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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. § 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 ...

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