SEC Amends the Tender Offer Best-Price Rule

The Securities and Exchange Commission adopted long-awaited amendments to the best-price rule under the Securities Exchange Act on November 1, 2006. This rule requires that the consideration paid to any security holder in a tender offer be the highest consideration paid to any other security holder in the tender offer. The amendments clarify that the best-price rule applies only with respect to the consideration offered and paid for securities tendered in a third-party or issuer tender offer and not to consideration offered and paid according to employment compensation, severance, or other employee benefit arrangements. Among other things, the amendments create an exemption from the best-price rule and a safe harbor from the rule for certain compensatory arrangements that meet specific criteria or are approved by independent directors. In most respects, the amendments are consistent with the SEC's proposals issued in December 2005.