THE STATE TENDER OFFER
ARE THEY
STATUTES
UNCONSTITUTIONAL?
BARBARA
HOFFMAN
314
INTRODUCTION
Prior to the 1960's the proxy contest was the most common form of
non-negotiated corporate takeover. However, in the last fifteen years
1
the cash tender offer has become a common method of acquiring control of a
2
publicly held corporation,
because it is less expensive and less time
consuming than traditional acquisition devices such as mergers, proxies or
gradual market acquisition.
The tender offer was discovered to be a superior
method to stock transfers and proxy contests because if resistance was
offered the success of a transfer was unlikely, and the cost of a tender
offer was considerably less than the cost of a proxy contest with higher
3
returns on investment.
In addition, the proxy contest was usually controlled
by incumbent management and was utilized by them as a self-perpetuating
mechanism.
Furthermore, the increased liquidity of corporations encouraged
use of the excess cash as a means of 4expanding corporate control without
causing a dilution in earning power.
Consequently, the corporate desire
to expand through mergers and acquisitions -exhibited itself in the increased
use of tender offers.
Although tender offers have been
viewed by some as "reckless
5
corporate raids on proud old companies"
and by others as a method of pro-
moting society's best interests
"by providing a method of removing entrenched
6
but inefficient management,"
it has been well recognized that tender offers,
like other securities transactions, are prone to abuse.
Regulation was
considered necessary since existing laws which controlled similar methods
of effectuating corporate change by requiring disclosure of the identity of
the offeror, its purposes, and 7the means of carrying out those purposes were
inapplicable to tender offers, and state regulation was likewise non-existent.
315
2
Extensive Congressional scrutiny of the area resulted in 1968 in
the passage of a major amendment to the Securities Exchange Act of 1934 known
8
as the Williams Act.
The Williams Act was designed primarily to protect
investors by providing for full disclosure of the material terms of offers
and other material information concerning the companies involved without
9
favoring either the offeror or the management of the target company.
MECHANICS OF A TENDER OFFER
Because the key mechanism of a tender offer is the offering price,
which is usually substantially above the market price, that price must be
significant incentive for shareholders to sell their stock and for arbitra10
geurs to accumulate shares on the market.
The arbitrageurs are beneficial
11
to acquiring corporations since they rapidly acquire large blocks of stock,
leaving the target corporation with little time to instigate defensive mech12
anisms.
Therefore, the offering price must remain attractive in order to
compensate for the risk the arbitrageur is taking that the offeror will
receive a sufficient number of shares and accept the tender.
Once the tender offer becomes public the market price of the shares
will rise, narrowing the margin between the market price and the offer price,
13
reducing incentive for shareholders and arbitrageurs.
In addition tenders
are ordinarily made only at the last minute before the expiration of the
offer in hope of a better offer or that the market price will rise above the
14
offer price.
The offeror can raise the tender offer price, but the cost
may be prohibitive since the offeror must purchase thousands of shares to be
15
successful.
Furthermore, once the market price rises toward the tender
offer price the offeror usually cannot refinance the acquisition because of
16
the types of financing available.
337
3
If the offer is contested the market reaction is much less predictable, investor uncertainty greater, and the prospect for success of the
17
offer declines sharply.
The target company typically directs its moves at
defeating the offer by discouraging security holders from tendering, arbitra18
geurs from buying and the offeror from persisting.
Delay by advance notice
of the tender offer provides the target company with more time to contest the
19
offer by implementing available defense mechanisms.
Even without delays
though, the offeror is rarely successful when the offer is contested because
20
of the numerous defense mechanisms.
The success of a tender offer depends
on secrecy and speed; an extended period of time eliminates what little chance
21
there is for a successful tender offer.
THE WILLIAMS ACT
During the pendency of the Williams Act, a critical issue was
whether or not offerors should be required to give advance notice of a takeover bid.
On the one hand, pre-notification would facilitate the disclosure of
material information and minimize the elements of unfairness to stockholders
and management which are inherent in the surprise and shock tactics of many
22
cash tender offers.
On the other hand, since surprise may be essential to
certain takeover bids, the investment community was generally opposed to
extending the
23period within which an announced cash tender offer could be
consummated.
The Williams Act resolution was to reject pre-notification
but include certain minimum standards of fairness, such as withdrawal rights
within the first seven days and after sixty days from the commencement of an
offer, and pro
24 rata acceptance of shares tendered within the first ten days
of an offer.
The original bill introduced by Senator Williams was intended to
317
4
protect American companies and their management from raids by corporate
25
"pirates."
This bill required that the offeror give twenty days advance
notice to the target corporation and the Securities and Exchange Commission of
its intent to make a tender offer, but the bill never made it out of committee.
In the intervening period the subject of regulation of tender offers was
accorded a great deal of discussion, and the prevailing view ultimately
recognized the economic utility of tender offers in not
27 only providing a
swift mechanism to dispose of inefficient management,
but also as a method
of obtaining an investment position in a company with relative facility.
Thus, the focus of the legislation changed from one of protecting incumbent
management to one of providing "full and fair disclosure for the benefit of
sotckholders while at the same time providing
28 the offeror and management equal
opportunity to fairly present their case."
The Congressional intent in enacting the Williams Act is very clear;
neither the incumbents nor the insurgents are to enjoy any advantage over
the other when five percent or more of a class of
29a reporting company's equity
securities become the subject of a tender offer.
Moreover, the investing
public is to be provided with certain material information to enable them to
render an informed investment judgment on whether to hold, sell or tender
their securities.
A proposal for pre-notification to the target company or
even the Commission was expressly rejected due to the possibility
of causing
30
undue market fluctuations and unfairness to the bidder.
The federal pattern of regulation of cash tender offers is disclosure oriented.
The disclosure provisions of the Williams
Act require the
31
offeror to file information, listed in schedule 13D
with the Securities and
Exchange Commission identifying its background, the source and amount of
consideration being offered, its purpose in the transaction, other interests
26
5
presently held in the target company, the dates upon which the security holders
who deposit their shares with the offeror can still withdraw, and the final
date securities will be purchased on a pro rata basis where the offer is for
less than the total number of outstanding securities.
The Act, as amended,
applies when a tender offer could result in the direct or indirect ownership
of more than five percent of any class of equity securities registered under
32
Section 12 of the Securities Exchange Act.
The required information must
be filed with the Securities Exchange Commission no later than the time the
offer is published or furnished to the persons being solicited, and copies
33
must be sent to the affected company not later than the same date.
These disclosure provisions may be complied with at any time
prior to the first publication or statement of the tender offer.
The prac-
tice, however, is not to file the information with the Commission and the
34
target company until the day the offer is made to the target's shareholders
so that the management of the target company cannot begin its defense, should
it choose to do so, until the last minute.
In addition to the information
required to be disclosed to the shareholders of the target by the offeror,
the Williams Act contains three other provisions which are designed to further
protect those shareholders.
First, section 14(d)(5) provides that a security holder may withdraw
his securities deposited in response to a tender offer within the first seven
days following publication of an offer of any time after sixty days from the
35
date of publication.
Second, when an offer is tendered for less than the
total number of outstanding shares of the target corporation and more shares
than requested are deposited wtihin ten days after publishing
the offer, the
36
offeror must purchase the securities on a pro rata basis.
Further, if the
offeror increases the price offered, then the pro rata provision is applicable
337
122
6
for the first ten days following the published increase.
Third, if the
offeror increases the offering price it is required to purchase all securities
38
deposited at the increased price.
The Williams Act also applies to target corporations in order to
implement the purpose of providing information to the investor so that he
may make an intelligent choice.
There are two instances in which the target
corporation must file with the Commission:
when it is trying to persuade its
security holders to either accept or reject the tender offer, and when it is
39
tendering for its own shares.
The Williams Act also protects all the parties to the tender offer
by its remedial provisions.
If the offeror fails to comply with the disclo-
sure requirements, then either the target corporation or the Commission can
seek an injunction restraining the offeror from purchasing
any securities
40
until it complies with the disclosure requirements.
Finally, Section 14(e)
provides that it is unlawful for any offeror or target company to engage in
41
any fraudulent, deceptive or manipulative practices.
A private right of
action similar to that under Section 10(b) of the 1934 Act and Rule 10b-5
42
had been implied for those damaged by violations of Section 14(e).
The basic structure of the Williams Act, through its registration
requirements, allows the shareholders of the target corporation to make an
informed decision whether to tender their shares.
of the shareholder
However, this protection
does not extend to providing for advance warning to the
target corporation or for any delays, thereby preserving tender offers as a
means of effectuating a change in corporate control.
THE STATE STATUTES
Following the enactment of the Williams Act, a few states introduced
334
7
"tender offer" legislation that went far beyond the substance of the Williams
43
Act.
To date twenty-three states have enacted tender offer legislation.
The proponents of the state "takeover" statutes advance several rationales
for assuming authority over tender offers for companies incorporated in or
based within their respective boundaries.
They maintain that there is a need
to afford investors additional protection in tlie area since tlie Williams Act
44
in itself is inadequate particularly in its time periods.
Additionally,
it is contended that takeover statutes are a valid reflection of local concern
with respect to local economic activity, the bid's effect on competition, the
efficiency of the target corporation, local vs decentralized control, debtequity structure and the concurrent impact on the
45 target's management,
employees, customers, suppliers, and creditors.
One further justification
is based on the grounds that states have a legitimate interest in the internal
46
affairs of a corporation, and therefore, can legislate in the area.
It is submitted that this type of state legislation is a reaction
to the fear that such a bid will adversely effect the local economy.
This is
evidenced by the fact that even though tender offers are used for purposes
other than obtaining control of a corporation, state legislation has denomi47
nated all tender offers "takeovers."
Some provisions of the various
statutes are designed not to provide additional disclosure but solely to
protect incumbent management, and are not for the protection of shareholders.
In fact, in some instances, management is benefited to the detriment of the
shareholders.
Although takeover statutes vary considerably, there are some characteristics common to all.
In general, the state statutes are applicable to
takeover bids or offers for shares of a target company.
A takeover is usually
defined as an offer to acquire any equity security of a target company, if
32i
8
after the acquisition the offeror would be directly or indirectly the
48
beneficial owner of a specified percentage
of any class of outstanding
equity securities of the target company.
The applicability of a takeover
statute to a particular tender offer depends on whether the target company
(1) is incorporated within the state in question, or (2) has its principal
49
place of business there, and/or
(3) has substantial assets located within
50
the state.
Some tender offers that fit the statutory definition are
51
exempt from the provisions of the statutes.
However, an examination of
the various exemptions illustrates the proposition that most of these statutes
52
are aimed at regulating unfriendly tender offers,
directed at larger
53
companies.
If the tender offer is regulated by a takeover statute, the offeror
is required to file specified information with the designated state securities
commission and to send copies to the target company, usually prior to making
the takeover bid.
The offeror is usually required to file ten days prior to
54
its takeover bid,
but may be required to file as early as thirty days prior
55
to the effective date of the offer.
As a result of these filing requirements,
the effective date of the tender offer is delayed beyond the initial date of
disclosure and, in effect a waiting period not required by the Williams Act is
imposed on the offeror.
The information required to be filed pursuant to takeover statutes
is, in some cases, similar to the disclosure requirements of schedule 13D
56
under the Williams Act.
However, several states go substantially beyond
those requirements and provide that the offeror must file a statement which
is equivalent to the combined information on a schedule 13D under the
57
Williams Act and on a registration form S-l under the Securities Act of 1933.
In addition, the tender offer may not proceed, under Ohio and similar
statutes, if the target company has requested a hearing or if one has been
tryry
9
58
ordered by the state securities commissioner.
The time in which the
59
60
hearing must be commenced varies in each state.
Ohio
and Virginia
require
that the hearing be initiated within forty days of the date of filing, and Ohio 61
further provides that the adjudications be made within sixty days after filing.
Wisconsin and Minnesota require that the hearing be held within twenty days
of the date of filing and that the determination be made within thirty days
of such filing in Wisconsin and twenty days following the hearing in Minne62
sota.
As a result, the tender offer could be delayed anywhere from twenty
to sixty days after being published.
Furthermore, none of the state statutes
delineate any meaningful standards for deciding when a hearing will be
63
required.
Consequently, a state which favors local management may insti-
gate a hearing upon the request of the target corporation's managers, whether
meritorious or not, and thereby thwart a tender offer.
Ohio and Minnesota have placed a further provision in their statutes
to prevent circumvention of their acts.
The statutes provide that no acquiring
corporation can publish a takeover bid unless it is made to all security
holders residing within the state and is made64on the same terms as that made
to other security holders outside the state.
Ohio further provides that
sanctions can be imposed on securities dealers licensed in Ohio for participating or aiding in making a tender offer in which Ohio residents are not
65
included.
Consequently, even if there are only a few security holders
residing in Ohio, the acquiring corporation must file with the state or forego
the tender offer since all takeover bids must be tendered through securities
dealers licensed in Ohio.
Because the state statutes clearly go far beyond the Williams Act
by providing for advance warnings and hearings, the question remains whether
these additional requirements are necessary and valid to the scheme of regulating tender offers, and whether they are unconstitutional.
10
EFFECT OF THE STATE STATUTES
The most obvious effect of these state takeover statutes is that
as a result of the premature disclosure and the inherent delays, the tender
offer will be effectively barred, because the target will have succeeded in
eliminating the offeror's critical advantage of surprise and speed.
This bar
applies to all tender offers without distinguishing between those which could
66
benefit the corporation and those benefiting "corporate raiders."
A target
company's most effective defensive tactic is to stall for time, allowing
market forced to make it economically undesireable for shareholders to
relinquish their securities.
Another undesireable effect of these statutes is the irregular
67
price fluctuations in the market during the period of delay.
In discussing
this problem the New York Stock Exchange stated that during the period of
time in which the tender offer is filed and published,68 there could be numerous
counteroffers causing great disruption of the market.
The resulting price
fluctuations could make it necessary for the Securities Exchange Commission to
halt trading in the security, thereby depriving 69
security holders of a market
for their stock, and causing great uncertainty.
The SEC also expressed
the fear that if many states enacted similar but different legislation such 70
disuniformity would result that national trading would be severely impaired.
The uncertainty generated by the state statutes is demonstrated by examining
a few recent cases that have applied these statutes.
In an Ohio filing in 1971, the offeror, prior to the expiration
of the waiting period, had commenced the tender offer outside of Ohio for
securities of an Ohio corporation.
When the securities division did not
order a hearing, the target corporation sued 71
in state court to obtain a
restraining order, injunction and a hearing.
The lower court ordered a
337
11
hearing, on appeal injunctive relief was granted and the statutory procedures
72
73
were upheld.
The tender offer was ultimately withdrawn.
Prior to 1975, when target companies began to use takeover statutes
effectively, the offeror had to be concerned primarily with maintaining
secrecy prior to making its bid, and with the schedule 13D requirements.
Now
the offeror must also be concerned with one or more state takeover statutes
which may have serious adverse effects upon the offer.
This is exemplified
by two recent cases in which state takeover statutes caused considerable
74
delay: Copperweld Corp. v. Imetal
and Otis Elevator Co. v. United Tech75
nologies Corp.
On September 9, 1975, Societe Imetal, a French concern, filed a
schedule 13D with the SEC and made a tender offer for shares of the Copperweld
Corporation, a Pittsburgh-based producer of specialty steels.
Of its seven
wholly owned subsidiaries, two were incorporated under the laws of Ohio, two
were incorporated under the laws of Pennsylvania, and three were incorporated
in Delaware.
As a foreign corporation, Copperweld was not required to be
licensed in Ohio merely because of its ownership of shares in two Ohio
corporation.
Furthermore, ownership of these shares did not make Copperweld
the owner of any operating assets in Ohio, nor did it constitute doing
bus iness in the state.
Because the Ohio takeover statute applies to tender
offers for a company which either was incorporated in Ohio or has its principal place of business in Ohio, and which has substantial assets within
Ohio, one might reason that the statute would not apply in this case since
the target company was not incorporated in Ohio nor did it have either its
principal place of business or substantial assets in the state.
Nevertheless,
the Ohio attorney general
76 sued to enjoin Societe Imetal until it complied
with the Ohio statute.
In support, Copperweld argued that the tender offer
337
12
was within Ohio's jurisdiction because substantial assets and operations of
its two subsidiaries were tanamount to a principal place of business of the
77
parent.
The merits of this argument were never adjudicated and it remains
unclear whether substantial assets within the state provide a sufficient
jurisdictional basis under the statute.
Societe Imetal eventually consented
to jurisdiction and the Division of Securities entered an order stating that
the offeror had complied with the statute.
In a similar case, United Technologies Corporation made a tender
offer for fifty-five percent of the shares of Otis Elevator Company, a New
Jersey corporation.
A motion by Otis for a preliminary injunction based on
alleged violations of federal law was pending in the United States District
Court for the Southern District of New York when Otis invoked the Indiana
takeover statute on
78 the ground that a "substantial portion of its total assets"
was located there.
After (1) a cease and desist order by the Indiana
Securities Commissioner, (2) a lawsuit commenced by Otis in state court
resulting In a temporary restraining order, (3) an action by United in the
United States District Court in Indianapolis challenging the constitutionality
of the Indiana statute, (4) a subsequent ruling by the Indiana Securities
Commissioner dissolving the cease and desist order on the ground that the
statute did not apply to Otis, (5) an action by Otis in state court to review
the Commissioner's ruling, (6) the expiration of the state court's temporary
restraining order, (7) United's removal of all state court proceedings to
the United States District Court, and (8) the remand of Otis' action to the
state court to review the Commissioner's ruling, the applicability and constitutionality of the Indiana statute were still not adjudicated.
Eventually,
United announced termination
of its offer and its intent to make a new offer
79
at a higher price.
At present, the full effects of state takeover statutes remain
337
13
unclear.
When fewer states had statutes, offerors could effectively employ
the expedient of limiting offers to states where no more restrictive regulations than the federal scheme were in effect.
As more laws are enacted,
this tactic becomes useless, and to avoid injunction and other penalties an
offeror, as a practical matter, may be forced to comply with the most restrictive of the state acts.
Case law regarding these statutes is limited, in part
because they are new, but also because the few cases filed have not been
adjudicated on the merits.
The most serious questions about state takeover statutes, however,
are whether these statutes violate the commerce clause of the Constitution,
and whether the Williams Act has preempted state authoirty to regulate in this
area.
THE COMMERCE CLAUSE
80
The Commerce Clause of the United States Constitution
does more
than authorize Congress to enact laws regulating trade among the states, for
by its own force it creates an area of trade free from interference by the
81
states.
82
Recently, in Great Atlantic and Pacific Tea Co. v. Cottrell,
the Supreme Court reaffirmed the standard to be applied in determining the
validity of a state statute affecting interstate commerce. The standard
83
as originally set out in Pike v. Bruce Church, Inc.
provides that:
Where the statute regulates evenhandedly to
effectuate a legitimate local public interest,
and its effects on interstate commerce are only
incidental, it will be upheld unless the burden
imposed on such commerce is clearly excessive
in relation to the putative local benefits.
If a legitimate local public purpose is found,
then the question becomes one of degree, and
the extent of the burden that will be tollerated
will of course depend on the nature of the local
interest involved, and on whether it could be
promoted as well with a lesser impact on interstate activities.
337
14
Under Pike three questions must be resolved.
First, does the
state statute promote a legitimate local public interest?
Second, does the
statute impose a significant burden upon interstate commerce or is the
burden imposed merely incidental?
Third, when a balancing test is applied,
does the burden imposed clearly outweigh the local benefits presumably
being promoted?
Several state interests have been advanced to justify takeover
legislation.
However, close scrutiny will reveal that the articulated pur-
poses are probably not legitimate, and, therefore, do not justify interference
with interstate commerce.
The protection of life, health and safety have
84
been upheld as appropriate subjects of local regulation.
Likewise, state
regulation of intrastate securities transactions under the blue sky laws has
85
been upheld as a subject of legitimate local concern./ \ It has been argued
/
that since the purpose of state tender offer regulation is to protect persons
investing in corporations which are incorporated within or substantially related
to the enacting state, the legislation is a logical extension of the blue sky
86
laws.
Traditionally, however, the blue sky laws of each state protected
87
persons from fraudulent acts committed within state borders.
The juris-
dictional basis of the blue sky laws was found in the fact that the shareholder
was present in the state, and an offer or sale of securities was made within the
88
state,
89
not in whether the issuer is incorporated or does business there.
The jurisdictional basis of the state statutes does not entitle the states to
maintain in personam jurisdiction over a foreign corporation, or regulate
90
tender offers extending outside the state.
Protection of property outside
the state has never been construed as a legitimate local interest.
Furthermore,
discrimination against the citizens of other states results from the enforce91
ment of some state statutes,
because no tender offer can be made to a
337
15
shareholder residing outside the state unless the same offer is made to a
92
resident shareholder. Thus, the entire tender offer can be halted.
Another suggested purpose of state tender offer legislation is that
the regulation of tender offers for corporations incorporated within the
93
regulating state concerns the "internal affairs" of the corporation.
However, as the leading proponent of this theory has recognized, "internal
affairs" has generally meant questions such as shareholders liability,
validity of stock issues, ability to merge and effect other organic changes,
election of directors, voting trusts and voting agreement, dividends, relative
rights of shareholders, and duties of officers, directors, and controlling
shareholders to the corporation and to shareholders, all of which are governed
94
by the law of the state of incorporation.
Thus, the internal affairs
doctrine applies only to existing intracorporate relationships.
The crucial
distinction between regulating the corporation in its dealings with shareholders
and imposing substantive regulations on tender offers for purposes of deciding
whether or not the internal affairs doctrine is applicable is that in the
first instance the relationship between the corporation and shareholders is
already formed.
In the tender offer situation the relationship is not yet
95
formed between the acquiring corporation and the target.
Therefore,
application of the doctrine to tender offers is conceptually incorrect since
it applies to existing corporate relationships and not to future relationships,
and cannot legitimize state regulations of tender offers for state-based
corporations.
The insulation of local management has also been asserted as a pur96
pose for the enactment of the state statutes.
The reason expressed for
protecting management is the fear that upon a takeover the acquiring corporation
can either liquidate all the assets of the target corporation
or relocate,
97
thereby causing loss of revenues and local unemployment.
This underlying
337
16
purpose is also arguably illegitimate.
The United States Supreme Court has
long held that a benefit to the business or economic life of the state, at
98
the expense of other states, does not supply an acceptable purpose.
In
99
Pike,
the state of Arizona was seeking to regulate the interstate shipment
of fruit, the effect of which was to benefit the state but to burden the
shippers.
The Court held that the statute was unconstitutional on commerce
clause grounds stating:
The Court has viewed with particular suspicion
state statutes requiring business operations to
be performed in the home State that could more
efficiently be performed elsewhere. Even where
the State is pursuing a clearly legitimate local
interest, this particular burden on commerce has
been declared to be virtually per se illegal.100/
The practical effect and unstated purpose of the state statutes
regulating tender offers is to insulate management from attack or takeover
by tender offer and thereby protect the business and economic life of the
state.
Under the Pike rationale this purpose of preserving or insuring local
employment is illegal per se and is analogous to conferring an advantage on
101
local producers over out-of-state competitors.
Assuming that a legitimate purpose exists for state regulation of
tender offers, the statutes may still be unconstitutional if the burden on
interstate commerce is too great.
In determining the extent of the burden,
the courts take into consideration whether the statute affects transactions
or activities beyond the state's own boundaries and whether there is a need
for uniform regulation of the area so as to maintain the free flow of commerce.
103
In Southern Pacific Co. v. Arizona
the Supreme Court held that one state
may not regulate train lengths because the regulation affected commerce
beyond its boundaries, and if other states passed similar legislation the
result would be a serious impediment to the free flow of commerce.
337
It was
102
17
determined that a uniform system was necessary since the regulations could
impose a considerable burden on the train operators by requiring them to
104
change the number of cars when entering different states.
The tender offer regulations can be analogized to the Southern
Pacific situation.
Since the state regulations apply to tender offers
beyond their boundaries, an acquiring corporation when making a tender offer
may be required to file differing data in numerous states.
As a result the
acquiring corporation may be discouraged or prohibited from making a tender
105
offer.
In addition the action taken by one state in respect to a tender
offer may also disrupt trading and the orderly regulation of the national
106
securities market.
107
Furthermore, in the Copperweld case
concurrent regulation of a
tender offer resulted in a stand-off between a state and a federal court.
Copperweld's injunction request was denied by a federal judge, but was
granted by a state judge with the result that the tender offer effective
in all states was suspended until the state takeover requirements were met.
The commerce clause was aimed at preventing such unilateral action by a state.
108
In addition, in the case of statutes which do not exempt "friendly" offers
from their scope, the method chosen to protect state interests puts a different
burden on interstate commerce.
Unlike laws that use positive provisions,
such as tax and other incentives, to attract and keep business in the state,
such takeover laws suggest that there exists state power to prevent the
voluntary emigration of domestic corporations.
109
Such an assertion cannot
survive commerce clause scrutiny.
Even if the burdens do not outweigh the benefits gained, the
question remains of whether there exists a less intrusive alternative to
110
achieve the legitimate purpose of protecting local shareholders.
the purpose of these statutes is to protect local shareholders, this
If
18
purpose may be implemented by a less intrusive alternative; the Williams Act
itself.
The burdens of great fluctuations on the market, uncertainty, and
the inability of the Securities and Exchange Commission to control or police
the national market result from advance notice of the tender offer and delays,
111
both of which are incidents of the state statutes.
The Williams Act pre-
serves secrecy and speed, thereby avoiding the imposition of these burdens
on interstate commerce, and protects shareholders through its comprehensive
scheme of regulations.
The Act requires, pursuant to Schedule 13D, the dis-
closure of any plans or proposals to liquidate or to sell the assets of, 112
to merge, or to make any other major changes in, the targer corporation.
If the offeror fails to make such disclosure it is subject to injunction and
113
sanctions.
The Williams Act also goes beyond the state statutes in pro-
tecting the shareholder by requiring truthful information to be given by the
target corporation when recommending acceptance or rejection of the tender
114
offer.
Consequently, the Williams Act implements the interests of the
state statutes without imposing the burdens inherent in them, and thus is a
less intrusive alternative.
THE SUPREMACY CLAUSE
Preemption occurs either when an outright conflict exists between
the federal scheme and the state requirement, or when state regulation unduly
115
interferes with the accomplishment of federal objectives.
A state law
exhibiting a purpose which is valid, and perhaps even consistent with federal
legislation, may nevertheless be invalid where its effect is to pose an
obstacle to the accomplishment and execution of the purposes and objectives
116
of Congress.
Congress has not expressly forbidden the states to regulate
tender offers, but it has been held that the lack of an express statement
117
is not decisive.
19
State power to legislate in a given area may continue concurrently
118
be reason of a specific savings clause in a federal statute,
but the scope
of concurrent jurisdiction must be determined by further statutory construction.
Arguably, a general savings clause precludes preemption.
119
Nelson,
In Pennsylvania v.
however, the Supreme Court found a general savings clause in the
U.S. Criminal Code, similar to Section 78bb(a) of the 1934 Securities Exchange
Act irrelevant to the decision of a specific preemption question.
In Nelson
the Supreme Court set out three tests to determine the validity of state
120
laws where Congress has not specifically stated whether the area is preempted.
121
These tests, which originated in Rice v. Sante Fe Elevator Corp.,
(1) whether the scheme of federal regulation is so
pervasive as to make reasonable the inference
that Congress left no room for the states to
supplement;
(2)
whether the federal statutes touch a field in
which the federal interest is so dominant that
the federal system must be assumed to preclude
enforcement of state laws on the same subject;
(3)
whether enforcement of the state statute presents
a serious danger of conflict with the administration of the federal program.
are:
It is submitted that Congress intended to exclusively occupy the
field of tender offer regulation.
It may be argued that, on its fact, the
Williams Act is not a "pervasive" scheme to regulate tender offers since it
merely mandates the timing and content of disclosure.
However, the sections
were integrated by Congress into the Securities Exchange Act of 1934, which
in effect controls every facet of tender offers.
is certainly comprehensive.
Taken as a whole, that Act
Moreover, the regulation of the timing of dis-
closure in tender offers is no mere procedural detail.
Concurrent disclosure
was found by Congress to be the only fair way to regulate tender offers, since
advance disclosure gives such an advantage to the target company and severely
337
20
122
limits the usefulness of the tender offer technique.
It may, therefore,
be concluded that the timing of disclosure has a substantive effect on tender
offers, and that Congress1 delineation of one method was intended not as a
minimum standard but as the standard to be applicable in every state.
The Williams Act was enacted because Congress recognized that
123
existing regulations were inapplicable to cash tender offers.
Since
passage of the Act, shareholders confronted with a tender offer are protected
by full disclosure of the identity and pertinent background of the offeror,
the purpose of the offer, and the terms and conditions of the offer, including
124
financing.
The 1970 Amendment expanded both the SEC's rule-making authority
and the coverage of the Act to some offers previously exempt from regulation,
including reduction from ten percent to five percent of stock ownership
needed to trigger the disclosure requirement, thereby further extending
125
national regulation.
In the aggregate, the Securities Acts and their
amendments provide extensive registration and disclosure provisions and
extensive methods of enforcement.
Furthermore, the federal interest in regulating interstate securities
is so dominant that it probably precludes enforcement of the state statutes.
The Nelson Court, applying the second test, emphasized that Congress had
devised an all-embracing program for resisting totalitarian aggression both
126
nationally and locally be setting up the FBI and other intelligence agencies.
The securities acts, likewise, provide such an all-embracing program for
national and local exchange of interstate securities by setting up the SEC.
The SEC like the FBI is an administrative agency established by Congress to
implement a national legislative scheme.
Neither was formed until the
necessity for national control became apparent.
Most importantly, however, enforcement of the state statutes presents
334
21
a serious conflict with the administration of the federal securities program.
Pre-effective filing, hearing and extensive disclosure requirements of state
takeover statutes, viewed in light of the history of the Williams Act, plainly
interfere with Congress' overall design for securities regulation, since
127
Congress explicitly rejected such provisions.
When a tender offer was
made prior to the Williams Act, a security holder could sell all of his
holding, or he could sell only a portion of them and remain a shareholder
in the old company "under a new management which he. . .helped to128
install
without knowing whether it would be good or bad for the company."
The
Williams Act sought to provide the shareholder with knowledge of the identity
of the offeror and of its plans and intentions regarding the target company's
future.
The minimal disclosure requirements of the Act provide shareholders
with the information necessary to make an informed decision regarding the
129
sale of their equity interests in the target.
In providing for this
disclosure, Congress drafted the bill without prejudice against the tender
130
offer as a method of achieving the transfer of corporate ownership.
The legislative history of the Williams Act and of the attempts to
amend it clearly shows that when Congress was faced with the choice of
requiring an information statement to be filed some time before the effective
date of an offer in order to give the SEC time to examine the adequacy of
disclosure, or of requiring the statement to be filed when the offer is
131
commenced, it preferred the latter.
During the Senate hearings, critics
voiced their disapproval of any pre-effective filing and scrutiny by the SEC.
Representatives of the major stock exchanges were concerned that leaks which
132
might occur before the tender offer was made would force its abandonment.
133
New York Stock Exchange Vice-President Donald L. Calvin testified that:
The prefiling proposal might also provide an opportunity
for market manipulations. An information statement might
uOO
22
be filed solely to provide the basis for rumors of
an impending offer for a company by someone without
any intention of making the offer. The price manipulation could then take place, and it would be difficult, if not impossible, to prove that such manipulation was intended.
134
Congress purposefully chose not to require any pre-effective disclosure.
This repeated rejection, coupled with the explicit reason given therefor,
namely fairness to both sides in tender offers, amounts to a clear national
policy in the field.
135
In the recent case of Rondeau v. Mosinee Paper Corp.,
where the
defendant failed to file a Schedule 13D prior to acquiring more than five
percent of the outstanding common stock of Mosinee Paper, the Supreme Court
refused to grant injunctive relief without the traditional showing of
irreparable harm.
The Court in denying the injunction, did so because it
believed allowing the injunction to issue would tip the balance of regulation
in favor of target company management providing a weapon "to discourage
136
takeover bids or prevent large accumulations of stock."
Most recently
137
in Piper v. Cris Craft Industries, Inc.
the Supreme Court, after an extended
discussion of the legislative history of the Williams Act, concluded that the
sole purpose of the Williams Act was the protection of investors confronted
with a tender offer.
Referring to this emphasis on protecting investors, the
court denied a tender offeror a cause of action for damages for statutory
violations of his adversary.
These two cases exhibit the Supreme Court's
desire to uphold the intention of Congress of protecting shareholders and
allowing fairness to both sides when a tender offer is made.
The Court has
denied both the tender offeror and the target company management an advantage
by its holdings in Rondeau and Piper.
While the differences between the federal and state statutes may
seem trivial, the practical effect of these variations in the context of a
337
23
tender offer is to pose such burdens and uncertainties as to threaten the
viability of any offer.
Under the supremacy clause the individual substan-
tive provisions of state takeover statutes which directly clash with the
Williams Act must give way to a national and uniform system of regulating
tender offers.
CONCLUSION
As economic and corporate development has progressed, transactions
involving securities have become more sophisticated and the tender offer has
become a viable means by which corporate control can be changed.
The federal
government has imposed such regulation through comprehensive enactments,
including the Securities Act of 1933, the Securities Exchange Act of 1934,
and the Williams Act.
The states' adoption of further regulation in the
tender offer field has made it increasingly difficult for an acquiring company to rely on the tender offer as a device for effecting a smooth transfer
of corporate control.
The pre-effective disclosure and hearing requirements
pursuant to these state statutes frustrate the Congressional design of the
Williams Act.
In addition, some takeover act provisions directly conflict
with the provisions of the Williams Act.
Even if the state statutes protect
legitimate public interests, their operation unconstitutionally burdens the
flow of interstate commerce in a field which requires uniform regulation.
337
FOOTNOTES
1.
A tender offer may be defined as a public invitation extended to all
or part of a class of the shareholders of a publicly held corporation (the
"target") to sell their shares to an offeror during a fixed period of time
at a specified price. See Fleischer & Mundheim, Corporate Acquisition by
Tender Offer, 115 U. Pa. L. Rev. 317 (1967).
2.
One study determined that in 1974 and 1975 more than $1.7 billion
in gross corporate assets was contested in 34 tender offer fights and more
than $1 billion of those assets changed control. H. Hansell & W. Steinbrink,
The Tender Offer: How to Protect Your Company, Presented at American Management Association Seminar, July 19-21, 1976.
3.
Comment, Commerce Clause Limitations Upon State Regulation of
Tender Offers, 47 So. Cal. L. Rev. 1133, 1138 (1974).
4.
Hayes & Taussig, Tactics of Cash Takeover Bids, 45 Har. Bus. Rev.
Mar/Apr 1967 at 138.
5.
Ill Cong. Rec. 28257-58 (1965), (remarks of Senator Williams).
6.
E. Aranow & H. Einhorn, State Securities Regulation of Tender Offers,
46 N. Y. U. L. Rev. 767 (1971).
7.
114 Cong. Rec. 21484, 21954 (1968).
8.
Act of July 29, 1968, Pub. L. No. 90-439, 82 Stat. 454 (codified at
15 USC §§78m, 78n (1970).
9.
See H. R. Rep. No. 1711, 90th Cong., 2d Sess. 4 (1968); S. Rep. No.
550, 90th Cong., 1st Sess. 3 (1967).
10. See. E. Aranow & H. Einhorn, Tender Offers for Corporate Control
177-80 (1973).
11. In approximately 95% of the cases arbitrageurs make or break a tender
offer. G. Demas, Take Overs: Attack and Defense Strategies, remarks to
American Management Association Seminar, July 19-21, 1976.
Approximately 80% of tendered stock comes from arbitrageurs. R.
Rubin, Arbitrage Activity, remarks to American Management Association Seminar,
July 19-21, 1976.
12. Henry, Activities of Arbitrageurs in Tender Offers, 119 U. Pa. L. Rev.
466, 467 (1971) The arbitrageurs purchase all available stock of the target
corporation at the market price and then tender the accumulated shares for
the higher tender offer price, which if accepted by the acquiring corporation,
causes the realization of a quick profit.
13. Hearings on H. R. 14475 and S. 510 Before the Subcomm. on Commerce
and Finance of the Comm. on Interstate and Foreign Commerce, 90th Cong., 2d
Sess. 44 (1968), (remarks of Donald L. Calvin, Vice-President of the New York
Stock Exchange).
338
14. A. Bromberg, Tender Offers: Safeguards and Restraints—An Interest
Analysis, 21 Case Western Reserve L. Rev. 613, 616 (1970).
15.
See note 13 supra.
16.
See note 10 supra.
17.
See note 14 supra at 618.
18.
Id.
19. The defense mechanisms which the target corporation may utilize are:
merging with a friendly corporation; obtaining an alternative tender offer,
thereby obviating the takeover; repurchasing its own shares, thereby reducing
the number of shares available, which consequently causes the price to rise
and destroys the inventive to sell; extending dividend increases, stock splits
or some other mechanism which makes the stock more desirable to the shareholders;
and finally, "triggering state takeover statutes" which in effect prohibit
tender offers. See note 3 supra at 1136.
20. Note, Economic Realities of Cash Tender Offers, 20 Maine L. Rev.
237, 243-47 (1969). Two out of ten offers were successful.
21. Hearings on S. 510 Before the Subcomm. on Securities of the Comm.
on Banking and Currency, 90th Cong., 1st Sess. 59 (1967), (remarks by Professor
Samuel Hayes). See also note 10 supra.
22.
See note 2 supra.
23.
Id.
24.
See 15 USC §78n(d)(5) and 15 USC §78n(d)(6).
25.
Ill Cong. Rec. 28256-7 (1965), (remarks of Senator Williams).
26.
Cong. Rec. S. 2731, 89th Cong., 1st Sess., Ill Cong. Rec. 28256 (1965).
27. See Moylan, Exploring the Tender Offer Provisions of the Federal
Securities Laws, 43 Geo. Wash. L. Rev. 557 (1975).
28. "The purpose of this Bill is to provide full and fair disclosure
for the benefit of the stockholders while at the same time providing the
offeror and management equal opportunity to fairly present their case."
113 Cong. Rec. 854-55 (1967), (remarks of Senator Williams).
29. "We have taken extreme care to avoid tipping the scales either in
favor of management or in favor of the person making the takeover bids."
113 Cong. Rec. 24664 (1967).
30.
See note 13 supra.
31.
17 C.F.R. §240.13d-101 (1976).
32.
15 USC §781 (1970).
339
33.
15 USC § 78m
34.
See note 14 supra at 615.
35.
Securities Exchange Act 514(d)(5), 15 USC §78n(d)(5) (1970).
36.
Securities Exchange Act 514(d)(6), 15 USC §78n(d)(6) (1970).
37. Id. Manuel F. Cohen, Chairman of the Securities Exchange Commission,
explained that the pro rata provision was provided to prevent pressure on
the security holder to sell his shares in the target corporation promptly.
See note 13 supra at 11.
38.
Securities Exchange Act §14(d)(7), 15 USC §78n(d)(7) (1970).
39.
17 C.F.R. §240.14d-4 (1968).
40. Studebaker v. Gittlin, 360 F.2d 692 (2d Cir. 1966). The Second
Circuit applied the same private-attorney-general rationale that was set
forth in J. I. Case v. Borak, 377 U.S. 426, 432 (1964) to find that a
private right of action existed under Section 14(a) of the Securities
Exchange Act which would allow an individual to bring suit in order to
force compliance with proxy rules.
41.
Securities Exchange Act §14e, 15 USC §78n(e) (1970).
42. Electronic Specialty Co. v. International Controls Corp., 409 F.2d
937 (2d Cir. 1969); Susquehanna Corp. v. Pan American Sulpher Co., 423 F.2d
1075 (5th Cir. 1970).
43.
See Appendix.
44. The minimum time periods of the Williams Act are criticized as being
too short. The contention is that offerors have gained the upper hand in the
context of tender offer regulation as it exists today and that experience has
indicated that a large volume of arbitraging and other factors make it unlikely
that a target company can successfully resist a tender offer unless delay is
obtained by a court order. State Takeover Statutes and the Williams Act, 32
Bus. Lawyer,187, 189 (November, 1976).
45. Shipman, Some Thoughts About the Role of State Takeover Legislation:
The Ohio Takeover Act, 21 Case Western Reserve L. Rev. 722, 756 (1970).
46.
Id. at 724.
47. J. Moylan, State Regulation of Tender Offers, 58 Marquette L. Rev.
687, 690 (1975).
48. The percentages specified vary between 5% and 20% with most states
using 10%.
49. In some states the language of the statute is in the disjunctive and
in others It is in the conjunctive. Although it might appear that where the
conjunctive is used both elements must be present to trigger the statute this
340
is not necessarily so. In Copperweld Corp. v. Societe Imetal, 75 Civ. 09-3868
(C.P. Franklin County, Ohio, Act. 9, 1975), the Ohio statute, written in the
conjunctive, was interpreted by the Attorney General of Ohio to equate "substantial assets with "principal place of business."
50. Section 2(a) of the Connecticut Act, Pub. Act No. 76-362 (June 2,
1976) provides other bases for applicability, i.e., when a target company has
"its principal executive offices" or "a majority of its business operations"
in the state.
51. D. Wilner & C. Landy, The Tender Trap: State Takeover Statutes and
Their Constitutionality, 45 Fordham L. Rev. 1, 4 (1976).
52. An example of discrimination can be seen in some of the exemptions
provided in the state statutes. In some states an offer made by an issuer to
acquire (a) its own securities; or, in some state, (b) securities of a
subsidiary of which at least two thirds of the voting securities are owned
beneficially by such issuer (Alaska, Colorado, Connecticut, Delaware, Hawaii,
Iadho, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota,
Nevada, Pennsylvania, South Dokota, Tennesse, Utah, Virginia and Wisconsin.)
53. An example of statutory provisions being directed at larger companies
can be seen in some further exemptions; such as the exemption of an offer
to acquire equity securities of a class not registered pursuant to Section 12
of the Securities Exchange Act of 1934 (Colorado, Nevada, Utah, Virginia); and
an exemption of an offer to purchase shares of a corporation with less than
100 shareholders (Alaska, Connecticut, Indiana, Lousiana, Maryland, Michigan,
and Wisonsin), and with less than one million dollars in assets (Hawaii, Pennsylvania) .
54. Idaho Code §30-1502 (Supp. 1975); Minn. Stat. Ann. §80B.02 (Cum.
Supp. 1976); Nev. Rev. Stat. §78.3771 (1973); S. D. Comp. Laws Ann. §47-32-21
(Supp. 1976); Wis. Stat. Ann. §552.03 (Spec. Pamphlet 1975).
55.
See Kan. Stat. Ann §17-1277 (1974).
56. Minn. Stat. Ann. §80B.01 Subd. 2, 80B.06 Subd. 2-6 (Supp. 1973); Nev.
Rev. Stat. §78.3771 (Supp. 1973); Ohio Rev. Code Ann. §1707.041(A)(3) (Page
Supp. 1973); Va. Code Ann. §13.1-531(b) (Supp. 1973); Wis. Stat. Ann. §552.03
(West Supp. 1973).
57. See Ohio Rev. Code Ann. §1707.04(B)(3) (Page Supp. 1975); Ind. Code
§23-2-3-2 (c) (Supp. 1976).
58. Minn. Stat. Ann. §80B.03 subd. 4 (Supp. 1973); Ohio Rev. Code Ann.
§1707.041(B)(1) (Page Supp. 1973); Va. Code Ann. §13.1-531(a) (Supp. 1974);
Wis. Stat. Ann. §552.05(3), (4) and (5) (West Supp. 1973).
59.
Ohio Rev. Code Ann. §1707.041(b)(4) (Page Supp. 1973).
60.
Va. Code Ann. §13.1-534(b) (Supp. 1973).
61.
Ohio Rev. Code Ann. §1707.041(B)(4) (Page Supp. 1973).
62. Minn. Stat. Ann. §80B.03 subd. 5 (Supp. 1973); Wis. Stat. Ann. §552.05
(5) (West Supp. 1973).
341
63. Ohio Rev. Code Ann. §1707.041(B)(1)(a)(b) (Page Supp. 1973) and
Va. Code Ann. §13.1-531(a)(i) (Supp 1973) provide that a hearing will be held
upon request of the target company, through its board of directors, as long
as the commission does not decide that there is no cause therefor. Nowhere,
however is the meaning of cause provided. Under Minn. Stat. Ann. §80B.03 subd.
4 (Supp. 1973) and Wis. Stat. Ann. §552.05(4) (West Supp. 1973) on the other
hand, a hearing must be held if requested by the target company regardless
of whether the commissioner deems the request to be meritorious.
64. Minn. Stat. Ann. §80B.06 subd. 1 (Supp. 1973); Ohio Rev. Code Ann.
§1707.041(C) (Page Supp. 1973).
65.
Ohio Rev. Code Ann. §1707.041(C) (Page Supp. 1973).
66.
See note 3 supra at 1151.
67. A New York Stock Exchange Review of the Ohio Act summarized in 1
BNA Sec. Reg. & L. Rep. No. 1, at A-12 (June 4, 1969).
68.
Id.
69.
Id.
70.
Id.
71. Sparton Corp. v. Ward, Nos. 243, 230 (C.P. Franklin County, Ohio,
Jan. 8, 1971). The facts in this unreported case are reviewed in note 10
supra at 161-62.
72. Sparton Corp. v. Ward, No. 71-8 (Ct. App., Franklin County, Ohio,
Jan. 12, 1971).
73.
See note 10 at 162.
74.
403 F. Supp. 579 (W.D. Pa. 1975).
75. 405 F. Supp. 960 (S.D.N.Y. 1975). A recent suit challenging a state
takeover statute was instituted on August 23, 1976 in the U.S. District Court
for the Southern District of Ohio. The plaintiff, Thrall Manufacturing Co.
sought to enjoin Ohio officials from continuing to interfere with its offer
to pay $14 a share for up to 625,000 shares of the Youngstown Steel Door Co.,
an Ohio corporation. The complaint included allegations that the Ohio
statute unconstitutionally burdened interstate commerce and that the regulation of tender offers had been preempted by the federal securities laws.
76. Suit was commenced in the Court of Common Pleas. Ohio v. Imetal, No.
75 Civ. 09-3868 (C.P. Franklin County, Ohio, Oct. 9, 1975). At the time the
suit was instituted, a suit based upon federal law was being litigated in
the Federal District Court in Pittsburgh. Copperweld Corp. v. Imetal, 403
F.Supp. 579 (W.D.Pa 1975). Although Societe Imetal was successful in the
federal case, the tender offer was delayed pending the adjudication of the
Ohio suit.
77. See Pre-hearing Brief of Defendants Copperweld Corp., Copperweld
Steel Co. and Ohio Steel Tube Co., Ohio v. Imetal, No. 75 Civ. 09-3868
(C.P. Ohio 1975). This argument was apparently based upon a test set forth
342
in Kelly v. United States Steel Corp., 284 F.2d 850, 854 (3rd Cir. 1960).
However, in Kelly the issue was the location of defendant's principal
place of business and the court resolved the question by looking to the
place where most executive decisions were made. The court did not mention
the existence or location of subsidiaries.
78. Otis Elevator Co. v. United Technologies Corp., 405 F. Supp. 960
(S.D.N.Y, 1975). Under the Indiana statute, "substantial assets" within
the state provide a sufficient jurisdictional basis. Ind. Code §23-2-3-l(j)
(Supp. 1976).
79. Troubh, Purchased affection: a primer on cash tender offers,
Harv. Bus. Rev., July/Aug. 1976, at 82-83.
80.
United States Constitution, Article I, Section 8.
81.
McLeod v. J. E. Dilworth Co., 322 U.S. 327, 330 (1944).
82.
424 U.S. 366 (1976).
83.
397 U.S. 137, 142 (1970).
84.
Huron Cement Co. v. Detroit, 362 U.S. 440, 443 (1960).
85.
Traveler Insurance Assn. v. Virginia, 339 U.S. 643 (1950).
86. The Ohio Act has as its stated purpose "to protect all shareholders
wherever located of Ohio and Ohio-based corporations by requiring public
announcement and fair and full disclosure to shareholders in regard to takeover
bids." Amend. Sub. S.B. No. 138, File No. 90, at 1 (Reg. Sess. 1969-70),
cited in note 45 supra at 740.
87.
L. Loss & W. Cowett, Blue Sky Law 173 (1958).
88.
See Note 45 supra at 752-53.
89.
International Shoe Co. v. Washington, 326 U.S. 310 (1945).
90.
Pennoyer v. Neff, 95 U.S. 714 (1877).
91.
See notes 64 and 65 supra.
92.
See note 3 supra at 1148.
93.
See note 45 supra at 741.
94.
Id.
95.
See note 3 supra at 1154.
96. States began enacting these statutes when state-based corporations were
being threatened by takeovers. For example, Ohio's statute has been viewed
as a measure to prevent a reoccurrence of the attempt of Northwest Industries
to assume control of B. F. Goodrich, an Ohio based corporation. 1 BNA Sec.
Reg. & L. Rep. 2 (1969)
<r% m «rj
97.
Vorys, Ohio Tender Offer Bill, 43 Ohio Bar 65, 68 (1970).
98.
Bethlehem Motors Co. v. Flynt, 256 U.S. 421, 427 (1921).
99.
See note 83 supra.
100. Id at 145.
101. See note 3 at 1159.
102. California v. Thompson, 313 U.S. 109, 113-14 (1941); South Carolina
State Highway Dept. v. Barnwell Bros., 303 U.S. 177, 189 (1938).
103. 325 U.S. 761 (1945).
104. Id at 775.
105. See note 3 supra at 1161.
106. See New York Stock Exchange review of Ohio Rev. Code Ann.
§1707.041 (Page Supp. 1975), in BNA Sec. Reg. & L. Rep. No. 1, at A-12
(June 4, 1969).
107. Copperweld Corp. v. Imetal, 403 F. Supp. 579 (W.D. Pa. 1975).
108. These presently include Colorado, Connecticut, Delaware, Hawaii,
Kansas, Kentucky, Maryland, Nevada, Pennsylvania and Utah.
109. See note 51 supra at 22.
110. See note 83 supra at 146.
111. See notes 67-70 supra, and accompanying text.
112. See note 31 supra and accompanying text.
113. See note 40 supra.
114. See note 41 supra.
115. Hines v. Davidowitz, 312 U.S. 52 (1940).
116. Id.
117. Rice v. Sante Fe Elevator, Corp, 331 U.S. 218, 230 (1947).
118. 15 USC §78bb(a),
119. 350 U.S. 497, 501 (1956).
120. Id.
121. See note 117 supra.
122. See note 51 supra at 30.
123. See note 7 supra and accompanying text
124. See notes 31-42 supra and accompanying text.
125. 15 USC §§78m, 78n (Supp. 1970).
126. See note 119 supra at 505.
127. See notes 22-30 supra and accompanying text.
128. H. R. Rep. No. 1711, 90th Cong., 1st Sess. 2 (1968); S. Rep. No.
550, 90th Cong., 1st Sess. (1967).
129. See notes 31-33 supra and accompanying text.
130. See notes 22-28 supra and accompanying text.
131. See note 51 supra at 28.
132. Id. at 27.
133. See note 13 supra at 69-79.
134. See notes 22-28 supra and accompanying text.
135. 422 U.S. 49 (1975).
136. Id. at 58.
137. 97 S. Ct. 726 (1977).
345
APPENDIX
Alaska
Alaska Statutes, Take-Over Bid Disclosure Act (1976).
Colo.
Colo. Rev. Statutes, Title II, Art. 51.5, Investor Protection
Act (1975).
Conn.
General Statutes of Conn., The Connecticut Tender Offer Act (1976).
Del.
Delaware Code, Title 8, Sec. 203 (1976).
Hawaii
Hawaii Rev. Statutes, Ch. 417E (1974).
Idaho
Idaho Code, Title 30, Ch. 15 (1975).
Ind.
Indiana Statutes, Sec. 23-2-3-1 et seq., Business Take—Over Law (1976).
Kansas
Kansas Statutes, Sec. 17-1276 et seq., Take-Over Bids Law (1974).
Ky.
Kentucky Rev. Statutes, Take-Over Bid Disclosure Act (1976).
La.
Louisiana Rev. Statutes, Ch. 15, Business Take-Over Offers (1976).
Md.
Annotated Code of Maryland, Title 11, Maryland Securities Act,
Subtitle 9, Corporate Takeover Law (1976).
Mass.
General Laws of Mass., Ch. H O C , Regulation of Take-Over Bids in
the Acquisition of Corporations (1976) .
Mich.
Michigan Compiled Laws, Take-Over Offer Act (1976).
Minn.
Minnesota Statutes, Ch. 80B, Corporate Take-Over Law (1974).
Nev.
Nevada Rev. Statutes, Sec. 78.376 et seq., Takeover Bid Disclosure
Law.
N.Y.
New York Business Corporation Law, Ch. 4, Art. 16, Security Takeover
Disclosure Act (1976).
Ohio
Ohio Rev. Code, Sec. 1707.041, Take-Over Bids-Requirements (1969).
Pa.
Pennsylvania Statutes, Take-Over Disclosure Law (1976).
S. Dak.
South Dakota Compiled Laws, Ch. 47-32, Corporate Take-Over Offers
Law (1975) .
Tenn.
Tennessee Code, Sec. 48, Investor Protection Act (1976).
Utah
Utah Code, Take-Over Offer Disclosure Act (1976).
Va.
Code of Virginia, Title 13.1, Corporation Law, Ch. 16, Take-Over
Bid Disclosure Act (1968).
Wise.
Wisconsin Statutes, Ch. 552, Corporate Take-Over Law (1976).
346