The opinion of the court was delivered by: SAND
OPINION RENDERED IN OPEN COURT
This action is currently before the Court upon plaintiff's application for a preliminary injunction enjoining the tender offer by Fluor Corporation through Fluor Acquisition Corporation, hereinafter referred to collectively as Fluor, to purchase up to approximately 45 percent of the shares of common stock of St. Joe Minerals Corporation.
Oral argument was heard on April 22, 1981. Neither plaintiff nor defendants have sought an evidentiary hearing or leave to conduct any discovery.
For the reasons stated herein, the plaintiff's application is denied.
Based on the record before the Court, the following facts appear:
When Fluor announced its tender offer on March 31, 1981, after a short period of negotiations, there was already a tender offer outstanding for the common stock of St. Joe. That offer by Seagram & Sons, Inc., was a cash offer for all of St. Joe's stock at $ 45 per share, which was scheduled to expire on April 10, 1981. The Seagram offer was withdrawn subsequent to commencement of the Fluor tender offer.
The Fluor tender offer was made after Fluor and St. Joe executed on Sunday, April 5, 1981 a merger agreement which was authorized by the board of directors of both companies.
This merger agreement was part of a two-step transaction.
The first step was the Fluor tender offer for up to approximately 45 percent of the common stock of St. Joe at a price of $ 60.
The second step was the proposed merger of Fluor and St. Joe in which 1.2 shares of Fluor would be exchanged for each share of St. Joe common stock.
The proposed merger was subject to various conditions, including approval by the shareholders of both companies.
Fluor sought and received a no-action letter from the SEC which exempted the tender offer from 17 CFR, Section 240.10b-6 and Section 240.10b-13, and which stated a condition that shares could be acquired up to thirty days before the merger vote or five days before mailing of the proxy materials, whichever occurred first.
The tender offer was scheduled to expire before the mailing of the merger prospectus, and the materials sent to shareholders so stated.
The St. Joe stockholders were thus presented with a choice between tendering their shares for $ 60 or holding them and voting on the proposed merger or disposing of them in some other way. (The tender offer materials indicate the view that it is likely that the cash transaction would be taxable but that the exchange of stock would be nontaxable.)
The Fluor tender offer was announced on March 31, 1981, and pursuant to SEC Rule 14d-2(b) a Schedule 14D-9 was filed and tender offer materials were sent by Fluor to St. Joe shareholders within five business days on April 6, 1981, along with a letter from the chairman and chief executive officer of St. Joe recommending both the offer and the merger. The reverse side of this letter contains a summary of some of the additional information contained in the Schedule 14D-9 filed by St. Joe, including the conclusions of Smith Barney, Harris Upham & Company, and the First Boston Corporation that the terms of the Fluor offer are fair to St. Joe and its shareholders.
The summary stated that this conclusion was based on familiarity with St. Joe and its financial statements, reports filed with the SEC, and internal business and financial projections, as well as based on consideration of the terms of the Seagram offer and other natural resource company acquisitions.
I will discuss the specific provisions of the tender offer materials later as it becomes necessary.
Plaintiff commenced this lawsuit on April 15, 1981, seeking to enjoin the Fluor tender offer. After oral argument it appears plaintiff relies on two arguments:
First, plaintiff argued that in this two-step transaction the shareholders are entitled to receive at the tender offer stage essentially all of the information which would be contained in the prospectus which must be sent to shareholders before the proposed merger may be approved, in order to permit the shareholders to make an informed choice.
Plaintiff contends that this additional disclosure is required to make the prior disclosures not misleading, apparently relying on the alleged impression given by the tender offer that the value of 1.2 Fluor shares at the time of the merger will be $ 60.
It is unclear whether plaintiff complains of confusion with respect to the market value or the underlying value of 1.2 Fluor shares. (Of course, the pro forma financial statements which plaintiff seeks to have disclosed and available to her prior to the expiration of the cash tender offer would be relevant to book value, which is just one consideration which has an impact on a stock's market value.)
Second, plaintiff argues that even if we accept the views expressed by the SEC in Release No. 5927/14699 (April 24, 1978) (the existence of which plaintiff's counsel candidly conceded in the supplemental affidavit and in oral argument he was not aware of when the suit was commenced), in this case the conduct of Fluor and St. Joe by granting interviews to the press violated the restrictions placed by the SEC on this transaction in the release and in the no-action letter and constituted "jumping the gun," i. e., an attempt to precondition the market to a $ 60 value for the 1.2 Fluor shares to be exchanged as part of the merger.
Again, it is unclear whether the plaintiff refers to $ 60 as the market value or an underlying value for the Fluor stock.
Defendants contend, first, that plaintiff has failed to establish the requisite elements for a grant of ...