tender offers affect the success of such offers in the same manner as delays in commencement.
V. INTERSTATE COMMERCE FINDINGS
One reason why the Bureau Chief ordered a hearing under N.J.Stat.Ann. § 49:5-4 was to determine whether Kennecott planned to close down any of Curtiss-Wright's New Jersey operations, which would mandate that a hearing be called if a tender offeror planned to close down any of the target's New Jersey plants.
If a tender offeror were denied permission to proceed under the New Jersey Takeover Law, then the New Jersey Takeover Law, as interpreted by the Bureau Chief, would render it unlawful to proceed with the offer in any part of the United States.
As interpreted by the Bureau Chief, the Act is designed in part to protect employees and shareholders who reside outside the State of New Jersey. If, after a hearing pursuant to N.J.Stat.Ann. § 49:5-4, the Bureau Chief determined that a tender offer adversely affected only shareholders or employees of the target company outside the State of New Jersey, the Bureau Chief would prohibit the offer from going forward.
Although this case involves the complex and sophisticated world of corporate takeovers, it contains some simple truths. Delay in takeover offers inures to the benefit of the target company and is detrimental to the offeror company. Whether or not the investor is injured or benefitted by such delays is disputed by the combatants. However, that issue has been decided by Congress, which has decreed that delays are disadvantageous to the investor. The principals profess to advance the interests of the shareholders in their respective arguments; however, any benefits to the investor predicated upon the positions advanced by either party is purely coincidental. The parties to this action (excluding the state) seek to further, protect or acquire, as the case may, a substantial economic interest. If the investor is a victor in this arena, it is despite, rather than because of, the acts and intentions of the offeror and the target.
Tender offers are subject to federal regulation under the Williams Act. A majority of the states, as well, have enacted statutes which regulate tender offers. If both are enforceable, an offeror must satisfy both statutory schemes. Whether or not such state statutes are preempted by the federal act depends upon a determination of whether they merely supplement or are inconsistent with the purposes of the federal enactment. However, a determination that the state act supplements the federal act does not necessarily require a conclusion that such act does not frustrate the federal act. Added requirements and standards may impede the federal legislation.
The prime purpose of the Williams Act was to assist investors confronted with a cash tender offer in making an informed decision as to whether they should or should not tender their shares. It is intended to provide shareholders with the information necessary to evaluate the merits of a proposal.
The prime criticism directed at state takeover statutes is that they impose different or added burdens on the offeror to protect local companies and their management from takeovers. Furthermore, the additional disclosure requirements of such statutes represent a burden in themselves. Delays are promoted, and such delays redound to the benefit of the target company's management. Substantive and procedural weapons are provided to delay and discourage such bids. A corollary to investor protection is the concept of evenhanded regulation. It is argued that such statutes conflict with the balance envisioned by the Williams Act.
This court recognizes that it should be highly solicitous of state interests when considering the issue of preemption. There has been no specific expression by Congress excluding the states from this area of regulation, nor does it appear that such intent can be inferred. Therefore, the sole issue before this court in respect to preemption is whether the state regulation "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress". Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404, 85 L. Ed. 581 (1941).
The subject statute is also challenged on the grounds that it is violative of the commerce clause of the Constitution. It is argued that such statutes interfere with interstate commerce by imposing burdensome filing requirements on offerors, by regulating transactions involving shareholders who live in other states, and by prohibiting or impeding the issuance of nationwide tender offers. It is necessary to determine whether the burdens imposed on interstate commerce by local tender offer statutes are balanced by any legitimate state interest. Such analysis must be applied to the separate provisions of the state statutes.
All such statutes have an extraterritorial effect. Nonresident offerors and nonresident investors come within their ambit. This court must determine whether, despite such effects, the statute in issue effectuates a legitimate state interest.
Having set forth the issues and the general guidelines to be applied thereto, the court submits the following analysis of the specific statute here in issue.
CONCLUSIONS OF LAW
I. THE NEW JERSEY TAKEOVER LAW IS PREEMPTED BY THE WILLIAMS ACT.
The Williams Act and the regulations promulgated thereunder were enacted to establish a comprehensive regulatory framework governing tender offers. Investors are to be provided all material information with respect to an offer and be given the unfettered right to accept or reject such offer. In enacting the Williams Act, Congress adopted the "market approach" to tender offers, under which public investors determine the acceptability of such offers. Secondarily, Congress recognized that tender offers often create competitive situations, and, therefore, it sought to establish and maintain a careful balance between the offeror and management of the target company. The purpose of the legislation is to protect public investors (i) by insuring that they receive adequate information promptly and (ii) by not imposing such burdens on tender offers that they will become unavailable.
The New Jersey Takeover Law is not consistent with that purpose and intercedes in the free choice of investors. It creates a system which imposes obstacles to the commencement and completion of a tender offer and in which the outcome of the offer may be determined by a single individual, the Bureau Chief, rather than the informed judgment of public investors. The procedures imposed by the New Jersey Takeover Law are accordingly incompatible with the intent and purpose of the Williams Act.
A. The Regulation of the Tender Offers Under the Williams Act.
The underlying purpose of the Williams Act is the protection of investors. Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 30, 97 S. Ct. 926, 943, 51 L. Ed. 2d 124 (1977). In enacting the Williams Act, Congress determined to protect the investing public through a "market approach" in which there is a "free flow of information from both sides, so that knowledgeable shareholders can make an unfettered and knowledgeable choice whether to relinquish their shares for a cash premium." Kennecott Corp. v. Smith, 637 F.2d 181 at 188 (3d Cir. 1980). Under the market approach, the "function of federal regulation is to get information to the investor by allowing both the offerer and the incumbent managers of a target company to present fully their arguments and then to let the investor decide for himself." Great Western United Corp. v. Kidwell, 577 F.2d 1256, 1276 (5th Cir. 1978), rev'd on venue grounds sub nom. Leroy v. Great Western United Corp., 443 U.S. 173, 99 S. Ct. 2710, 61 L. Ed. 2d 464 (1979). Accord, MITE Corp. v. Dixon, 633 F.2d 486, (Current) Fed.Sec.L.Rep. (CCH) P 97,660, at 98,498 (7th Cir. 1980).
In furtherance of the policy to permit investors to determine their own economic self-interest, the Williams Act was carefully designed not to defeat or discourage tender offers, but to provide a balanced framework between the interests of the acquiring company and incumbent management of the target company. As the Supreme Court noted in commenting on the Williams Act in Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 95 S. Ct. 2069, 45 L. Ed. 2d 12 (1975):
"The Congress expressly disclaimed an intention to provide a weapon for management to discourage takeover bids.... Indeed, the Act's draftsmen commented upon the "extreme care' which was taken "to avoid tipping the balance of regulation either in favor of management or in favor of the person making the takeover bid.' "
MITE, 633 F.2d 486, (Current)Fed.Sec.L.Rep. (CCH) at 98,501 (footnote omitted).
Both the Congress and the courts have recognized that the most potent weapon available to incumbent management is delay. Kennecott Corp., 188-189; MITE, 633 F.2d 486, (Current)Fed.Sec.L.Rep. (CCH) at 98,502-03; Kidwell, 577 F.2d at 1277-78. As the Court of Appeals for this Circuit has determined, delay frustrates the purpose of the Williams Act in three critical ways: (i) delay of the commencement of a tender offer denies investors the critical information about both the offer and the offeror that is essential to making the kind of informed choice contemplated by the "market approach"; (ii) delay is inevitably used by the incumbent management of the target, through various defensive tactics, to deprive shareholders of the opportunity to choose at all, see, e.g., Kennecott Corp., at 188-189; and (iii) delay harms an offeror whose offer may be frustrated "not through adverse action of the shareholders, as Congress contemplates, but through barriers erected by the target management." Id. at 189.
Curtiss-Wright offered evidence in this matter to contravene Kennecott's contention that delay was necessarily detrimental to shareholders. However, in Kennecott Corp., the Court of Appeals for this Circuit held that it is neither necessary nor appropriate to attempt to adjudicate policy issues already resolved by Congress.
"A traditional testimonial record is not necessary here since Congress has already established the record after extensive hearings Congress determined that delay is detrimental to the interests of the investing public. We are not free to challenge this legislative judgment."