Securities Exchange Act of 1934
April 3, 2006
Response of the Office of Mergers and Acquisitions
Division of Corporation Finance
James H. Ball, Jr., Esq.
Milbank Tweed Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Scottish Power plc - Return of Cash
Division of Market Regulation File No. TP 06-49
Division of Corporation Finance File No. 005-78838
Dear Mr. Ball:
This is in response to your letter dated March 31, 2006. A copy of that letter is attached with this response. By including a copy of your correspondence, we avoid having to repeat or summarize the facts you presented. The defined terms in this letter have the same meaning as in your letter, unless otherwise noted.
On the basis of your representations and the facts presented, but without necessarily concurring in your analysis, the Commission hereby grants an exemption from Rule 14e-5 under the Exchange Act to permit the Company, UBS, Morgan Stanley and the other Prospective Purchasers to purchase B Shares outside of the Initial Repurchase Offer and to permit UBS and Morgan Stanley to conduct market making activities in the B Shares during the Initial Repurchase Offer. In granting this exemption, the Division of Market Regulation considered the following facts, among others:
- The Company, a public limited company incorporated under the laws of Scotland, is a "foreign private issuer," as defined in Rule 3b-4 under the Exchange Act;
- Any purchases outside the Initial Repurchase Offer by any party to the transaction, including the Prospective Purchasers, will be subject to the Listing Rules;
- UBS and Morgan Stanley maintain and enforce written policies and procedures that are reasonably designed to prevent the flow of information to or from their respective advisory arms and affiliates that might result in a violation of the federal securities laws through the establishment of information barriers;
- The respective trading arms of UBS and Morgan Stanley have no officers (or persons performing similar functions) or employees (other than clerical, ministerial, or support personnel) in common with their advisory arms that direct, effect, or recommend transactions in the B Shares; and
- The existence of the Memorandum of Understanding on Exchange of Information between the Commission and the United Kingdom Department of Trade and Industry in Matters Relating to Securities and the United States Commodity Futures Trading Commission and the United Kingdom Department of Trade and Industry in Matters Relating to Futures, dated September 25, 1991.
The Commission grants this exemption from Rule 14e-5 under the Exchange Act to permit (i) the Prospective Purchasers to purchase or arrange to purchase B Shares otherwise than pursuant to the Initial Repurchase Offer subject to conditions (a) through (i) below; and (ii) UBS and Morgan Stanley to engage in market-making activities in the B Shares on the LSE during the Initial Repurchase Offer, subject to conditions (a) through (l) below:
- No purchases or arrangements to purchase B Shares, otherwise than pursuant to the Initial Repurchase Offer, will be made in the United States;
- Each of the Shareholder Circular, the Prospectus and the U.S. Supplemental Memorandum will disclose the possibility that the Prospective Purchasers may make purchases outside of the Initial Repurchase Offer and that UBS and Morgan Stanley will be market makers for the B Shares during the Initial Repurchase Offer;
- The Prospective Purchasers, UBS, and Morgan Stanley shall disclose in the United States information regarding purchases of B Shares otherwise than pursuant to the Initial Repurchase Offer, to the extent such information is made public in the United Kingdom pursuant to applicable law and regulations;
- The Prospective Purchasers, UBS, and Morgan Stanley shall comply with any applicable rules in the United Kingdom, including the rules and regulations of the FSA (including the Listing Rules), the LSE and the City Code;
- Upon request of the Division of Market Regulation, the Prospective Purchasers, UBS, and Morgan Stanley shall provide to it a daily time-sequenced schedule of all purchases of B Shares made during the Initial Repurchase Offer, on a transaction-by-transaction basis, including: (i) a description of the size, broker (if any), time of execution and purchase price; and (ii) if not executed on the LSE, the exchange, quotation system or other facility through which the purchase occurred;
- Upon the request of the Division, the Prospective Purchasers, UBS and Morgan Stanley shall transmit the information specified in paragraphs (e)(i) and (e)(ii) above to the Division at its offices in Washington, D.C. within 30 days of its request;
- The Prospective Purchasers, UBS and Morgan Stanley shall retain all documents and other information required to be maintained pursuant to this exemption for a period of not less than two years from the date of the termination of the Initial Repurchase Offer;
- Representatives of the Prospective Purchasers, UBS and Morgan Stanley shall be made available (in person at the offices of the Division of Market Regulation in Washington, D.C. or by telephone) to respond to inquiries of the Division of Market Regulation relating to their records;
- Except as otherwise exempted herein, the Prospective Purchasers, UBS and Morgan Stanley shall comply with Rule 14e-5;
- in connection with all purchases of B Shares by UBS and Morgan Stanley outside the Initial Repurchase Offer, UBS and Morgan Stanley will comply with the "Chinese/Ethical Wall" requirements of the City Code and the FSA rules that would be applicable to a connected exempt principal trader in connection with an offer for the shares of a company incorporated in Scotland that would result in a change of control;
- All purchases of B Shares by UBS and Morgan Stanley outside the Initial Repurchase Offer will be effected in the ordinary course of business and in compliance with any U.K. laws and rules applicable to such purchases, and will not be undertaken for the purposes of promoting or otherwise facilitating the Initial Repurchase Offer or for the purpose of creating actual or apparent active trading in, maintaining, raising or affecting the price of the B Shares; and
- Each of the Shareholder Circular, the Prospectus, and the U.S. Supplemental Memorandum shall disclose prominently that during the Initial Repurchase Offer, all market-making transactions effected by UBS and Morgan Stanley will be made pursuant to an exemption from Rule 14e-5.
In addition, based on the representations in your letter dated March 31, 2006, the staff of the Division of Corporation Finance will not recommend that the Commission take enforcement action under Rule 13e-4(f)(1)(i) or Rule 14e-1(a) under the Exchange Act if the Company conducts the Initial Repurchase Offer in the manner described in your letter. In issuing this no-action position, the Division of Corporation Finance considered the following facts, among others:
- The Initial Repurchase Offer will be open for at least 20 U.S. business days after Commencement;
- The assertions in your letter that the market has become familiar with repurchase and redemption schemes similar to the Initial Repurchase Offer and that the Company has requested that new holders of Securities have the Shareholder Circular, the U.S. Supplemental Memorandum, the Election Forms and any other relevant accompanying materials distributed to them promptly to the extent that they have purchased Securities after the Commencement of the Initial Repurchase Offer; and
- That relief is being sought in order to ensure that all holders of Securities are treated equally.
The foregoing exemption and no-action position under the Exchange Act are based solely on your representations and the facts presented, and are strictly limited to the application of the rules listed above to the proposed transactions. Such transactions should be discontinued, pending presentation of the facts for our consideration, in the event that any material change occurs with respect to any of those facts or representations.
In addition, we direct your attention to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 10(b) and 14(e) of the Exchange Act and Rule 10b-5 thereunder. The participants in the proposed transactions must comply with these and any other applicable provisions of the federal securities laws. The Divisions of Market Regulation and Corporation Finance express no view with respect to any other questions that the proposed transactions may raise, including, but not limited to, the adequacy of disclosure concerning, and the applicability of any other federal or state laws to, the proposed transactions.
For the Division of Corporation Finance,
Brian V. Breheny
Chief, Office of Mergers and Acquisitions
Division of Corporation Finance
For the Commission,
by the Division of Market Regulation
pursuant to delegated authority,
James A. Brigagliano
Acting Associate Director
Division of Market Regulation
The Incoming Letter is in Acrobat format.