774 F.2d 47 (2d Cir. 1985)
SCM is a New York corporation with its principal place of business in New York City.1 Its shares, of which at least 9.9 million were outstanding, trade on the New York Stock Exchange and Pacific Stock Exchange.2 Hanson Trust PLC is an English company with its principal place of business in London.3 Its indirect wholly owned subsidiaries HSCM Industries, Inc. and Hanson Holdings Netherlands B.V. are Delaware and Netherlands entities respectively.4
On August 21, 1985, Hanson publicly announced a cash tender offer of $60 per share for any and all outstanding SCM shares.5 Five days later it filed the required tender offer documents with the SEC.6 The offer was to remain open until September 23 unless extended, with no shares accepted before September 10.7
On August 30, 1985, SCM recommended that its stockholders reject the Hanson offer. SCM announced a preliminary agreement with Merrill Lynch Capital Markets under which a new entity would acquire all SCM shares at $70 per share in a leveraged buyout.8 The agreement was executed on September 3.9 Hanson responded the same day by increasing its offer to $72 cash per share.10 Hanson expressly reserved the right to terminate if SCM granted anyone an option to purchase assets on terms Hanson viewed as a lock-up device.11
On September 10, 1985, SCM entered a new leveraged buyout agreement with Merrill.12 The agreement provided for acquisition of approximately 82 percent of SCM stock for cash at $74 per share followed by debentures for the remainder upon merger.13 If any party other than Merrill acquired more than one-third of SCM shares, Merrill would have the irrevocable option to purchase SCM's consumer foods and pigments businesses for $80 million and $350 million respectively.14 At 12:38 p.m. on September 11 Hanson announced on the Dow Jones Broad Tape that it was terminating its $72 tender offer.15 Minutes later Hanson issued a press release stating that all tendered shares would be promptly returned.16
Later that afternoon Hanson made five privately negotiated cash purchases and one open-market purchase. Hanson acquired 3.1 million SCM shares representing 25 percent of the outstanding stock at $73.50 per share.17 The sellers included Mutual Shares, whose 387,700 shares were offered by Michael Price before Hanson decided to buy privately.18 Ivan Boesky sold approximately 1.2 million shares.19 An open-market block of 600,000 shares was purchased.20 Additional blocks came from Jamie & Co., David Gottesman, and Jeffries & Co.21 The NYSE ticker and Broad Tape reported the first two large anonymous transactions.22 Professional investors then contacted Rothschild, Hanson's financial advisor, to sell additional blocks.23 All purchases were completed by 4:35 p.m.24
In the early evening of September 11 SCM obtained a temporary restraining order from Judge Shirley Wohl Kram in the Southern District of New York barring further acquisitions.25 The TRO was extended by consent on September 12 and 13 pending decision on SCM's preliminary injunction motion.26 Judge Kram conducted an evidentiary hearing on September 12 and 13 at which Sir Gordon White, Rothschild representatives, and risk-arbitrage professionals testified.27 The district court granted the preliminary injunction restraining Hanson from acquiring additional SCM shares or voting the 3.1 million shares already purchased.28 Hanson appealed to the Second Circuit.29
Whether Hanson's September 11, 1985, acquisition of 3.1 million SCM shares through five privately negotiated purchases and one open-market purchase constituted a tender offer within the meaning of § 14(d) of the Williams Act?30
Section 14(d) of the Williams Act requires any person making a tender offer for more than 5 percent of a class of registered equity securities to file a disclosure statement with the SEC. This filing must occur at the time the offer is first published or sent to security holders. Congress left the term tender offer undefined to preserve flexibility.31 The statute's purpose is to protect public shareholders confronted by a cash tender offer from responding without adequate information about the bidder's identity, plans, and the terms of the proposal.32 Courts determine whether a solicitation constitutes a tender offer by examining the totality of circumstances. The inquiry assesses whether there is a substantial risk that solicitees will lack the information needed to make a carefully considered appraisal unless the pre-acquisition filing strictures are followed.33 This inquiry focuses on whether the particular class of persons affected needs the protection of the Act. The principle draws guidance from the rule that an offering to those able to fend for themselves does not trigger the statute's requirements.34
No. Hanson's five private purchases and one open-market purchase of 3.1 million shares occurred after a clear and unequivocal termination of its earlier tender offer.35 The purchases involved only six sellers in a market of 22,800 shareholders.36 At least five of those sellers were highly sophisticated professional investors.37 The sellers already possessed Hanson's detailed 27-page disclosure filed under § 14(d)(1) for the $60 offer.38 They also had the September 5 amendment raising the price to $72.39 They had press releases describing the SCM-Merrill leveraged buyout at $74 per share together with the lock-up option on the consumer foods and pigments businesses.40 The transactions were negotiated privately at $73.50 per share.41 That price was only marginally above the day's market range of $72.50 to $73.50.42 There was no active widespread public solicitation.43 There was no fixed minimum number of shares.44 There was no time limit.45 There was no premium meeting the SEC's proposed definition.46 Several sellers initiated contact themselves.47 All remained free to accept the higher SCM-Merrill offer.48 In the totality of these circumstances, the sellers faced only ordinary market pressures rather than the informational disadvantages the Williams Act was designed to remedy.49 The purchases therefore did not amount to a tender offer.50
The district court therefore erred in treating the post-termination purchases as a de facto continuation of the earlier tender offer.51 Hanson's termination notice was straightforward. All tendered shares were to be returned.52 Hanson had expressly reserved in its August 26 filing the right to make open-market or privately negotiated purchases afterward.53 The prior public disclosures already supplied substantially the same information that would have been required under § 14(d)(1) for the new acquisitions.54
Hanson's September 11, 1985, purchases did not constitute a tender offer within the meaning of § 14(d) of the Williams Act.55
Whether the district court abused its discretion by granting SCM a preliminary injunction on the ground that the September 11 purchases violated the Williams Act disclosure requirements?56
A preliminary injunction may be overturned when the district court abuses its discretion by relying on clearly erroneous findings of fact or an error of law.57 When the material facts are undisputed, the appellate court reviews de novo whether the district court erred as a matter of law in determining that the challenged conduct violated the statute.58 An error of law in finding a likelihood of success on the merits constitutes an abuse of discretion that requires reversal of the injunction.59
Yes. The district court erred as a matter of law. It concluded that SCM had demonstrated a likelihood of success on its claim that the September 11 purchases constituted a tender offer requiring prior compliance with § 14(d). Because the purchases did not meet the statutory definition under the totality-of-circumstances standard, the court had no proper basis for finding a violation of the Williams Act disclosure requirements. The error of law on the merits therefore rendered the grant of preliminary injunctive relief an abuse of discretion.60
The balance of hardships and irreparable injury determinations need not be reached once the likelihood-of-success finding is overturned.61 The record indicates that SCM stockholders could pursue money damages or rescission if a violation were later established.62 No other bidders were demonstrably deterred by the purchases.63
The district court abused its discretion by granting SCM a preliminary injunction on the ground that the September 11 purchases violated the Williams Act disclosure requirements.64