The opinion of the court was delivered by: DUFFY
The captioned matters, hereby formally consolidated for all purposes, arise out of an offer by the Crane Co. (hereinafter "Crane") to exchange certain subordinated debentures to be issued by it for five million common shares of The Anaconda Company (hereinafter "Anaconda"). By such a transaction Crane would gain 22.6 per cent of the ownership of Anaconda, a somewhat dominant position since presently the largest stockholder of record in Anaconda has.05 per cent of the issued and outstanding common stock.
Both Anaconda and Crane now seek preliminary injunctions: Crane seeks to restrain Anaconda from alleged violations of Section 14 of the Securities Exchange Act of 1934 and Anaconda seeks to restrain Crane from alleged "omissions to state material facts" in its registration statement and prospectus covering the new subordinated debentures to be used in the exchange offer and from alleged violations of the antitrust laws.
Upon the application for a temporary restraining order both sides agreed before me to stop all publication of statements to the public concerning the proposed exchange offer until the decision of this Court on the applications for preliminary injunctions. This opinion is that decision and constitutes findings of fact and conclusions of law as required by Rule 52 of the Federal Rules of Civil Procedure.
I. THE TEST TO BE APPLIED
In this Circuit two separate tests may be used in considering granting a preliminary injunction. The movant must demonstrate either "(1) probable success on the merits and possible irreparable injury, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief." Missouri Portland Cement Co. v. Cargill, Inc., 498 F.2d 851, 866 (2d Cir.), cert. denied, 419 U.S. 883, 42 L. Ed. 2d 123, 95 S. Ct. 150 (1974); Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir. 1973). See also Gulf & Western Ind., Inc. v. Great Atlantic & Pacific Tea Co., Inc., 476 F.2d 687, 692 (2d Cir. 1973).
In the case at bar both sides argue that they are entitled to the preliminary injunction on the basis of the "balance of hardships" standard.
II. THE CRANE CASE AGAINST ANACONDA
On August 7, 1975, Crane issued a press release publicly announcing that its Board of Directors had approved a proposed exchange offer for the five million shares of Anaconda stock. The press release indicated that for each share of Anaconda there would be an exchange of a $25 principal amount of Crane's 8% subordinated sinking fund debentures, due 1985, (the second amendment to the registration statement filed with the Securities and Exchange Commission (the "S.E.C.") reduced the face amount of the debentures to $20). The original press release provided that the exact terms of the exchange offer would be contained in a prospectus and registration statement to be filed with the S.E.C. and would not commence until the effective date of the registration statement (that registration statement has yet to become effective.)
A. ANACONDA'S AUGUST 8 PRESS RELEASE
Apparently Crane's announcement took the management of Anaconda by surprise. On August 8, 1975, Anaconda issued a press release which states in pertinent part:
"When Crane does file a registration statement and preliminary prospectus with the S.E.C., Anaconda will be in a position to consider an evaluation of the situation. Until that time it should not be assumed that the Anaconda management is sympathetic to the proposed offer."
At the time this press release was issued no Schedule 14D statement had been filed with the S.E.C., as required by Section 14(d) of the Securities Exchange Act of 1934 (the "Act"), 15 U.S.C. 78n(d) and Rule 14d-4 promulgated thereunder.
Crane contends that this press release was in violation of Section 14(d) of the Act.
B. ANACONDA'S AUGUST 14 LETTER AND PRESS RELEASE
On August 14, 1975, Anaconda filed the requisite Schedule 14d with the S.E.C. and issued a letter to its stockholders (the press release with the text of the letter which contained the following paragraph:
"Nor is there any assurance that an exchange offer will ever be made. * * * In this connection you should know that earlier this year Crane announced a proposed exchange offer for shares of another copper mining company. Crane never made the proposed offer, however, and after repeated delays finally disaffirmed its intention to do so. Some shareholders of that company may have traded in reliance on a proposed offer that did not materialize."
It is Crane's position that this paragraph was intentionally misleading, in violation of Section 14(e) of the Act, since the "proposed exchange offer" for shares of another copper mining company referred to was thwarted by the connivance of Anaconda.
C. ANACONDA'S AUGUST 26 LETTER
Thereafter, on August 19, 1975, Crane filed its registration statement with the S.E.C. covering the new subordinated debentures proposed to be issued in exchange for Anaconda stock. On August 26, 1975, Anaconda mailed a second letter to its shareholders which said in relevant part:
"Your Board of Directors, after study and consultation with Lehman Brothers Incorporated and The First Boston Corporation, investment bankers, has concluded that the proposed exchange offer of Crane Co.'s Subordinated Debentures for five million shares of Anaconda Common ...