Hanson Tr. PLC v. SCM Corp. - 774 F.2d 47 (2d Cir. 1985)

Rule:

The role of the courts in construing and applying the Williams Act must be one of strict neutrality. Although a court should not hesitate to enforce the Act's disclosure provisions through appropriate relief, it must also guard against improvident or precipitous use of remedies that may have the effect of favoring one side or the other in a takeover battle when allegations of violation of the Act, often made in the heat of the contest, may not be substantiated. In this context a preliminary injunction, which is one of the most drastic tools in the arsenal of judicial remedies, must be used with great care, lest the forces of the free market place, which in the end should determine the merits of takeover disputes, are nullified. 

Facts:

The parties were involved in a bidding contest for control of SCM Corporation, a large public corporation. Hanson Trust PLC, HSCM Industries, Inc., and Hanson Holdings Netherlands B.V. (hereinafter sometimes referred to collectively as "Hanson") made a public announcement to make a cash tender offer pursuant to the Williams Act, 15 U.S.C.S. § 78n(d)(1). SCM entered into a leveraged buy-out agreement to stop Hanson from gaining control. Hanson announced that it terminated its cash offer. Hanson then decided to make a cash purchase in the open market or through privately negotiated transactions. SCM alleged that this purchase of stocks violated the Williams Act, 15 U.S.C.S. § 78n(d)(1).

Issue:

Did Hanson’s post-tender offer private purchases of SCM’s stock constitute a de facto tender offer?

Answer:

No.

Conclusion:

The court held that the district court erred in ruling as a matter of law that SCM had demonstrated a likelihood of success on the merits, based on the theory that Hanson's post-tender offer private purchases of SCM constituted a de facto tender offer, it was an abuse of discretion to issue a preliminary injunction. SCM and its stockholders may well have an adequate remedy at law. No other SCM stockholder is prevented by Hanson's acquisitions from tendering stock in response to the SCM-Merrill offer for purchase at $74 per share. Assuming that Hanson's purchases were ultimately found to violate the Willams Act, SCM stockholders deprived of their ability to realize $74 per share under the SCM-Merrill offer could recover money damages for the losses they suffered. Furthermore, an order requiring Hanson to rescind its purchases is within the scope of relief courts may grant. Finally, there is no evidence that any other "White Knights" or independent bidders for control of SCM stood in the wings and might have joined the bidding fray except for Hanson's purchases. On the contrary, the SCM-Merrill tender offer states that Goldman Sachs "held discussions with several potential purchasers of the Company [SCM]" but that, although interest was expressed in acquiring one or more of SCM's businesses, "no firm proposals were made or prices discussed . . . for the Company as a whole, other than the proposal [by Merrill] for the leveraged buy-out of the Company described below." The order of the district court is reversed, the preliminary injunction against Hanson is vacated, and the case is remanded.