Appeal from the United States District Court for the Southern District of Indiana. No. IP 75-195-C - James E. Noland, Judge.
Swygert, Circuit Judge, Moore, Senior Circuit Judge,*fn* and Sprecher, Circuit Judge.
The primary issues on this appeal are whether, where sophisticated parties agree to trigger delivery of securities under a tender offer by a "public announcement" of a stated event rather than by actual notice, the law nevertheless imposes a notice requirement on the offeror and whether, assuming that a "public announcement" is an appropriate way to trigger certain events, a press release is the proper and normal means of making a public announcement.
In August 1974, defendant Mobil Oil Corporation ("Mobil"), made a cash tender offer for the securities (common and preferred stock) of Marcor, Inc., ("Marcor").*fn1 Prior to the offer, Marcor common stock was trading at about $27.00 per share. Mobil proposed to purchase 17,250,000 shares at $35.00 per share, a healthy premium over the market price. Mobil agreed in the tender offer that if more than that number of shares were tendered and if Mobil decided to accept less than all the tendered shares, Mobil was required to accept properly tendered shares pro rata as among all properly tendering shareholders. This result is mandated by section 14(d)(6) of the Williams Act. See 15 U.S.C. § 78n(d)(6) and Paragraph 1(b) of the Tender Offer. Over 33,000,000 shares ultimately were tendered, representing substantially all of the outstanding available shares of Marcor.
Paragraph 4 of the Tender Offer provided three alternative methods of tendering shares. The first method was by actual delivery of the share certificates to the named Depositary or one of its forwarding agents together with a Letter of Transmittal. This alternative was open to all shareholders and did not require the intervention of a bank or broker. Approximately 86% of the shares were tendered by this method.
The two other means of tendering did not require the immediate delivery of the certificates and were only available to "eligible institutions," which included commercial banks and trust companies, members of national securities exchanges and members of the National Association of Securities Dealers. The delayed delivery option in Paragraph 4 at issue here provided:
Tenders may be made without the concurrent deposit of stock certificates if such tenders are made by or through a firm which is a member of a registered national securities exchange or of the NASD or by or through a commercial bank or trust company in the United States ("Eligible Institution"). In such cases a properly completed and executed Letter of Transmittal must be received by the Depositary or a Forwarding Agent prior to the expiration of this Offer and the guarantee of delivery contained in the Letter of Transmittal must have been executed by an Eligible Institution. Payment for Shares so tendered and purchased will be made only against the deposit with the Depositary of the certificates and any other documents required by the Letter of Transmittal no later than eight business days after public announcement by Mobil that a specified number of Shares will be purchased under this Offer if all of the terms and conditions of this Offer are satisfied.
The plaintiffs, the Indiana National Bank ("INB") and Merchants National Bank & Trust Company of Indianapolis ("Merchants") are national commercial banks located in Indianapolis, Indiana, that attempted to tender Marcor securities on behalf of their customers and trust accounts. Plaintiffs were eligible to and did exercise the delayed delivery option contained in the Mobil offer and set out above.*fn2 Plaintiffs fulfilled the first portion of the delayed delivery option by forwarding to the Depositary properly completed Letters of Transmittal and properly executed delivery guarantees during the offer period (Findings of Fact 6, 7). The dispute arises over the second portion of this option which required plaintiffs to deliver the stock certificates in accordance with their guarantees by the close of the eighth business day after Mobil publicly announced the number of shares it would purchase.
Plaintiffs contended that Mobil failed to make the required public announcement. They also maintained that the tender offer omits material information concerning how the "public announcement" would be made in violation of section 14(e) of the Securities and Exchange Act of 1934 ("Act").*fn3 Finally, they contended that by virtue of their completion of the first phase of the delayed delivery option they are entitled to have their tendered securities purchased pro rata under the provisions of section 14(d)(6) of the Act.*fn4
Mobil responded that the public announcement was properly made in the form of a press release to the Dow Jones Wire Service, Reuters Economic Services, Platts Oilgram, the Oil and Gas Journal, Petroleum Intelligence Weekly, and a press service which distributed it to the wire services, radio and television networks and major newspapers. Moreover, Mobil contended that neither provision of the Act applies to the instant controversy. Mobil also denied any breach of contract and raised several affirmative defenses.
The district court, after full trial, held in favor of Mobil and against the banks on all three counts of the ...