the fiduciary holder of Ursini's Liquigas shares. Neither ENI, IRI nor the Italian Government owns any Liquigas stock. Restatement at 12. The Restatement explains that ENI, Montedison and Banca Nazionale del Lavoro are three of four groups owning Capitalfin, the purchaser of the Liquipar stock from which the funds for the tender offer originated. The Restatement declares that Capitalfin does not own any Liquigas stock, nor does Liquigas own any Capitalfin stock.
These intricate relationships have been fully revealed to the Ronson stockholders. The record does not provide any factual basis from which to conclude that any of these entities control Liquigas. Thus, the Restatement does not violate Section 14(e) with respect to these disclosures.
Another claim of Ronson is that Societa General Immobiliare ("Immobiliare") could be in control of Liquigas because Liquigas has guaranteed payment of nearly sixty million dollars of Manifattura Cermamica Pozzi S. p. A. ("Pozzi") debts to Immobiliare. The theory of this claim is that Pozzi will not be able to meet these obligations and when Liquigas is called upon and unable to perform its guarantees, Immobiliare will become the largest creditor of Liquigas and in a position to control it.
The Williams Act requires only that the person in control of the offeror at the time of the offer be identified. During the preliminary stages of this suit, it was necessary for further inquiry into the Pozzi transactions because if, as a result of these substantial guarantees, Immobiliare would be able in the near future to control Liquigas, that would be a material fact to a stockholder deciding whether to tender his Ronson shares to a wholly-owned subsidiary of Liquigas.
The defendants have described the basic facts concerning the guarantee of Pozzi debts to Immobiliare. These guarantees are related to Liquigas' purchase of Pozzi's petro-chemical business. Restatement at 12. The record supports the description in the Restatement of these transactions.
Ronson argues that certain "interesting unanswered questions" about the Pozzi transactions justify permanent injunctive relief. Yet after trial these theoretical questions remain speculative and unproven. At first plaintiff seemed to complain that Liquigas had "mortgaged away" its future by guaranteeing such large debts of a company like Pozzi, and then plaintiff attacked the transactions as too "good" for Liquigas when certain stockholder suits were filed in Italy.
After a review of the evidence this Court concludes that the disclosures concerning the Liquigas-Pozzi transactions do not violate Section 14(e). The important facts are revealed, and the Ronson stockholders have been alerted that perhaps at some point in the future Immobiliare may influence or even control Liquigas if these debts of Pozzi cannot be guaranteed by Liquigas.
Finally, Ronson also asserts that defendant Michele Sindona controls Liquigas because he is the "secret" beneficial owner of Ursini's Liquigas shares. Sindona became involved in this tender offer as a personal and business friend of Ursini. Ursini consulted with Sindona for guidance in making the tender offer in this country. Sindona introduced Ursini to counsel and investment bankers as well as providing his offices for meetings concerning the offer. All of these dealings are candidly revealed to the Ronson stockholders. Restatement at 13.
Sindona is also involved in this tender offer through his various business interests. He owns approximately one-third of the stock of Immobiliare through his wholly-owned subsidiary, Fasco. Through Fasco he owns 21.6% of the stock of defendant Franklin New York Corporation which wholly owns defendant Franklin National Bank, the depository bank for the funds in this tender offer. Sindona claims that he has no direct or indirect stock interest in, nor is he a director or officer of, Liquigas. Sindona will not receive any compensation from Liquigas for his assistance in the offer. All of this information is provided to Ronson stockholders. Restatement at 13-14.
Ronson's claims against Sindona do not rely upon the factual proofs in the record, but instead, depend upon hypothetical inferences allegedly so convincing in logic that they overwhelm the evidence which clearly shows that Ursini controls Liquigas.
Ronson relies upon Ursini's exercise of a "call" in early 1973 over part of one hundred twenty-five million Liquigas shares which were held beneficially by an Italian entity known as Coil Finanzieria. By exercising this "call", Ursini obtained his ninety million shares of Liquigas stock. Ronson suggests that Coil Financiere, the alleged Swiss parent of Coil Finanzieria, was indirectly controlled by Sindona through his interest in an entity described only as "Finabank". Ronson then concludes that Sindona must be the "secret" person in control of Liquigas since he supplied Ursini with the funds for Ursini's exercise of the "call".
The record does not support Ronson's theories. First, Sindona has sworn by affidavit that he never had any interest, direct or indirect, in Coil Financiere, and more importantly, that he never had any interest, direct or indirect, in any of the ninety million shares registered in the name of Servizio Italia nor any other shares of Liquigas. Sindona also denies that he provided Ursini with the funds to buy Liquigas shares.
Second, it would not be logical or prudent for a person such as Sindona to part with thirty-two million dollars for control of Liquigas shares through a "front" man such as Ursini without a written agreement and/or a proper recording of his interest or lien on the stock ledger and certificates.
Indeed plaintiff's own expert conceded that he would not advise a client of his to rely upon only an oral understanding to protect such a valuable interest in the stock against third parties.
Finally, if Sindona were the "secret" person in control, it would be illogical that he take part in the offer by introducing counsel and conducting meetings in his offices. Such actions could hardly be effective to protect any alleged "secret" control of Liquigas.
Having reviewed all the evidence and the Restatement, the plaintiff has failed to establish that Sindona is a control person of Liquigas. The evidence supports the conclusion that Ursini, not Sindona, controls Liquigas. Ronson's hypotheses do not logically suggest that Sindona is in control and certainly do not overcome the evidence supporting Ursini's claim of control. Accordingly, it is the opinion of this Court that plaintiff has failed to establish a violation of Section 14(e) with respect to its allegations that Sindona or any persons or entities other than Ursini control Liquigas.
An important claim by Ronson is that the defendants have failed to disclose adequately or have misrepresented the foreign law or legal controls which may apply to the defendants in the event the tender offer is successfully consummated. The law applicable to such a claim is found in Judge Pierce's excellent opinion in General Host Corporation v. Triumph American, Inc., 359 F. Supp. 749, 758 (S.D.N.Y. 1973) where the court stated that foreign legal controls
. . . particularly when they differ in extent and kind from controls the U.S. investor has come to expect from the U.S. Government in relation to domestic corporations, are matters which should be called to the attention of shareholders in a tender offer.
In this case the defendants have disclosed the foreign law problems. Restatement at 17-18. The Restatement describes each contested point of foreign law and the opinions of counsel for the defendants and counsel for Ronson. The parties have attempted to persuade this Court of the merit of their respective opinions on the application of Italian and Swiss law by a "battle of legal experts".
It should be obvious that this Court need not decide points of Italian or Swiss law, but only whether these foreign legal questions have been fully and fairly called to the attention of the Ronson stockholders. After reviewing the Restatement and the evidence, it is the opinion of this Court that the defendants have complied with the Williams Act with respect to these questions of foreign law.
For example, Ronson contends that the defendants, under Italian corporate law, may not invest in Liquifin and Ronson without prior approval from the Italian Ministry of Foreign Trade. Restatement at 17. The Restatement clearly describes that in the opinion of Ronson's counsel, such approvals "would be difficult to obtain". The Restatement then explains that the opinion of Liquigas' counsel is to the contrary. In their view, such prior approvals are unnecessary because "these investments were from sources outside of Italy" and only apply to Italian residents.
Another contention of Ronson is that the effect of a United States withholding tax together with an Italian income tax would cause the defendants to hold Ronson dividends "to a minimum" in order to minimize taxes. In the Restatement, the defendants admit that no consideration has been given to any change in Ronson's dividend policy, but that if they are "in a position to control such policy . . . all appropriate factors" will be considered, including the fiduciary obligations to minority stockholders of Ronson. Restatement at 18.
In the next paragraph, the dispute over the effect of Italian and Swiss tax law on the sale by Liquimportex of the forty-nine percent interest in Liquipar to Capitalfin is discussed. Again the Restatement points out that Ronson's counsel believes that substantial foreign taxes must be imposed on this transaction while Liquigas' counsel believes that these taxes do not apply. However, the Restatement clearly states that "any taxes which may be found to be due and owing will be paid". Restatement at 18. Presumably, although it is not so stated, this declaration about this particular tax problem could apply to the other tax matters as well.
In view of these full revelations of the legal opinions of counsel for both sides and the factual bases for these opinions on disputed points of foreign law, it cannot be said that the Ronson stockholders have been denied information required by the Williams Act. Also, the Restatement discloses, as best it can at this time, the offeror's intentions to deal with these legal problems should the tender offer be consummated. Therefore, the Court concludes that the defendants have not violated Section 14(e) in the Restatement with respect to applicable foreign legal controls.
Another claim of Ronson is that the defendants have failed to disclose adequately the substantial questions of federal administrative law which apply to this tender offer. In the preliminary stages of this litigation, the tender offer misleadingly treated the problems arising under the Federal Aviation Act and the Federal Communications Act as if they were probably subject to resolution without divestiture of Ronson's helicopter and defense subsidiaries. Ronson, supra, 483 F.2d at 850. When reviewing this claim, the Court of Appeals stated:
. . . we agree with defendants that clearances from the several administrative agencies involved need not be secured prior to a final tender offer . . . 483 F.2d at 850-851.
Plaintiff now argues that when the Court of Appeals used the term "tender offer" it meant only that a final solicitation of shares could occur prior to the completion of the administrative proceedings. Plaintiff argues that the Court of Appeals did not authorize consummation of the offer before final resolution of the administrative legal questions. Plaintiff's view is supported by the suggestion in that opinion that courts should be careful to avoid consummation of a tender offer if it would become difficult to "unscramble" the corporate "eggs".
Although the opinion of the Court of Appeals could possibly be construed as plaintiff suggests, this Court does not interpret the term "tender offer" so narrowly. In the very next paragraph, the Court of Appeals applied the language of Sonesta, supra to this case by stating
'preliminary relief does not, in assuring that the offer will be lawfully made, sacrifice the legitimate desires of shareholders to accept the offer. If the offeror is subsequently vindicated after a trial on the merits, the offer may be renewed. Thus, in the normal situation, when it appears likely that the offer may contain materially misleading statements or omissions as made, the interest of the shareholders and of the public in full disclosure of relevant circumstances renders preliminary injunctive relief an appropriate method of remedying the deficiencies in disclosure before the offer is consummated.' 483 F.2d at 851.
When these two paragraphs are read together it seems fairly evident that the Court of Appeals did not intend for this Court to await the final administrative decisions before determining whether to continue or remove the restraints on this offer. If the offeror is vindicated after a trial on the merits or the deficiencies in the offer are corrected,
the tender offer may proceed to consummation provided that removal of a preliminary injunction in a particular case would further the Congressional purposes of the Williams Act.
In this case the federal administrative legal problems are discussed. Restatement at 3. The Restatement fully sets forth the facts and intentions of the offeror concerning its proposal to comply with the Federal Aviation Act by means of a trust agreement with the First National Bank of Washington, D.C. as the trustee. The Restatement discloses the status of the proceedings before the CAB regarding Ronson Heliocopters, Inc. and the total sales and net losses of this subsidiary from the final quarter of 1965 through the first five months of 1973. The Restatement also declares that the outcome of the administrative bodies are not predictable, and that if the trust arrangement is not approved, certain Ronson subsidiaries may be disposed of at the "best terms available". Restatement at 5 n. 1, 6 n. 2, 7.
Similarly, the Restatement informs the stockholders of the potential effects on Ronson if the FCC does not grant the approvals needed to continue operation of the various Ronson radios. Restatement at 8.
The Restatement candidly discusses facility security clearances which are necessary to the Ronson hydraulics subsidiaries in their business with the United States Department of Defense. Also provided is the sales and pre-tax income of the hydraulics subsidiaries as indicated by the Court of Appeals. Ronson, supra, 483 F.2d at 851; Restatement at 10. The offeror warns that if the necessary facility security clearances cannot be obtained from the Defense Department, the defense business "would have to be terminated or the Hydraulics Subsidiaries might have to be sold".
After a full review of all the evidence and the Restatement, the disclosures concerning the federal administrative legal problems do not violate Section 14(e). The intentions of the offeror and the facts behind those intentions have been revealed. Of course the defendants have a "continuing obligation" to insure that the Ronson stockholders are aware of the important administrative developments, if any, since September, 1973.
Certain other defendants also seek relief. Defendants Franklin New York Corporation and Franklin National Bank move to dismiss the complaint for failure to state a claim upon which relief can be granted and to dismiss the complaint on the merits. Previously these defendants moved to dismiss the action for lack of venue under the National Bank Act, 12 U.S.C. Section 94. That motion as well as the motion at the preliminary stage to dismiss the complaint for failure to state a cause of action was denied by this Court and affirmed by the Court of Appeals. Ronson Corporation v. Liquifin Aktiengesellschaft, 483 F.2d 852, 855 (3d Cir. 1973).
These defendants raise compelling arguments in their brief for dismissal based upon deficiencies in the pleadings. However, having examined the proofs in support of plaintiff's claims for permanent injunctive relief, there is no evidence of any wrongdoing by either Franklin New York Corporation or Franklin National Bank that would justify permanent injunctive relief against them.
Franklin National Bank has acted merely as a depository for the funds to pay for the tendered Ronson shares. As for the interest of defendant Sindona in these defendants, even if Sindona were subject to permanent injunctive relief, plaintiff has not demonstrated that either of these defendants should be enjoined solely because Sindona is a shareholder indirectly in Franklin New York Corporation. There is no evidence that these defendants have conspired with Sindona for any unlawful purpose. Consequently, there are no grounds for permanent injunctive relief against defendants Franklin National Bank and Franklin New York Corporation.
These defendants also move that plaintiff's claims for damages be dismissed at this time. As previously indicated, the Court at this stage is only concerned with the claims for injunctive relief and not with any claims for damages.
Accordingly, the motion of these defendants to dismiss the claims for damages will be denied without prejudice to renew at a later stage of these proceedings.
The evidence also fails to justify any further injunctive relief against defendants D.F. King & Company, Servizio Italia, Kuhn, Loeb & Company,
and Philip Marfuggi.
The evidence in this case demonstrates that plaintiff Ronson Corporation has failed to prove that it is entitled to permanent injunctive relief under Section 14(e). The preponderance of the evidence shows that the Restatement of the tender offer fully informs the Ronson stockholders of the material facts without omission or misrepresentation. The Restatement adequately discloses the persons behind and the methods used to fund the offer, the effect of foreign laws on the offer, and the federal administrative legal problems involved in the offer. Consequently, not only should plaintiff's prayer for permanent injunctive relief be denied, but the preliminary restraints now in effect against the offer should be dissolved.
Of course when these restraints are removed by order of this Court, the defendants must show that they have corrected the minor discrepancies in the Restatement as it is now written. The passages referring to these Court proceedings and the administrative proceedings must be revised to reflect the significant developments since September, 1973. The figures relating to the amount of shares to be purchased and the price per share must be adjusted throughout the Restatement in accordance with amendment to the 13D Schedule filed with the SEC. The proper identification of the Liquipar Company must be included as well as the correction of footnote 8 of the Restatement which improperly refers to "preferred" shares of Pozzi.
Accordingly, plaintiff's application for permanent injunctive relief must be denied, and defendants' motion to vacate the preliminary injunction must be granted. Counsel, with notice, shall submit an order immediately.
The foregoing opinion shall constitute this Court's findings of fact and conclusions of law under F.R. Civ. P. 52(a).