The opinion of the court was delivered by: BONSAL
Plaintiff, a stockholder of defendant Continental Motors Corporation (Continental), a Virginia corporation, 62.2% of whose common stock is owned by the Ryan Aeronautical Corporation (Ryan), which in turn is wholly owned by defendant Teledyne, Inc. (Teledyne), commenced this action, on behalf of himself and all other minority stockholders of Continental, against Continental and Teledyne. On July 11, 1969, plaintiff moved by order to show cause for a preliminary injunction, enjoining Continental from accepting any Continental common stock which might be tendered pursuant to an Exchange Offer, and for an order requiring Continental to furnish plaintiff with a list of Continental stockholders and any current transfer lists.
On December 31, 1968, Teledyne bought 96.3% of Ryan, and on February 18, 1969, Teledyne merged Ryan with a wholly-owned subsidary. In January, 1969, three members of the Continental Board of Directors resigned, and an officer of Teledyne and an officer of Ryan were named to the Continental Board. On March 19, 1969, Continental's Board voted to discontinue the payment of the quarterly cash dividend of $.10 on its common stock, which it had paid for many years.
On May 27, 1969, Continental's Board announced its intention to offer to exchange one $30.00, 20-year, 7% subordinated debenture for each share of Continental's outstanding common stock. The offer became effective on June 11, 1969, and was to expire on July 18, 1969, but the offer has been extended to August 15, 1969. The announcement of May 27, 1969, stated that "Ryan does not presently intend to tender any of its shares pursuant to the Exchange Offer and accordingly, its percentage of ownership will increase if other shareholders tender their shares"; and that Continental "is currently negotiating for the sale of certain [assets] representing * * * approximately 20% of its total book assets * * * [which] are used to produce * * * approximately 20% of [Continental's] sales."
Plaintiff alleges that Continental's Exchange Offer is inequitable and is designed to benefit Teledyne at the expense of the minority stockholders. Plaintiff further alleges that the discontinuance of the dividend (in the face of record net earnings for the previous fiscal year) and the Exchange Offer are part of a scheme designed to artificially depress the price of Continental common stock, to force the minority stockholders to surrender their common stock at an unfair price, and to deprive them of their statutory right of appraisal.
I. Application for a preliminary injunction
Plaintiff offers no facts to support his assertions that the price of Continental common stock has been artificially depressed, that the basis of the Exchange Offer is unfair, or that the defendants intend to raid Continental by selling 20% of its assets in a way to reduce the "going concern" value of the corporation.
While the price of the common stock reclined 1 1/4 points immediately after the discontinuance of the dividend, it rose sharply after the announcement of the Exchange Offer, and during the past three weeks, it has traded in the range of 20 5/8 to 22 1/2.*
With respect to the alleged "raid" of Continental's assets, Continental states that the company has been attempting to sell these assets for the past year, starting before Teledyne acquired control of Ryan and Continental, and that the contemplated sale is still under negotiation.
Plaintiff has also made no showing of irreparable injury to the minority stockholders if the injunction is not granted. If at trial, plaintiff proves his allegations, the court can order payment of the dividends, set aside the Exchange Offer, and award damages.
On the other hand, if the injunction were granted, the damage to Continental, as well as to the Continental stockholders who wish to accept the Exchange Offer, would be irreparable. The money which Continental has expended on the Exchange Offer would be irretrievably lost. The Continental stockholders who wish to exchange their common stock for debentures would be deprived of that opportunity. Symington Wayne Corp. v. Dresser Industries, Inc., 383 F.2d 840 (2d Cir. 1967).
The "extraordinary relief" of an injunction will not be granted except upon a clear showing of probable success and possible irreparable injury. Checker Motors Corp. v. Chrysler Corp., 405 F.2d 319 (2d Cir. 1969); Clairol, Inc. v. Gillette Co., 389 F.2d 264 (2d Cir. 1968). Plaintiff has not made a sufficient showing of either to warrant granting the injunction. Nor does the "balance of hardships [tip] decidedly toward the party requesting the ...