A member of the SEC Corporation Finance Division's Office of Mergers and Acquisitions issued a warning that a popular two-track merger and acquisition structure could trigger certain prohibitions under the Securities Exchange Act of 1934 (the "1934 Act"). Under the so-called Burger King structure — named after the 2010 private equity acquisition of the fast-food chain — companies simultaneously pursue a tender offer and one-step merger. If the tender offer fails to reach the required majority of shares, the parties then switch to the one-step merger midway through the transaction. The Burger King structure affords the advantage of shortening the time period required to close the acquisition transaction.
The warning was issued in light of Rule 14e-5 under the 1934 Act. Rule 14e-5 prohibits buying or offering to buy the target company's securities outside of a tender offer. As part of the one-step merger process, the acquirer files a preliminary proxy statement with the SEC, which could trigger the prohibition. The SEC is monitoring whether the Burger King structure does in fact violate Rule 14e-5. At present, it is uncertain whether the SEC will take a definitive position on the issue.