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← Series 79: M&A, Tender Offers & Restructuring
Series 79 practice questionmediumTender Offer Rules

The 'best-price' rule in the context of tender offers requires that:

  1. AHighest consideration paid to any security holder during the tender offer must be paid to all tendering security holders✓ Correct answer
  2. BThe bidder must offer the highest price in the company's trading history
  3. CThe target board must obtain the best possible price before recommending the offer
  4. DThe bidder must gradually increase the offer price throughout the tender period
Explanation

Why A — Highest consideration paid to any security holder during the tender offer must be paid to all tendering security holders

The best-price rule (SEC Rule 14d-10(a)(2)) provides that the consideration paid to any security holder pursuant to the tender offer must be the highest consideration paid to any other security holder during such tender offer. If the bidder increases the offer price during the tender period, all tendering shareholders receive the higher price, even those who tendered at the original lower price. This rule prevents discriminatory pricing that could pressure early tendering or favor certain shareholders.

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