Hanson Trust PLC v. SCM Corporation

Brief Fact Summary. SCM Corporation (Plaintiff) argued that Hanson Trust PLC (Defendant) acquired its shares in it through an unacceptable tender offer.

Synopsis of Rule of Law. As long as there is no risk that the sellers will be hindered from forming an educated decision regarding the transaction the buying of corporate shares in a private transaction does not need to observe the notice requirements enacted on tender offers.

Facts. Hanson Trust PLC created a tender offer, including a time limit for consent and a declaration that two other shares would be acquired in private transactions unrestrained by offer terms, to buy shares of SCM Corporation. Hanson engaged in said transaction and SCM effectively appealed for a preliminary injunction prohibiting Hanson from continuing to trade its stock. The court held that Hanson’s procurement of the shares in a private transaction created a tender offer needing to comply with the notification requests. Hanson appealed.

Issue. If there is no risk the sellers will be hindered from forming an educated decision regarding the transaction, when buying corporate shares in a private transaction, does the transaction need to observe the notice requests enacted on tender offers?

Held. (Mansfield, J.) No. When buying corporate shares in a private transaction, if there is no risk that the sellers will be hindered from making knowledgeable decisions regarding the transaction, the transaction does not need to observe the notice requests enacted on tender offers. Here, the sellers are completely cognizant of the correctly noticed tender offer, its terms, and the likelihood of private transactions. So, there was no need to officially notice the transactions as tender offers and no risk of concealment. Reversed, preliminary injunction vacated, remanded.

Discussion. As identified by the court in Kenncott Copper Corp v. Curtiss-Wright Corp., 449 F. Supp. 951 (1978), a tender offer is comprised of various factors. The factors are: (1) extensive and aggressive petitioning of public shareholders for the issuers shares; (2) petition for a large portion of the issuer’s stock; (3) a premium price offered; (4) non-negotiable terms; (5) the tender of a set least quantity to be bought, which the offer is dependent upon; (6) time restrictions; (7) burden applied on the offeree and (8) the offer must be broadcast to the public prior the swift amassing of stock.