December 15, 2004
Brigid Rentoul, Esq.
Dear Ms. Rentoul:
This is in response to your letter dated December 15, 2004. 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 United States Securities and Exchange Commission (the "Commission") hereby grants an exemption from Rule 14e-5 under the Securities Exchange Act of 1934 (the "Exchange Act"), particularly in light of the following facts:
The Commission grants this exemption from Rule 14e-5 under the Exchange Act to permit the Prospective Purchasers to purchase or arrange to purchase Kidde Shares otherwise than pursuant to the Offer, subject to the following conditions:
The foregoing exemption from Rule 14e-5 under the Exchange Act expressed above does not apply to purchases or arrangements to purchase Kidde Shares prior to this exemption being granted, is based solely on your representations and the facts presented, and is strictly limited to the application of this rule 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 Offer must comply with these and any other applicable provisions of the federal securities laws. The Division expresses 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 Commission,
James A. Brigagliano
December 15, 2004
Dear Mr. Brigagliano,
Tender Offer by United Technologies Corporation for Kidde plc
We are writing on a confidential basis on behalf of our client, United Technologies Corporation, a Delaware corporation ("UTC"), to respectfully request that the Securities and Exchange Commission (the "Commission") issue an order granting an exemption from Rule 14e-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to UTC, allowing its wholly-owned subsidiary which will be the entity to make the offer (the "Offeror"), and any person acting on its or their behalf to make certain purchases of ordinary shares, nominal value 10 pence per share (the "Kidde Shares"), of Kidde plc ("Kidde"), a public limited company incorporated under the laws of England and Wales, following public announcement of the proposed tender offer (the "Offer") by the Offeror on behalf of UTC for the entire issued share capital of Kidde (as described more fully below).
The Offer will be made in cash, will be structured as a single offer made concurrently in the United Kingdom and United States, as well as other jurisdictions in which the Offer may legally be extended, and will be to purchase the entire issued share capital of Kidde. UTC currently plans to announce the Offer at 7:00 a.m. (London time) on December 16, 2004, or soon as practicable thereafter (the "Announcement Date").
UTC provides high-technology products and services to the aerospace and building systems industries throughout the world. For the financial year ended December 31, 2003, in accordance with generally accepted accounting principles in the United States, UTC had sales revenue of $31.0 billion and net income of $2.4 billion. UTC is one of the largest corporations in the United States, does business in some 180 countries and employs approximately 205,700 people. UTC's principal operating companies are Pratt & Whitney, Carrier, Otis, Sikorsky, Hamilton Sundstrand and UTC Fuel Cells and Chubb. A brief description of the business of each principal operating company is as follows:
Shares of UTC's common stock, par value $1.00 per share (the "UTC Stock"), are listed on the New York Stock Exchange (symbol: UTX) and are registered with the Commission pursuant to Section 12(b) of the Exchange Act. As of December 31, 2003, UTC had approximately 607.0 million shares of UTC Stock issued and outstanding.
Kidde is a foreign private issuer as defined in Rule 3b-4(c) under the Exchange Act and the Kidde Shares are admitted to the Official List of the U.K. Listing Authority (the "UKLA") and trade on the London Stock Exchange (the "LSE") (symbol: KID.L). Kidde is exempt from the registration requirements of Section 12 of the Exchange Act pursuant to Rule 12g3-2(b) thereunder (Commission file number 82-5153). In addition, Kidde has a Level I sponsored American Depositary Receipt ("ADR") program operated by The Bank of New York, as depositary. Each ADR evidences an American Depositary Share (an "ADS") which represents ten Kidde Shares.
Kidde is one of the global leaders in fire and safety products. Kidde serves aerospace, defence, industrial, commercial and consumer markets with the widest range of quality fire and safety products, systems and services, covering detection, protection, prevention and fire fighting. Kidde has three principal operating divisions: (i) Aerospace and Specialist Equipment; (ii) Residential and Commercial; and (iii) Industrial Fire Protection. Kidde operates throughout North America, Western Europe, Eastern Europe, Russia, the Middle East, Asia and Australia and has approximately 7,750 employees. For the financial year ended December 31, 2003, in accordance with generally accepted accounting principles in the United Kingdom, Kidde had total turnover of £938.1 million and retained profit of £36.8 million.
Based on publicly available information, as of November 1, 2004, Kidde had approximately 843.7 million Kidde Shares issued and outstanding (including those evidenced by ADSs) (the "Issued Share Capital"). According to the information available at such date, there is one institutional holder of the Kidde Shares that holds 10 percent or more of the Issued Share Capital, holding approximately 84.6 million Kidde Shares (10.0 percent), and such holder is located in the United States. In addition, based on the information mentioned above, it has been estimated that other U.S. holders own approximately 95.3 million Kidde Shares (including those represented by ADSs). UTC and its affiliates own (beneficially or otherwise) approximately 21.8 million Kidde Shares (2.6 percent).
Based on the foregoing and calculated in accordance with Instruction 2 to Rules 14d-1(c) and (d), UTC estimates that between 12.9 percent and 13.8 percent (assuming all unidentified shareholders are in the United States) of the Issued Share Capital is beneficially held in the United States.
Proposed Offer Structure
The Offer will be made in cash and will be structured as a single offer made concurrently in the United Kingdom, the United States and other jurisdictions where the offer may be legally extended. In accordance with customary practice in the United Kingdom, the Offer will be made outside the United States on behalf of UTC and the Offeror by UTC's financial advisor, UBS Limited, and any Offer extended into the United States will be made by the Offeror and UTC directly.
The Offer will be structured to comply with (i) the rules and regulations of the UKLA and the LSE, (ii) the City Code on Takeovers and Mergers (the "City Code") of the United Kingdom and (iii) except as otherwise exempted, Section 14(e) of the Exchange Act and Regulation 14E thereunder. UTC's primary objective in structuring the Offer is to allow for participation by holders of the Kidde Shares in the United Kingdom and the United States, while complying with the requirements applicable to the Offer in each such jurisdiction to the greatest extent practicable. The Offer document used in connection with the Offer (the "Offer Document") will be prepared with a view to complying with the applicable rules and regulations of the UKLA and the LSE and with the City Code and, except as otherwise requested herein, Section 14(e) of the Exchange Act and Regulation 14E thereunder. Since Kidde does not have any class of equity securities registered under Section 12 of the Exchange Act, the Offer is not subject to compliance with Section 14(d) of the Exchange Act or Regulation 14D thereunder.
The Offer Document will be mailed to all holders of Kidde Shares in the United Kingdom and the United States within 28 calendar days of the Announcement Date, as required by Rule 30.1 of the City Code. The Offer will remain open for acceptance until the date it becomes or is declared unconditional as to acceptances (the "Initial Offer Period"). Pursuant to Rule 14e-1(a) under the Exchange Act, the Initial Offer Period cannot be less than 20 U.S. business days from the mailing of the Offer Document and can be extended for such additional period or periods as may be (i) determined by UTC ("Voluntary Extensions") and (ii) required or necessary to comply in this respect with Section 14(e) of the Exchange Act and Regulation 14E thereunder or the City Code ("Mandatory Extensions"), but not beyond midnight on the 60th calendar day after mailing or such later date as to which The Panel on Takeovers and Mergers (the "Panel"), which administers the City Code, may agree.
Once the Offer becomes or has been declared wholly unconditional (which shall be within 21 calendar days of the close of the Initial Offer Period), UTC will have acquired all Kidde Shares with respect to which it has received valid acceptances and will, in accordance with the City Code, pay for all such accepted Kidde Shares within 14 calendar days thereafter.
If the Offer becomes or is declared wholly unconditional, the Offer must, in order to comply with the City Code, remain open for acceptances for at least 14 calendar days following the date on which it would otherwise have expired and may remain open for such longer period as UTC deems appropriate (the "Subsequent Offering Period"). All valid acceptances received during the Subsequent Offering Period will be paid for within 14 calendar days of the date of receipt. As permitted by the City Code and in accordance with U.K. market practice, UTC intends to keep the Subsequent Offering Period open at least until the compulsory acquisition procedures under the U.K. Companies Act 1985 are completed (which would normally be three months after an offer becomes wholly unconditional). Rule 31.2 of the City Code requires that notice of the termination of the Subsequent Offering Period must be given not less than 14 calendar days prior to such termination.
Statement of Applicable Regulation
General Application of Rule 14e-5 to the Offer
In the United Kingdom, purchases of a target's securities by a bidder or a person acting for the account or benefit of the bidder outside an offer are permitted, subject to certain limitations, and such purchases are common in connection with offers for U.K. companies. Under the City Code, UTC and its advisers and brokers are permitted to purchase Kidde Shares in the open market or otherwise prior to and during the conduct of, but outside, the Offer, subject to certain limitations, including as to price (as described below).
Subject to certain exceptions, Rule 14e-5 prohibits a covered person from directly or indirectly purchasing or arranging to purchase any securities to be acquired in a tender offer for equity securities or any securities immediately convertible into, or exchangeable for or exercisable for such securities, except as part of the tender offer. This prohibition applies from the time the offer is publicly announced until it expires. Rule 14e-5 defines a covered person as (i) the offeror and its affiliates, (ii) the offeror's dealer-managers and any of their respective affiliates, (iii) any advisers to the parties descried in (i) and (ii) above whose compensation is dependent on the completion of the offer and (iv) any person acting in concert either directly or indirectly with any of the foregoing in connection with any purchase or arrangement to purchase any subject securities or related securities. Purchases of Kidde Shares by UTC or other covered persons acting for the account or benefit of UTC outside the Offer would not fall within any of the excepted activities specifically outlined in Rule 14e-5. Accordingly, in the absence of exemptive relief, such purchases would be prohibited after the Announcement Date.
Rules 6.1 and 6.2 of the City Code provide protections similar to those provided by Rule 14e-5, making exemptive relief appropriate in the circumstances of the Offer, by requiring that the Offer price be increased to the level of any higher purchase price outside the Offer. In addition, under Rule 8.1 of the City Code, any purchases outside the Offer by any party to the transaction (including UTC, the Offeror and any adviser, broker or other financial institution acting as its agent (collectively, the "Prospective Purchasers")) are required to be disclosed on a next-day basis through a Regulatory Information Service, as set out in Schedule 12 of the U.K. Financial Service Authority Listing Rules, and the Panel. Disclosures of these purchases attract significant publicity by their very nature and they are disseminated on dealers' trading screens throughout the London market.
Application of Rule 14e-5 to Irrevocable Undertakings
Certain large institutional shareholders as well as the directors of Kidde, in each case outside of the United States, may be asked, as is typical in U.K. takeovers, to undertake irrevocably to accept the Offer in respect of their holdings of Kidde Shares. No additional compensation will be paid to these shareholders and they will receive their offer consideration at the same time as the other Kidde shareholders that accept the Offer.
Under English law, an irrevocable undertaking is an agreement of a shareholder to accept an offer when made and, in some cases, not to accept a competing offer during the pendency of the first offer. An irrevocable undertaking is not treated by the City Code as a purchase, and the City Code permits bidders to enter into irrevocable undertakings at any time, subject to certain limitations. We note for emphasis that any Kidde Shares subject to an irrevocable undertaking are purchased in the Offer, and consequently, count towards satisfying the minimum acceptance condition under the City Code. Acceptance of the Offer in respect of Kidde Shares which are the subject of irrevocable undertakings represent tenders subject to both the terms and conditions of the Offer and the City Code. Accordingly, we are not requesting exemptive relief from Rule 14e-5 with respect to such shareholders entering into irrevocable undertakings.1
Basis for Exemption
Rule 14e-5 is designed to protect investors by "preventing an offeror from extending greater or different consideration to some security holders by offering to purchase their shares outside the offer, while other security holders are limited to the offer's terms."2 The Commission has recognized that a strict application of Rule 14e-5 could disadvantage U.S. security holders in some situations. In this context, the Commission has noted that "flexible application of Rule 14e-5 is necessary and appropriate to encourage offerors for the securities of foreign private issuers to extend their offers to U.S. security holders."3 The Commission has enumerated certain factors that it considers important in ruling on a Rule 14e-5 exemption request, including (i) the degree of ownership of the target by U.S. holders; (ii) whether the offer will be made to U.S. holders on an equal basis to non-U.S. holders; (iii) whether the consideration will be cash or securities; (iv) the nature of the foreign regulation to which the offer is subject; and (v) whether the principal trading market for the target's securities is outside the United States.
In the context of this transaction, U.S. holders of Kidde Shares will be entitled to participate in the Offer on terms as favorable as those offered to holders in the United Kingdom. The London market has extensive history and experience in the tender offer context. UTC and the Offeror will disseminate to holders of Kidde Shares who are in the United States all available information that is required by the City Code.
The relief being requested is consistent with the relief granted in a number of prior letters.4 The Commission has provided for continued review of exemption requests, on a case-by-case basis, in situations, such as the instant case, where U.S. ownership exceeds (or is presumed to exceed) 10 percent. We believe the exemptive relief required from Rule 14e-5 with respect to the Offer is, in large measure, contemplated by or consistent with the exemptive relief granted in connection with other, similarly structured tender offers.
Requested Exemptive Relief
Based on the foregoing, we respectfully request that UTC, the Offeror and any other Prospective Purchasers be granted exemptive relief from the provisions of Rule 14e-5 in order to permit purchases of Kidde Shares outside the Offer by any Prospective Purchaser that would otherwise be prohibited by Rule 14e-5, subject to the following conditions:
Finally, we note the existence of the Memorandum of Understanding on Exchange of Information between the Commission and the U.K. Department of Trade and Industry in Matters Relating to Securities and the U.S. Commodity Futures Trading Commission and the U.K. Department of Trade and Industry in Matters Relating to Futures dated September 25, 1991.
Pursuant to Regulation 200.81, we respectfully request on behalf of UTC that this exemptive request and the response be accorded confidential treatment until 120 days after the date of the response to such request or such earlier date as the staff of the Commission is advised that all of the information in this letter has been made public. This request for confidential treatment is made on behalf of UTC for the reason that certain of the facts set forth in this letter have not been made public.
In compliance with Securities Act Release No. 6269 (December 5, 1980), seven additional copies of this letter are enclosed.
We respectfully request that the Commission issue the requested exemptive relief and confirmation as soon as practicable. If you require any further information or have any questions, please contact the undersigned at 011 44 20 7456 3370 or Thomas B. Shropshire, Jr. at 011 44 20 7456 3223. For your convenience, we may be contacted via e-mail at email@example.com and firstname.lastname@example.org, respectively.
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