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March 26, 1982

Carl C. ICAHN et al., Defendants

The opinion of the court was delivered by: LEVAL

On Application For Temporary Restraining Order Re Tender Offer

This is an application by three members of the Icahn Group for a temporary restraining order directed against the tender offer of BATUS, Inc. for the shares of Marshall Field Company. Icahn asks the court to set back the proration date of the tender offer and to restrain BATUS and Field from taking steps in furtherance of the tender offer so long as certain agreements of Marshall Field remain in force. It is alleged that the agreements in question constitute manipulative devices in the tender offer setting which violate Section 14(e) of the Williams Act, 15 U.S.C. ยง 78n(e) (1976).

 The application is denied. I find that the Icahn group ("Icahn") has shown neither irreparable harm, nor likelihood of success on the merits, nor a balance of hardships tipping in its favor. The force of its argument is based on unsupported speculation.

 Icahn contends that certain contractual agreements of Field, some with BATUS and some with potential bidders for control of Field, interfere with the possibility that others will compete with BATUS for control.

 The first of these arrangements is a stock purchase agreement committing BATUS to purchase and Field to sell two million shares of Field treasury stock at $ 25.50 per share. This price was set at the time of the original BATUS tender offer and was at the same price as the tender price. The tender price was increased to the current $ 30 per share on the day after it was announced. Under the stock purchase contract BATUS is relieved of its commitment if it or a third party obtains 51% of Field or if it keeps its offer open until April 1, 1983.

 The second is an agreement by which Marshall Field has conferred a right of first refusal on BATUS for the purchase of the properties constituting Field's Chicago Division in the event they should be sold by Field within a year after termination of the BATUS-Field merger agreement. This agreement provides that BATUS may pay with Field stock valued at BATUS' cost.

 It is contended that these agreements give BATUS an improper preferred position over competition and further deter competitive bids by giving BATUS the possibility of buying Field's most valuable and important assets below their fair price.

 I had expressed concern at a conference earlier this week whether the right of first refusal might operate in such fashion as to prevent competitive bidding for the Chicago properties. Thereafter a clarification agreement was entered into by BATUS and Field expressly providing that upon any exercise by BATUS of its right of first refusal, the bidding for the Chicago properties would be reopened. This clarification rebuts the contention that the property would be sold at a price below fair market value.

 Icahn also contends that the provision for payment using Field stock at BATUS' cost could result in a bargain purchase if Field stock would have dropped at the time. There are two answers. First, the only stock conceivably to be used in such a transaction is the 2 million treasury shares under contract at $ 25.50 per share. BATUS would not likely own other Field stock unless its tender offer had succeeded in bringing it control, in which case it would not be a buyer of what it already controlled. If that is the case, Field itself has received $ 25.50 for those shares, selling them to BATUS at a premium. Second and more important is that the circumstance is very unlikely to arise. The first refusal comes into play only if Field (including any new management after a take-over) seeks to sell the Chicago properties within a year of the termination of the Field-BATUS merger. A new management need only wait one year to sell those assets to defeat BATUS' rights. These contracts seem most unlikely to dissuade competitors (if any exist) from tendering for control of Field.

 Third, Icahn points to two agreements of Field, one with BATUS, another made with several companies approached by Goldman, Sachs & Co., Field's agent, as potential white knight bidders for control of Field. Prior to entering into its current arrangement with BATUS, the Field management, through Goldman Sachs, "shopped" the company. Prospective "white knights" were given confidential information on which to rely in formulating bids. Field obtained letters from potential bidders committing them not to purchase Field shares without having obtained the approval of Field's board of directors. Such a provision was well justified at the time to prevent purchases utilizing inside information.

 In its merger agreement with BATUS, Field committed itself to BATUS not to solicit or encourage competing bids for Field stock.

 Icahn contends that these two agreements in concert prevent the signatories of the letters from making competing tender offers. Icahn contends that it is injured as a shareholder of Field by being deprived of the competitive bidding for its shares.

 At oral argument, I raised the question whether, now that BATUS' tender offer had made public all the confidential information, such arrangements might effectively freeze out interested competitors for control.

 Field thereupon telegraphed to all signatories Field's waiver of its right of approval for offers seeking at least 51% of the Field stock.

 Icahn contends that even as modified these commitments improperly interfere with the market for competing tenders. I am convinced by Field's argument that the restrictions have a proper purpose and serve the interest of Field's shareholders. BATUS has bid for a minimum of 51% (and has committed itself to accept a much larger amount of Field's shares at a substantial premium over market. One who joined forces with Icahn's 30% holdings could top BATUS' $ 30 offer, bidding for only 20% of the shares. While such a bid might be at a higher price per share, it would be detrimental to all the Field shareholders except Icahn since control could be acquired by buying far less of the Field stock than BATUS is committed to accepting. In addition, should such an offer be made, BATUS might well withdraw from the competition, eliminating all bids except for the 20% offer.

 Equally important is Field's argument that the contentions of Icahn are purely theoretical. There is no indication that any potential competitor exists who is being thwarted by the contractual restriction. Field asserts that when Goldman Sachs was reviewing the bids, it advised each bidder that the time to make its best offer was at hand. None of the competing offers was sweetened. Since that time, no signatory has approached Field to request permission to bid. None has come to court asking to be relieved of the restriction. Icahn has named no entity which it contends is being restrained by the restrictive covenant.

 I conclude that Icahn's argument has no practical application to the circumstances. A temporary restraining order in these circumstances would have serious adverse implications for the BATUS tender offer. Even assuming that Icahn's theoretical arguments would be sufficient to make out a violation of the Williams Act, which is far from clear, an injunction will not be issued on theoretical, speculative possibilities without any showing of harm.

 Apart from the absence of proof of harm, Icahn's contentions rest on a questionable legal theory. Icahn relies solely on Mobil Corp. v. Marathon Oil Corp., 669 F.2d 366 (6th Cir. 1981). I doubt that decision represents the law in this circuit. In my view the reasoning of that decision could unduly interfere with the right of company management to combat a takeover attempt that it believes in good faith to be harmful to its shareholders. In my view the securities laws do not bar management from taking action in the best interests of its shareholders even if this will make more difficult the success of a disfavored offeror. The rule might be otherwise on a showing that management is acting for its own interests in violation of its fiduciary duty to its shareholders. No such showing has been made here.

 But even if the Mobil decision represented controlling law, it does not compel an injunction on these facts. The 2 million share purchase agreement is not merely an option, although defeasible in certain circumstances. It was not set at a bargain price, even though the tender offer price was soon raised above it. The right of first refusal on the Chicago properties is not an option and is not calculated to effectuate a sale below market value. I conclude that the Mobil case is properly distinguished even if it represents the law.

 Finally, Icahn contends that BATUS has not adequately disclosed the potential anti-trust problems involved in a merger with Field. I find that the current state of disclosure is adequate to alert the shareholders to the potential problem. Perfection is not required in a tender offer. Electronics Specialty Co. v. International Controls Corp., 409 F.2d 937, 948 (2d Cir. 1969).

 For the foregoing reasons Icahn's application for a temporary restraining order is denied.



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