Court Opinion

ID: 9465865
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:57:55.52128+00
Date Added: 2024-06-11T17:38:30.801630
License: Public Domain

MANSFIELD, Circuit Judge
(dissenting):
The majority holds that as a matter of law Seaboard cannot prove a violation by Tiger of § 14(e) of the Williams Act, 15 U.S.C. § 78n(e), and therefore remands to the district court with directions to dismiss the complaint. I dissent.
Section 14(e), 15 U.S.C. § 78n(e), prohibits the making of untrue or misleading statements of material fact in connection with any tender offer. A misstatement or omission is material “if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding” whether to accept the offer. Prudent Real Estate Trust v. Johncamp Realty, Inc., 599 F.2d 1140, 1146, (2d Cir. 1979), quoting from TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976).
It defies common sense and experience not to recognize that a stockholder, in deciding whether or not to accept a cash tender offer for his shares, would consider the various types of value attached to them by his own company and by the tenderor to be extremely important. Current market value is obviously of considerable significance. But if book or liquidation value were much higher, it could be of equal importance. For if a stockholder offered $13.50 per share knew that upon liquidation he could expect to receive $20 per share he might reasonably decide to hold on to his stock rather than sell, secure in the knowledge that if profits improved the shares might increase in value but that if the company experienced reverses he could fall rback upon its liquidation value. If, in addition, it were revealed that for the same reasons the tender offeror had considered the higher $20 liquidation value a significant factor in offering $13.50 per share, he might well decide that, rather than accept the $13.50 offer, he should wait for a higher one.
Applying these basic principles here, Tiger’s Offer to Purchase was definitely misleading. It stated in relevant part:
“Seaboard management indicated that its directors would consider a merger only if Seaboard’s other stockholders will receive value of the order of magnitude of $20 (approximately $18.18 as so adjusted [for the 10% Common Stock dividend]) per share. Tiger regarded Seaboard’s suggested price as unrealistic (the Common Stock had traded at $4, about $3.64 as so adjusted, per share in December, 1977, before Tiger commenced its purchases, see Section 9).”
The statement implied that the figure of $20 per share was created out of thin air by Seaboard’s management, whereas in actuality it represented the liquidation value of the company as calculated by Seaboard, which Tiger does not dispute. Indeed, Tiger itself reached a similar figure during its analysis of Seaboard prior to the decision to make the tender offer and treated it as an important factor of advantage to it in deciding to make the offer.
Tiger now argues that as a matter of law an admittedly much higher liquidation value of a target company is irrelevant if the offeror’s intention is to operate the target as a going concern, rendering it not materially misleading for Tiger simply to state that the $20 per share figure was “unrealistic.” The majority appears to agree with that contention. I do not.
Tiger did not state in its tender offer, as it did in the letter to Seaboard’s management quoted in the majority’s opinion, that $20 per share was a fair liquidation value but unrealistic for Tiger’s particular merger purposes as stated in the offer. Instead, Tiger in the tender offer implied that the $20 per share figure was in all possible lights totally without basis by juxtaposing the $20 figure with the $4 per share market value in December, 1977, thus creating the misleading impression that no sound calculation would yield a $20 per share value and that no potential purchaser would ever consider offering that price per share to Seaboard’s stockholders.
In fact the $20 per share figure, as Tiger’s own documents reveal, is an accurate *367and “realistic” reflection of the liquidation value of Seaboard. The Tiger documents produced at the preliminary injunction hearing further show that its analysts, in recommending the potential merger to their management, saw the $20 per share liquidation value as an important fact to be weighed in making its offer because, even though the plan was to maintain Seaboard as a going concern, liquidation value offered a relatively secure fail-back position if operations should prove to be unprofitable. For the same reason, the figure was material to Seaboard stockholders.
Moreover, Tiger’s statement that a $20 per share figure is “unrealistic” implied that in Tiger’s view no other purchaser would approach that figure, contrary to the suggestions of Seaboard’s management. In fact, Tiger’s documents reveal that a potential purchaser viewing Seaboard for liquidation of its assets would indeed see $20 per share as a realistic price, and even a potential purchaser seeking Seaboard as a going concern would probably, like Tiger, consider Seaboard’s high liquidation value as quite relevant. Knowledge of these facts could well influence a shareholder’s calculation of the likelihood that a better offer would be made. The phrasing of the tender offer not only deprived Seaboard’s shareholders of this information but also mischaracterized the position of Seaboard’s management at the same time.
The issue is not whether the price offered by Tiger was “fair” or which of the two figures — market value or liquidation value — this court feels is the more accurate price if the target company is to be kept as a going concern. The issue is whether there was “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” Prudent Real Estate Trust v. Johncamp Realty, Inc., supra, at 1147, quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976). The unrebutted credible evidence at the preliminary injunction hearing was more than ample to establish that Tiger knew the $20 per share figure was based on the liquidation value of Seaboard, Tiger agreed with that liquidation value, and Tiger’s own analysts felt that liquidation value was a relevant factor in deciding whether to buy Seaboard stock. Seaboard’s management was actively seeking another purchaser who would be willing to offer a higher price because of the high liquidation value of Seaboard’s assets, and the likelihood that such a higher price could be obtained from another purchaser would be highly relevant to shareholders deciding whether to accept the present offer.
For these reasons I fail to see how the majority can find as a matter of law that it would not be of interest to a Seaboard shareholder, in deciding whether to sell, to know that in fact Tiger viewed the $20 per share figure as totally realistic for purposes of liquidation and as a matter of relevance in deciding whether to merge as a going concern. Thus Seaboard has established a probability of success on the merits.
It is hardly “nit-picking” to require that obvious half-truths with respect to such an important matter as the value of Seaboard’s shares not be placed in a tender offer. Although Tiger’s letter to Seaboard’s management explained the difference in viewpoint between the two firms regarding the propriety of using market value or liquidation value for purposes of merger as a going concern, it was silent as to the relevance Tiger in fact attached to liquidation value in determining whether to purchase Seaboard stock for a possible merger as a going concern. The tender offer through its brevity in merely using the catch phrase “unrealistic” and then juxtaposing the $20 figure with the $4 market value figure from December, 1977, falsely implied that the $20 per share value was created out of thin air by Seaboard’s management and unlikely to be matched by any other potential offeror regardless of its purpose in acquiring Seaboard. This was untrue. The statement was thus misleading with respect to a matter of considerable importance to the shareholders.
*368I disagree with the majority’s view that Tiger is excused from its obligations under the law because Seaboard’s management did not choose to combat the misleading statements in the tender offer through literature of its own. Viewed most favorably to Tiger, Seaboard’s decision to sue rather than conduct a battle of words through the media would merely be “some evidence” on the issue of materiality. General Time Corp. v. Talley Industries, Inc., 403 F.2d 159, 162 (2d Cir. 1968), cert. denied, 393 U.S. 1026, 89 S.Ct. 631, 21 L.Ed.2d 570 (1969), quoted in Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F.2d 1195, 1200 n.4 (2d Cir. 1978). Moreover, the most that Seaboard could furnish to its stockholders at that stage by way of a “riposte” was its own management’s calculation of liquidation value, the credibility of which would be open to question because of its own interest in opposing a takeover. Of far greater materiality to Seaboard stockholders would be the knowledge that Tiger itself, which was offering only $13.50 per share, had appraised the stock as worth approximately $20 per share- on liquidation and considered this to be to its advantage in making the offer. Since Seaboard did not learn this crucial fact until after the lawsuit had been commenced, it was hardly in a position, as the majority suggests, to furnish the information at an earlier point to its stockholders.
Nor would requiring greater care on the part of Tiger constitute “imposing a duty of self-flagellation on offerors,” as in Missouri Portland Cement Co. v. Cargill, Inc., 498 F.2d 851, 873 (2d Cir. 1974), cert. denied, 419 U.S. 883, 95 S.Ct. 150, 42 L.Ed.2d 123 (1974). In Missouri Portland the target company was urging that it was false and misleading for the offeror to fail to include some mention in its offer of the possibility that an antitrust law violation would result from a successful tender offer. We concluded that it would have been reasonable under the circumstances for the offeror to conclude that no antitrust problems existed. Obviously in such a case it would approach “self-flagellation” for the offeror to raise in its offer an issue which it had reasonably concluded did not exist at all. But the offeror would not have been free to state that all fears of potential antitrust problems were unrealistic if its own documents revealed that in fact it was quite concerned about the antitrust implications of the merger. In the present case, T.iger chose to express its view on Seaboard management’s position concerning the appropriate value of the shares; having decided to embark on this path, Tiger had an obligation to avoid materially misleading statements.
Finally, I cannot agree with the majority that Judge Motley abused her discretion in finding irreparable harm to Seaboard if the preliminary injunction was not issued. As Judge Motley noted in her opinion, a representative of Kidder Peabody & Co. testified as an expert witness that there would be a “very serious impact” on his firm’s efforts to find another purchaser for the Seaboard stock (a so-called “White Knight”) at a higher price than Tiger’s offer if the tender offer should be permitted to be consummated. Tiger presented no evidence to the contrary. The record therefore amply supports the findings below.
For these reasons I dissent from the dismissal of the complaint and from the reversal of the judgment below. I would affirm the grant of the preliminary injunction.