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KOPPERS CO. v. AMERICAN EXPRESS CO.

April 15, 1988

Koppers Company, Inc., Plaintiff,
v.
American Express Company, a corporation, Shearson Lehman Brothers Holdings, Inc., a corporation, Shearson Lehman Hutton, Inc., a corporation, SL-Merger, Inc., a corporation, BNS Partners, partnership, BNS Inc., a corporation, Bright Aggregates Inc., a corporation, Beazer PLC, a public limited company, and National Westminster Bank PLC, an English banking company, Defendants



The opinion of the court was delivered by: COHILL, JR.

 MAURICE B. COHILL, JR., CHIEF UNITED STATES DISTRICT JUDGE

 Presently before the Court are cross-motions for preliminary injunctions. The plaintiff, Koppers Company, Inc. ("Koppers") brought this action to enjoin a hostile tender offer attempt commenced by defendant BNS, Inc. on March 3, 1988. In its request for a preliminary injunction, Koppers argues that there is a great likelihood that the tender offer violates federal securities and other laws and that irreparable harm will be caused its shareholders if the offer is not enjoined. Defendant BNS, Inc. requests a preliminary injunction ordering Koppers to correct allegedly misleading statements in its Schedule 14D-9 statement, a statement which is required to be filed with the Securities and Exchange Commission ("SEC") by a target company which is the subject of a tender offer. 15 U.S.C. § 78n(d)(4).

 INTRODUCTION

 This is a difficult case. The facts are intricate and complicated; the law is fuzzy. Because of the unusual posture of the American Express/Shearson interests, apparently as broker-dealer-investment banker-advisor-owner in this takeover transaction, we have had to find the way by looking at cases, statutes and regulations which merely give us clues as to the direction the court should take. We have found little to serve as an actual roadmap.

 The facts are similarly muddled because of the intricate arrangements of the tender offerors. This is demonstrated by the fact that more than the first one-third of this document is devoted to a description of those arrangements.

 The polestar for us, therefore, has been what we perceive to be the purpose and intent of Congress as reflected in the various securities laws and related statutes, regulations and cases interpreting them. Their overriding purpose was perhaps best-stated recently by Harvard Professor, Louis Loss:

 
As the Supreme Court has since [1933] put it, the SEC statutes embrace a "fundamental purpose * * * to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry." In short, Congress did not take away from the citizen "his inalienable right to make a fool of himself." It simply attempted to prevent others from making a fool of him.

 L. Loss, Fundamentals of Securities Regulation 32-33 (2nd ed. 1988).

 With this philosophy and clear legislative intent in mind, we have analyzed the facts of this case and concluded that it is more prudent to err on the side of disclosure than obfuscation.

 After consideration of the documents filed with the SEC, the briefs filed by the parties, and the arguments of the parties and other evidence of record provided to us at a hearing held April 4, 5, and 6, 1988, we now make the following findings of fact and conclusions of law in accordance with Fed. R. Civ. P. 52(a).

 I. THE PARTIES - THE TENDER OFFER - THE BACKGROUND

 A. Plaintiff

 Plaintiff, Koppers Company, Inc. ("Koppers") is a corporation organized under the laws of the State of Delaware with its principal place of business in Pittsburgh, Pennsylvania. Koppers' common and preferred stocks are registered pursuant to section 12(g) of the Securities Exchange Act of 1934, 15 U.S.C. § 78g, and are listed and traded on the New York, Midwest and Pacific Stock Exchanges. Koppers has two divisions: (1) Construction Materials and Services, and (2) Chemical and Allied Products.

 B. The Shearson Interests

 Defendant American Express Company ("American Express") is a corporation organized under the laws of the State of New York and has its principal place of business in New York City.

 Defendant Shearson Lehman Brothers Holdings, Inc. ("Shearson Holdings") is a corporation organized under the laws of the State of Delaware and has its principal place of business in New York City. American Express owns over 60% of the equity interest in Shearson Holdings.

 Defendant Shearson Lehman Hutton, Inc. ("Shearson Lehman") is a corporation organized under the laws of the State of Delaware with its principal place of business in New York City. Shearson Lehman is a wholly owned subsidiary of Shearson Holdings.

 Defendant SL-Merger, Inc. ("SL-Merger") is a corporation organized under the laws of the State of Delaware and has its principal place of business in New York City. SL-Merger is a wholly owned subsidiary of Shearson Lehman and an indirect subsidiary of Shearson Holdings. SL-Merger has engaged in no activities other than those incident to its organization and the tender offer.

 C. The Beazer Interests

 Defendant Beazer PLC ("Beazer") is an English public limited company with its principal place of business at Beazer House, Lower Bristol Road, Bath, Avon BA2 3EY, United Kingdom.

 D. The NatWest Interests

 Defendant National Westminster Bank PLC ("NatWest") is an English banking company that is registered in the United States under the Bank Holding Company of 1956, 12 U.S.C. § 1841.

 Speedward Limited ("Speedward") is a company organized under the laws of the United Kingdom and is a wholly-owned direct subsidiary of NatWest Investment Bank Limited ("NatWest Limited"), also an English company. NatWest Limited is a wholly-owned subsidiary (and the investment banking arm of) NatWest.

 Cutting through the maze of the corporations, partnerships and the individual just described, these defendants represent three interests united in attempting to take over Koppers - Beazer, Shearson and NatWest.

 E. The Acquisition Vehicles

 On October 16, 1987, Beazer, NatWest, and Shearson Holdings formed BNS Partners under the Delaware Uniform Partnership Act. The partnership consisted of Bright Aggregates, Speedward, and SL-Merger each of which jointly contributed $ 50 million in capital.

 Beazer, through Bright Aggregates, has contributed $ 24.5 million in capital and received a 49% interest in the partnership; Shearson, through SL-Merger, contributed $ 23.05 million and received a 46.1% interest in the partnership; and NatWest, through Speedward, contributed $ 2.45 million and obtained a 4.9% interest. The sole purpose of the partnership was to acquire shares of Koppers prior to the tender offer, which was not made until March 3, 1988. Bright Aggregates, with Mr. Beazer as its President, is the managing partner of BNS Partners and has sole authority to manage the partnership's affairs.

 Defendant BNS, Inc. ("BNS Inc.") is a corporation organized under the laws of the State of Delaware and has its principal place of business in Dallas, Texas. The shareholders of BNS Inc. are Bright Aggregates, Speedward, and SL-Merger. These three shareholders own stock in BNS Inc. in apparent direct proportion to the capital contributions of their progenitors; the relationship is somewhat obscured, however, by the fact that each of the three owns a fraction of one share of a different class of stock, with the three holdings coming to a total of one share.

 Thus, Bright Aggregates owns.490 shares of Class A common stock, which is all the Class A common stock outstanding; SL-Merger holds.461 shares of Class B common stock; Speedward holds.024 shares of Class B common stock and.025 shares of Class C common stock. We will discuss this unusual arrangement later.

 BNS Inc. was formed for the sole purpose of acquiring the shares of Koppers from the tender offer.

 F. Transactions in Target Stock Prior to March 3, 1988

 Bright Aggregates began purchasing Koppers' stock through Shearson prior to the tender offer. As of October 21, 1987, Bright Aggregates had accumulated 343,400 common shares of Koppers stock. Bright Aggregates now owns 458,100 shares of common stock which it purchased in the open market.

 Between October, 1987, and March 3, 1988, BNS Partners used its $ 50 million in capital and an additional $ 21 million in margin loans to purchase 1,636,000 shares of Koppers stock in the open market through its broker, Shearson Lehman. In order to comply with the stock purchasing notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a(a), BNS Inc. filed their Hart-Scott-Rodino Notification and Report forms with the SEC on March 3, 1988, the same day it commenced its tender offer. The timing of the purchases relative to the infusion of capital was called into question at the hearing.

 On March 3, 1988, BNS Inc., Bright Aggregates, and Beazer each filed a Schedule 14D-1 with the Securities and Exchange Commission ("SEC"), as required by 15 U.S.C. § 78n(d)(1), and commenced an unsolicited tender offer for Koppers' common stock at a price of $ 45.00 per share and its cumulative preferred stock 4% series at a price of $ 107.75 per share. The stated purpose of the tender offer is to acquire all the stock of Koppers and to seek to have Koppers consummate a merger or similar business combination transaction with BNS Inc., or an affiliate of BNS Inc. The tender offeror was identified as BNS Inc. There have since been at least 20 amendments to the original Schedule 14D-1.

 No entity identified with the Shearson interests - SL-Merger, Shearson Lehman, American Express, or Shearson Holdings - filed a Schedule 14D-1 relating to the tender offer. In addition to its part ownership of BNS Inc. through SL-Merger, Shearson is the financial advisor for BNS Inc. and one of the dealer-managers for the tender offer.

 To complete the tender offer, the BNS Inc. tender offer statement reveals that financing of approximately $ 1.7 billion is needed. Shearson is to provide approximately $ 570 million; a syndicate of banks led by Citibank is to lend approximately $ 864 million, and Beazer is to contribute $ 298 million for preferred stock issued by BNS Inc. and the 458,100 common shares of Koppers that it holds. Beazer's contribution is largely financed by NatWest. The financial arrangements are discussed more fully at Part III of this Opinion.

 Upon completion of the tender offer, BNS Partners will transfer its shares of Koppers to BNS Inc.; the partnership will be dissolved, and BNS Inc. will assume the liabilities and obligations of BNS Partners. BNS Inc., will, in turn, issue common shares to be distributed among the partners of BNS Partners, so that immediately after the distribution Bright Aggregates will hold 490 shares of Class A Common Stock, SL-Merger will hold 461 shares of Class B Common Stock, and Speedward will hold 24 shares of Class B Common Stock and 25 shares of Class C Common Stock.

 The stated purpose of the tender offer is to acquire control of Koppers through the purchase of common and preferred shares of Koppers. The tender offer states in part:

 
as soon as practicable following completion of the Offer, to seek maximum representation on the Company's [Koppers'] Board of Directors and to propose the Merger, pursuant to which each outstanding Common Share (other than Shares held by the Purchaser [BNS, Inc.], the Partnership [BNS Partners] or Bright [Bright Aggregates], Shares held in the treasury of the Company and Shares held by stockholders who properly perfect appraisal rights under Delaware law) would be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer. Prior to consummating the Merger, the Purchaser intends to cause the Company to redeem all Preferred Shares not purchased pursuant to the Offer for $ 107.75 per Preferred Share (plus accrued and unpaid dividends) or, in the case of a Short-Form Merger . . ., to cause each Preferred Share . . . to be converted in the Short-Form Merger into the right to receive such amount.

 Tender Offer, at 29.

 
The exact timing and details of the Merger will depend upon a variety of factors and legal requirements and the number of Shares acquired by the Purchaser pursuant to the Offer . . . . Although it is the Purchaser's intention . . . to propose and seek to consummate the Merger, the Purchaser can give no assurance that the Merger will be consummated or as to the timing of the Merger.

 Tender Offer, at 35.

 On March 16, 1988, the Koppers Board of Directors ("The Board") declared the $ 45 per share offer of March 3 to be inadequate. The Board did conclude, however, that the offer price of $ 107.75 for the preferred stock was adequate. As required by 15 U.S.C. § 78n(d)(4), Koppers filed a Schedule 14D-9 with the SEC.

 On March 21, 1988, defendants increased their tender offer proposal to $ 56 per share of common stock. On March 22, 1988, the Board declared the $ 56 per share offer to be inadequate.

 On March 25, 1988, the defendants increased their offer to $ 60 per share of common stock. On April 5, 1988, The Board met to consider the $ 60 offer, and announced that it was unable to take a position as to the adequacy of the offer, although Mr. Charles Pullin, Chairman and Chief Executive Officer of Koppers, indicated in his testimony at the hearing before this court that he feels the offer is inadequate.

 The original offer of $ 107.75 per share of preferred stock has not been modified.

 The tender offer is scheduled to expire April 15, 1988.

 H. Other Litigation

 There are two actions related to this tender offer proceeding in the United States District Courts in the District of Delaware and in the Central District of California. There have been significant rulings in each of those courts which put our case in an almost contingent posture. See this Court's Temporary Restraining Order of April 6, 1988. Nevertheless, counsel indicated during our preliminary injunction hearing that they wish to pursue their respective requests for preliminary injunctions, and we see no reason to delay our consideration of the matters before us.

 1. The Delaware Action

 The laws of State of Delaware have an important presence in this case. Among other conditions, the tender offer was predicated on:

 
(3) the purchaser being satisfied that the restrictions on business combinations contained in section 203 of the Delaware General Corporation Law are invalid, unenforceable, or otherwise inapplicable to the proposed merger (as a result of board action, the tender of a sufficient number of shares, court action or otherwise); (4) the purchaser being satisfied that the proposed merger can be consummated without the need for a supermajority vote of the company stockholders pursuant to Article Eighth of the company's certificate of incorporation (as a result of board action, the tender of a sufficient number of shares, or otherwise).

 Tender Offer, at 1.

 Accordingly, on March 3, 1988, the same day it commenced the tender offer, defendant BNS Inc. filed an action against Koppers, and its individual directors, the Attorney General and the Secretary of State of the State of Delaware in the United States District Court for the District of Delaware, docketed at Civil Action No. 88-130. BNS Inc. sought a declaratory judgment that the Delaware takeover statute is unconstitutional, and a preliminary injunction preventing the activation of the rights ("poison pill") plan previously adopted by Koppers' board of directors.

 On April 1, 1988, the Delaware court filed an opinion holding that the Delaware statute is most likely not unconstitutional and that Koppers' rights plan most probably will not immediately irreparably injure BNS Inc., and denying BNS Inc.'s motion for a preliminary injunction.

 Pursuant to the Delaware statute, the validity of which the court upheld, the defendants must obtain 85% of the voting stock of Koppers in order to avoid the restrictions of that statute. In such event, the rights plan of Koppers would also be inapplicable because its 80% supermajority requirement would be satisfied. The only other manner in which the tender offer's conditions can be satisfied is by action of Koppers' board of directors.

 2. The California Action

 The Beazer interests have an aggregate construction materials business in California, which competes with a plant owned by Koppers in California. The United States District Court for the Central District of California issued a preliminary injunction on April 4, 1988, indefinitely enjoining the tender offer on antitrust grounds. Although the Ninth Circuit Court of Appeals has agreed to hear BNS Inc.'s appeal on an expedited basis the week of May 9, 1988, the preliminary injunction is still in effect.

 II. CLAIMS PRESENTED IN THIS ACTION

 A. Plaintiff's Complaint

 At the outset, we note that this Court has jurisdiction pursuant to Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. (the "Exchange Act") and 28 U.S.C. §§ 1331 & 1337. Furthermore, venue is proper in the Western District of Pennsylvania pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1391.

 On March 11, 1988, Koppers filed this action, alleging that the defendants had committed various violations of the Williams Act, 15 U.S.C. § 78n(d)(1) & (e), in connection with the tender offer. The same day, defendants BNS Partners, BNS Inc., Bright Aggregates, and Beazer PLC filed a Motion to Transfer the Koppers' action to the United States District Court for the District of Delaware on the grounds (1) that venue more properly lies in Delaware for the convenience of the parties and witnesses, and in the interests of justice, pursuant to 28 U.S.C. § 1404(a); and (2) that this action belongs in the Delaware court as a compulsory counterclaim to the Delaware action, see Fed. R. Civ. P. 13. In my absence, Judge Diamond of this court heard arguments on an expedited basis, and denied the motion to transfer pursuant to section 1404(a). On March 17, 1988, after hearing additional arguments, I issued an Opinion and Order denying the defendant's Motion to Transfer, holding that the action filed in the Western District of Pennsylvania is not a compulsory counterclaim to the issues presented in the Delaware action.

 Koppers alleges that the defendants are soliciting tenders of Koppers' stock through a materially false and misleading Offer to Purchase that fails to disclose information required by the Securities Exchange Act of 1934.

 Count 1 of Koppers' Amended Complaint alleges that the defendants violated Sections 14(d) and 14(e) of the Williams Act, 15 U.S.C. § 78n(d) and (e), and the rules and regulations of the Securities Exchange Commission by (1) failing to provide adequate information regarding the role of the Shearson entities; (2) failing to disclose that a subsidiary of Shearson, E.F. Hutton & Company, Inc., has pled guilty to certain criminal charges and that certain of its former employees face legal actions and SEC investigations; (3) failure to file financial information with respect to "bidders" Shearson Lehman and NatWest; (4) failure to file other material information concerning the bidders; and (5) failure to state which jurisdictions are encompassed in a disclaimer that tenders will not be accepted from jurisdictions in which the making of the offer would not be in compliance with state securities laws.

 Count 2 alleges that the Schedule 14D-1 fails to disclose (1) the conditional and speculative nature of the financing; (2) that the terms of the financing would violate Section 7 of the Exchange Act; (3) that Shearson purchased and sold Koppers' securities between the date on which BNS Partners was formed and the date the tender offer commenced; (4) that Shearson Lehman contacted Koppers in February, 1988, and offered to assist Koppers in any defense of a tender offer; and (5) that significant criminal, civil, and administrative investigations have been undertaken.

 Count 3 alleges that the Schedule 14D-1 fails to disclose that the transaction contemplated by the tender offer violates Section 7 of the Exchange Act, 15 U.S.C. § 78g, and Federal Reserve Board Regulations G, T, U, and X, 12 C.F.R. §§ 207, 220, 221, and 224, in that the banks and broker-dealers involved in this transaction are prohibited from lending more than 50% of the funds used to purchase stock if such stock is to be used to secure a loan. It is further alleged that BNS Inc. is a shell corporation that will incur debt as a result of the tender offer which will exceed the 50% limitation.

 On the basis of these four counts, Koppers seeks a preliminary and permanent injunction against the defendants' solicitation and/or purchase of Koppers' stock by means of the tender offer, an order requiring correction of false and misleading statements, an order prohibiting future false and misleading statements, damages, and other just and proper relief.

 Count 5 alleges that Shearson Holdings and/or Shearson Lehman violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j, and the rules and regulations promulgated thereunder by executing transactions in Koppers' stock from October 17, 1987, through March 2, 1988, during which period Koppers repurchased 476,000 shares of its stock. Koppers alleges that the stock price was artificially inflated and manipulated during that period and seeks a judgment for all damages it sustained as a result of Shearson Holdings' and/or Shearson Lehman's actions.

 In its Second Amended Complaint, Koppers added Count 6, alleging that defendants violated the Williams Act by failing to disclose that BNS Inc. had violated the Hart-Scott-Rodino Antitrust Improvements Act, 15 U.S.C. 18a(a) & (d) by its transaction in Koppers stock prior to commencement of the tender offer. The relief requested for Count 6 is the same as that requested for Counts 1 through 4.

 On March 25, 1988, defendants BNS Partners, BNS Inc., Bright Aggregates, and Beazer, filed an answer and counterclaim setting forth affirmative defenses challenging the good faith of Koppers' responses to the tender offer and charging that the Schedule 14D-9 filed by Koppers violated the Williams Act in several respects.

 B. Counterclaim Brought by BNS, Inc., BNS Partners, Bright Aggregates and Beazer

 BNS Inc., BNS Partners, Bright Aggregates, and Beazer PLC have filed a counterclaim alleging that the Schedule 14D-9 filed by Koppers in response to the tender offer is materially false and misleading and is therefore in violation of the Williams Act, in that Koppers has failed to disclose material information about: (1) its rejection of the original tender offer price of $ 45 a share; (2) the terms of Koppers' suggested plan of recapitalization and proposed substantial cash dividend or distribution; (3) the terms for financing Koppers' suggested plan of recapitalization; (4) the sale of Koppers' stock to its employee stock ownership plan; (5) the potential sale of all or part of Koppers' construction materials and service business; (6) the effect of Koppers' proposed plans on the price of Koppers' stock; (7) how Koppers will service the debt it will incur if its plan is executed; and (8) how Koppers' plan is more advantageous than BNS Inc.'s offer.

 The defendants asserting this counterclaim request an order dismissing Koppers' complaint, granting a preliminary and permanent injunction ordering Koppers to correct its Schedule 14D-9 to comply with the Williams Act, and granting fees and costs.

 C. The Law of Preliminary Injunctions

 Under the law established by the Third Circuit Court of Appeals, a party seeking preliminary injunctive relief must establish four essential elements: (1) that it has a reasonable probability of success on the merits of its underlying claim, (2) that it will be irreparably injured by denial of the requested injunctive relief, (3) that the denial of the preliminary relief will result in greater harm for the moving party than that experienced by the non-moving party, and (4) that the granting of preliminary relief will be in the public interest. SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244, 1254 (3d Cir. 1985); Moteles v. University of Pennsylvania, 730 F.2d 913, 918 (3d Cir. 1984), cert. denied, 469 U.S. 855, 83 L. Ed. 2d 114, 105 S. Ct. 179 (1984).

 The four elements for preliminary injunctive relief constitute mixed questions of fact and law. Gearhart Industries, Inc. v. Smith Int'l, Inc., 741 F.2d 707, 710 (5th Cir. 1984).

 While a preliminary injunction should be issued only with great care, Hanson Trust PLC v. SCM Corp., 774 F.2d 47, 60 (2d Cir. 1985), preliminary injunctive relief is a particularly useful remedy to prevent potential violations of the disclosure requirements of securities laws. As the Third Circuit Court of Appeals has stated:

 
Prior to consummation of the offer the court still has a variety of methods available to it for correction of the misstatements or omissions. But once the tender offer has been consummated it becomes difficult, and sometimes virtually impossible to "unscramble the eggs." On the other hand, preliminary relief does not, in assuring that the offer will be lawfully made, sacrifice the legitimate desires of shareholders to accept the offer. If the offeror is subsequently vindicated after a trial on the merits, the offer may be renewed. Thus, in the normal situation, when it appears likely that the offer may contain materially misleading statements or omissions as made, the interest of the shareholders and of the public in full disclosure of relevant circumstances renders preliminary injunctive relief an appropriate method of remedying the deficiencies in disclosure before the offer is consummated.

 Ronson Corp. v. Liquifin Aktiengesellschaft, 483 F.2d 846, 851 (3d Cir. 1973), cert. denied, 419 U.S. 870, 42 L. Ed. 2d 108, 95 S. Ct. 129 (1974) (citations omitted). See also Sonesta Int'l Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir. 1973).

 Proper judgment requires a delicate balancing of all of these elements. Eli Lilly & Co. v. Premo Pharmaceutical Laboratories, 630 F.2d 120, 136 (3d Cir. 1979), cert. denied, 449 U.S. 1014, 66 L. Ed. 2d 473, 101 S. Ct. 573, 208 U.S.P.Q. (BNA) 88 (1980).

 As a remedy for defects in tender offers, injunctions may often play a supporting role, and the courts will not hesitate to enjoin the tender offer until compliance with the securities laws can be determined. Pacific Realty Trust v. APC Investments, Inc., 685 F.2d 1083, 1086 (6th Cir. 1982). As alternative remedies, a court may also require curative disclosure, a permanent injunction in order to punish and deter intentional violations of the securities laws, or a permanent injunction if there are manipulative acts that cannot be cured through disclosure. Id.

 In cases in which it is alleged that a tender offeror has failed to meet disclosure requirements, a showing of a material omission or misstatement in a tender offer prospectus does not of itself satisfy the requirement that the movant for preliminary injunctive relief show irreparable harm; the disputed tender offer must result in a situation which would be difficult to unravel, or the plaintiffs must identify specific injuries resulting from continuation of the offer in its present form for which monetary award or other legal remedy would not adequately compensate them. Schmidt v. Enertec Corp., 598 F. Supp. 1528, 1543 (S.D.N.Y. 1984).

 Defendants maintain that the only injunctive relief available under the Williams Act is for corrective disclosure. See, e.g., Hubco, Inc. v. Rappaport, 628 F. Supp. 345 (D.N.J. 1985); Energy Ventures, Inc. v. Appalachian Co., 587 F. Supp. 734 (D. Del. 1984), and that no further relief is available.

 D. The Williams Act

 Congress added the Williams Act to the system of federal securities regulation to fill a gap in the disclosure scheme of the 1933 and 1934 securities laws. The Williams Act is designed to insure that stockholders confronted with a tender offer, whether hostile or friendly, are provided with sufficient information about the transaction to make an informed investment decision. Bolton v. Gramlich, 540 F. Supp. 822, 836 (S.D.N.Y. 1982); Texasgulf, Inc. v. Canada Development Co., 366 F. Supp. 374, 420 (S.D. Texas 1973).

 Congress intended to assure basic honesty and fair dealing, not to impose an unrealistic requirement of laboratory conditions that might make the new statute a potent tool for incumbent management to protect its own interests against the desires and welfare of the stockholders. Sonesta, 483 F.2d at 255. Congress did not intend the Act to be a weapon with which to defeat tender offers. Gray Drug Stores, Inc. v. Simmons, 522 F. Supp. 961, 964 (N.D. Ohio 1981). "The Williams Act is not intended to favor either tender offerors or incumbent management. Congress recognized that while tender offers serve a useful purpose in providing a check on entrenchment and inefficient management, target management is in the best position to evaluate the offer and oppose a bid that is not in the best interests of the target's shareholders. Congress therefore attempted to preserve a neutral setting in which the contenders could fully and fairly present their arguments." Comment, A Critical Survey of Target Company Disclosure Obligations Under the Williams Act, 59 Temple Law Quarterly 1189, 1195 (1986).

  Section 14(d)(1) is codified at 15 U.S.C. § 78n(d)(1) and provides in relevant part:

  
(d)(1) - It shall be unlawful for any person, directly or indirectly, by use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, to make a tender offer for, or a request or invitation for tenders of, any class of any equity security which is registered pursuant to section 781 of this title, . . . if, after consummation thereof, such person would directly or indirectly, be the beneficial owner of more than 5 per centum of such class, unless at the time copies of the offer are first published or sent to security holders such person has filed with the Commission a statement containing the information specified in section 78m(d) and such information as the Commission by rules and regulations prescribe as necessary or appropriate in the public interest or to protect investors. The rest of this provision states in sum that all documents used to solicit the tender offer must follow the regulations of the Commission and must be filed with the Commission.

  Section 14(e) is codified at 15 U.S.C. § 78n(e) and provides:

  
(e) It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer, request, or invitation. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative.

  SEC Rule 14d-6, 17 C.F.R. § 240.14d-6, and SEC Schedule 14D-1, 17 C.F.R. § 240.14d-100, set forth the minimum disclosure requirements that must be satisfied for a tender offer to comply with Section 14(d)(1). These include, inter alia :

  (1) the identity and background of the bidder, including information regarding civil and criminal lawsuits involving the bidder and its affiliates during the past five years, Schedule 14D - Item 2,

  (2) Any borrowings by the bidder for the purpose of the tender offer, Schedule 14D - Item 4,

  (3) The purpose or purposes of the tender offer and any plans or proposals regarding, among other things, the sale of a material amount of assets of the company or its subsidiaries, changes in the present board of directors or management, and ...


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