NEW YORK — Hanson Trust PLC, frustrated in its attempt to acquire SCM Corp. through a tender offer, can resume purchases of the company's stock from individual shareholders or on the open market, a federal appeals court ruled Monday.
The U.S. 2nd Circuit Court of Appeals dissolved an injunction that a lower court issued in mid-September to block the purchases.
The appeals court said that U.S. District Judge Shirley W. Kram erred when she decided that Hanson's private purchases of 25% of SCM's stock were tantamount to a tender offer and thus were subject to federal reporting and timing requirements.
Hanson, a London-based combine that sells building materials, construction equipment, textiles, shoes and consumer products, touched off the struggle Aug. 21 when it bid $60 a share in cash for all of SCM's 12.25 million shares. New York-based SCM is best known for its Smith-Corona line of typewriters but has numerous other businesses, including pigments and frozen foods.
Merrill Lynch Bid
SCM management rejected the offer and obtained a competing bid of $70 a share--85% in cash and the rest in notes--from a group headed by Merrill Lynch. Hanson countered with a $72 cash bid and, after a delay, the Merrill group replied by bidding $74 a share, 80% in cash.
On Sept. 11, Hanson announced that it was withdrawing its tender offer because the second agreement with Merrill Lynch included a so-called poison pill designed, Hanson said, to strip SCM of its "crown jewels" in the event that a buyer other than Merrill Lynch won the bidding war.
The disputed provision gives the Merrill Lynch group an option to buy SCM's pigments and frozen-foods businesses for a total of $430 million in the event that any other party obtains more than one-third of SCM's stock. Hanson said the two businesses are actually worth $600 million to $700 million.
Within hours of withdrawing its tender offer, Hanson snapped up 25% of SCM's shares at $73.50 apiece in six separate transactions with Wall Street professionals. Late that night, SCM lawyers obtained a restraining order halting the purchases.
Had Hanson continued buying SCM stock to the point where it held more than one-third of the shares, it could have sunk the Merrill Lynch deal, which is contingent on that group obtaining two-thirds of SCM's stock.
SCM charged that Hanson misled the public by claiming to abandon its tender offer while proceeding to buy SCM stock privately. The Securities and Exchange Commission, which has initiated its own inquiry into the purchases, filed papers endorsing SCM's position that the private purchases amounted to either a new tender offer or a continuation of the old one.
But the appeals court Monday rejected the view that any large purchase of a company's stock could be considered a tender offer.
Aid to Small Investors
The rules controlling tender offers are designed to keep uninformed small investors from being stampeded into selling their shares, the appeals court said.