Iv. Tender Offers

Washington and Lee Law Review Volume 34 | Issue 3 Article 8 Summer 6-1-1977 Iv. Tender Offers Follow this and additional works at: https://scholarlycommons.law.wlu.edu/wlulr Part of the Securities Law Commons Recommended Citation Iv. Tender Offers, 34 Wash. & Lee L. Rev. 945 (1977), https://scholarlycommons.law.wlu.edu/wlulr/ vol34/iss3/8 This Article is brought to you for free and open access by the Washington and Lee Law Review at Washington & Lee University School of Law Scholarly Commons. It has been accepted for inclusion in Washington and Lee Law Review by an authorized editor of Washington & Lee University School of Law Scholarly Commons. For more information, please contact . 1977] SECURITIES LAW DEVELOPMENTS succeed in suits under section 14(a), the ultimate result may be a more meaningful disclosure of the facts necessary to an informed corporate election. Scorr HAMILTON IV. TENDER OFFERS Congress instituted federal regulation of tender offers' with the Williams Act, 2 which requires both the offeror and management of tions by the trier of fact. See 3B, Securities Law Series, H. Bloomenthal, SECURITIES AND FEDERAL CORPORATE LAW § 13.17[b] at 13-63-13-64 (rev. ed. 1976); Anderson, in PLI EIGHTH ANNUAL INSTITUTE ON SECURITIES REGULATION (Mundheim, Fleischer & Vandegrift, 1977). Attempts have been made to classify the cases into factual categories that generally will require disclosure. See, e.g., Goolrick, Some Disclosure Problems in Acquisition Proxy Statements and Prospectuses, 28 Bus. LAW. 111 (1972); Note, Disclosure of Corporate Payments Abroad and the Concept of Materiality, 4 HoFsTRA L. REv. 729 (1976). Nevertheless, generalizations are of little help where the fact is not patently significant. In close cases, litigation may well be the only sure way to determine whether a given fact should have been included in the proxy statement. I Federal securities statutes make no attempt to define the term "tender offer." The classic tender offer is understood to be a public offer to purchase a fixed amount of securities of the target corporation at a specified price. E. ARANOw & H. EINHORN, TENDER OFFERS FOR CORPORATE CONTROL 70 (1973) [hereinafter cited as ARANOW & EINHORN]; Note, The Developing Meaning of "Tender Offer" Under the Securities Exchange Act of 1934, 86 HARv. L. REv. 1250 (1973); Note, The Scope of Section 14(d); What is a Tender Offer?, 34 OHIO ST. L.J. 375 (1973). The consideration offered may be in cash, securities, or both. When consideration includes securities, the transaction is termed an "exchange offer." Bromberg, Tender Offers: Safeguards and Restraints-An Interest Analysis, 21 CASE W. REs. L. REv. 613, 613 (1970) [hereinafter cited as Bromberg]. 2 Pub. L. No. 90-439, 82 Stat. 454 adding Securities Exchange Act of 1934 § § 13(d)-(e), 14(d)-(f), 15 U.S.C. § 78m(d)-(e), 78n(d)-(f) (1970) [hereinafter referred to as the Williams Act]. Under the Act, a person that acquires more than five percent of a certain class of equity securities of a corporation must disclose to that corporation and the SEC information concerning the funding and purpose of the purchases, as well as the background of the purchaser. Securities Exchange Act of 1934 § 13(d)(1), 15 U.S.C. § 78m(d)(1)(1970) [hereinafter referred to as the '34 Act]. Promulgated according to that provision, SEC Rule 13d-1, 17 C.F.R. § 240.13d-1 (1976), requires the 5% purchaser to file with the SEC a Schedule 13D report. In the report, the purchaser must disclose information concerning the funding and purpose of the purchases. 17 C.F.R. § 240.13d-101 (1976). The Williams Act also includes a broad antifraud provision that proscribes misleading statements or omissions of material facts made in connection with a tender offer. '34 Act § 14(e), 15 U.S.C. § 78n(e)(1970). SEC rules also regulate the solicitation and recommendations pertaining to tender 946 WASHINGTON AND LEE LAW REVIEW [Vol. XXXIV the target corporation to disclose facts material to an informed decision by shareholders concerning tender of their shares to the takeover bidder. Although the congressional purpose of shareholder protection through informed consideration of the merits of a tender offer is clear, 3 the Williams Act does not define the key components in the scheme of enforcement. The Act provides only for administrative supervision by the SEC.4 Courts have implied private causes of action as a means of enforcing the Act,' but in doing so have created definitional problems related to the elements of those actions and the proper relief to be granted. In the past year, courts have dealt with issues concerning the point at which the duties of the Williams Act attach,' the standing of a tender offeror to assert violations,7 and the propriety of preliminary relief to injured parties.' A. Exchange Offers: Pre-registrationActivity A takeover bidder may offer consideration to target company shareholders in the form of cash, securities, or a combination of the two The principal attraction of the cash transaction to offerors is the offers. Any party making such statement must file a Schedule 14D with the SEC. 17 C.F.R. § 240.14d-14(a)(1970). Schedule 14D requires information concerning the identity and background of the party making the solicitation or recommendation, as well as copies of the statements. 17 C.F.R. § 240.14d-101 (1976). See Piper v. Chris-Craft Indus., Inc., 97 S. Ct. 926 (1977) (extensive discussion of purpose of Williams Act); Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975); H. R. REP. No. 1711, 90th Cong., 2d Sess., reprinted in [1968] U.S. CODE CONG. & AD. NEWS 2811 [hereinafter cited as H.R. REP.]; S. REP. No. 550, 90th Cong., 1st Sess. (1967); ARANOW & EINHORN, supra note 1, at 67; Note, The Developing Meaning of "Tender Offer" Under the Securities Exchange Act of 1934, 86 HARv. L. Rav. 1250 (1973). 1 See note 2 supra. The '34 Act, into which the Williams Act is incorporated, provides the SEC with power to conduct investigations of alleged violations of the statute. The Commission has the power of subpoena in connection with these investigations, and also is empowered to seek injunctive aid from federal district courts to enjoin violations of the statute. '34 Act § 21, 15 U.S.C. § 78u (1970). 1 See, e.g., GAF Corp. v. Milstein, 453 F.2d 709 (2d Cir. 1971), cert. denied, 406 U.S. 910 (1972) (target corporation has standing under § 13(d)); Electronic Specialty Co. v. International Controls Corp., 409 F.2d 937 (2d Cir. 1969) (target corporation and nontendering shareholders have standing to sue under § 14(e)); cf. J. I. Case Co. v. Borak, 377 U.S. 426 (1964) (private right of action exists under § 14(a)-proxy statements). Applied Digital Data Systems, Inc. v. Milgo Elec. Corp., [1976-1977 Transfer Binder] FED. SEC.L. REP.(CCH) 95,824 (S.D.N.Y. Jan. 3, 1977); see section A infra. Piper v. Chris-Craft Indus., Inc., 97 S. Ct. 926 (1977); see section C infra. See section B infra. ARANOW & EINHORN, sup (...truncated)