Opinion ID: 408092
Heading Depth: 3
Heading Rank: 1

Heading: Timetables

Text: 44 The Williams Act requires the disclosure of certain information, imposes substantive restrictions and includes a general anti-fraud provision. It also confers broad rulemaking authority upon the SEC. In particular, SEC Rule 14d-2(b) requires an offeror to commence or withdraw the tender offer within five business days of the first public announcement of the tender offer. 17 C.F.R. § 240.14d-2(b). As the Third Circuit explained: 45 The commencement of the offer is the time at which an offeror is required to disseminate to shareholders the material information regarding the offer that the federal securities laws require. An offeror must file a disclosure statement on schedule 14D-1 with the (SEC), and must take certain additional steps to effect actual receipt by the shareholders of material information relating to the offer, the companies involved in the offer, and the terms of the offer. The federal policy underlying these requirements is to insure the prompt dissemination of all material information after the first public announcement. The information is necessary because the announcement of the offer itself will precipitate significant market activity in the securities of the target company, thus confronting public investors with an immediate need to make investment decisions. See SEC Release No. 34-16384, 44 Fed.Reg. 70326, 70329 n.15 (1979). 46 Kennecott Corp. v. Smith, 637 F.2d at 182-83. 47 In contrast, the statutory scheme embodied in the state Act envisions a minimum twenty-day waiting period after the offeror has filed detailed disclosure statements with both the Missouri Commissioner and the offeree company before a tender offer becomes effective. Mo.Rev.Stat. § 409.515.1. In addition, the pre-effective waiting period can be extended if the Commissioner schedules a hearing on the adequacy of the disclosures in the registration statement, as he may do at his own discretion, Mo.Rev.Stat. § 409.515.1(2), and must do at the request of any person aggrieved by the Commissioner's failure to hold a hearing. Mo.Rev.Stat. § 409.555. 11 If such a hearing is ordered by the Commissioner it must be held within forty days of the filing of the registration statement, Mo.Rev.Stat. § 409.530.2. 12 During such period the offeror cannot proceed with its takeover bid until the Commissioner determines that the offeror proposes to make full, fair and effective disclosure to offerees of all information material to a decision to accept or reject the offer. Mo.Rev.Stat. § 409.515.1(2). 48 In effect the Missouri Act upsets the congressionally designed balance by creating delay in the commencement and consummation of the tender offer. While the hearings authorized by the Missouri Act are underway and the tender offer is suspended, the management of the target company can take a number of steps, fully described in other cases, to defeat the offer. See Kennecott Corp. v. Smith, 637 F.2d 181; MITE Corp. v. Dixon, 633 F.2d 486; Great Western United Corp. v. Kidwell, 577 F.2d 1256. Such a delay and advantage to the target company are inconsistent with the scheme of the Williams Act. 49 Appellants concede that the prefiling requirements of the Missouri Act, Mo.Rev.Stat. § 409.515.1, are in conflict with and preempted by SEC Rule 14d-2(b). Brief for Appellant LLC Corp. at 41-42. However, they argue that the hearing requirements are consistent with the Williams Act's goal of investor protection. They argue that the hearing ensures complete disclosure and provides shareholders more time to consider whether to tender their shares. See Note, Securities Law and the Constitution: State Tender Offer Statutes Reconsidered, 88 Yale L.J. 510, 521-25 (1979). 50 However, the legislative history of the Williams Act demonstrates that Congress considered whether such delay confers necessary protection or imposes unwarranted obstacles and decided tender offers were not to be hindered (by delay under state law) to the detriment of investors. MITE Corp. v. Dixon, 633 F.2d at 498 (citations omitted). See also Great Western United Corp. v. Kidwell, 577 F.2d at 1279. 13 51 Appellants argue, however, that MITE Corp. v. Dixon is distinguishable on the basis that it involved a state statute which authorized the state securities commission to conduct hearings on whether the takeover offer was inequitable. Appellants argue that the Missouri statute, which does not contain such a provision, does not pose the same risk of benevolent bureaucracy. However, this qualitative difference is insufficient to cause this court to reach a different result. State statutes which can be used to unduly delay tender offers are preempted by the Williams Act. The extended delay threatens the viability of tender offers by discouraging the tender offeror from completing the offer once made.