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Seven elements are characteristic of a tender offer: (1) active and widespread solicitation of public shareholders for the shares of an issuer; (2) solicitation made for a substantial percentage of the issuer's stock; (3) offer to purchase made at a premium over the prevailing market price; (4) terms of the offer are firm rather than negotiable; (5) offer contingent on the tender of a fixed number of shares, often subject to a fixed maximum number to be purchased; (6) offer open only a limited period of time; (7) offeree subjected to pressure to sell his stock.
Sun Company, Inc. ("Sun") executed a takeover bid/tender offer, and the Securities and Exchange Commission (Commission) alleged violations of the Securities Exchange Act of 1934, 15 U.S.C.S. §§ 78j et seq., the Investment Company Act of 1940, 15 U.S.C.S. §§ 80a et seq., and various rules and regulations promulgated thereunder. Plaintiffs in other consolidated actions also alleged violations of fiduciary obligations, the New York Stock Exchange Rule 390 (Rule), and the New Jersey Corporation Takeover Bid Disclosure Law (Disclosure Law), 49 N.J. Stat. Ann. § 5-9(b).
Were the defendants liable for violations of various statutory filing requirements?
The court found Sun is liable for violation of Section 14(d) of the Williams Act for making a tender offer without the required pre-acquisition filing. Dickinson, Eberstadt, M & D and others violated Section 13(d) by failing to file the necessary statement indicating the formation of a group involved in the transfer of corporate control. Zeller, Lipper, Salomon, and Eberstadt aided and abetted Sun's violation and Zeller, Lipper and Salomon aided and abetted the 13(d) group violation. Eberstadt also violated the Investment Company Act and Zeller and M & D abetted this violation as well. Sun violated Section 10(b) of the Exchange Act and Rule 10b-13 by buying from Dickinson and Turner on terms different from those offered the other solicitees. The defendants' affirmative defenses are without merit and do not warrant relieving them of liability. On the other hand, Sun substantially complied with the filing requirements of 13(d) and Dickinson did not violate Sections 10(b), 14(e), Rule 10b-5 or his fiduciary duties. No private right of action can be implied under Rule 390 of the NYSE, so no relief will be obtained here for violation of that rule. Finally, I will abstain from decision regarding alleged violations of New Jersey law, because the relevant issues have not been fully addressed. The agreement among counsel and the court was that this phase of the litigation would concern liability only. Both the Commission and defendants, however, have expressed a desire to deviate from that agreement at least to some extent. The Commission desires an injunction to enjoin future violations. Defendants argued that the individual and class plaintiffs have established no injury and for that reason their claims should be dismissed. Under the arrangements agreed upon, plaintiffs properly concentrated on issues of liability and made no attempt at making a showing of injury except on a generalized basis. The court sees no need to deviate from our understanding. The agreement, as the court understands it, means that the parties have bound themselves to maintain the status quo except with prior consent of the court until the issues involved are finally and fully determined. There is, therefore, no need to grant the Commission's request. As for defendants' argument, unless plaintiffs succeed in showing injury and the extent to which they have suffered hurt, they, obviously, will not establish entitlement to relief which is the next phase of this proceeding.