denial of the preliminary injunction.
- It held that, on this record, the issuer’s open-market repurchase program was not a “tender offer” within the meaning of § 13(e)(1) and Rule 13e-4.
- The court applied a fact-intensive, multi-factor tender-offer analysis and agreed that the program lacked the characteristic features of a tender offer.
- Because the regulator did not show a sufficient likelihood of establishing that the program was a tender offer, the district court did not abuse its discretion in denying injunctive relief.

## Legal Principles

- Rule 13e-4 applies to issuer repurchases only if the repurchase program is properly characterized as a “tender offer”; neither the statute nor the rule supplies a comprehensive definition, so courts look to indicia developed in case law.
- A multi-factor test may be used to distinguish tender offers from ordinary market transactions, considering indicia such as: widespread solicitation, a premium over market, fixed nonnegotiable terms, minimum-tender conditions, a limited acceptance period, and pressure on sellers, as well as publicity accompanying rapid accumulation.
- The factors are not a checklist; courts evaluate the overall character of the purchasing program rather than mechanically counting satisfied factors.
- Open-market purchases executed through brokers at prevailing market prices, without direct solicitation, fixed-price terms, minimum-share conditions, or a short acceptance deadline, generally resemble ordinary market activity rather than a tender offer.
- Public announcement of an issuer’s intent to repurchase, without other tender-offer features, is insufficient by itself to trigger issuer tender-offer regulation.
- In reviewing denial of a preliminary injunction, an appellate court assesses whether the district court abused its discretion in evaluating likely success on the merits and related equitable considerations.

## Conclusion

The court affirmed denial of preliminary injunctive relief because the issuer’s defensive, publicly announced open-market repurchase program did not, in its overall structure and operation, bear the hallmarks of an issuer tender offer regulated by Rule 13e-4.


Securities & Exchange Commission v. Carter Hawley Hale Stores, Inc., 760 F.2d 945 (9th Cir. 1985)