PIPER v. CHRIS-CRAFT INDUS., INC.

430 U.S. 1 (1977)

Mr. Chief Justice BURGER delivered the opinion of the Court.

III

The Williams Act

We turn first to an examination of the Williams Act, which was adopted in 1968 in response to the growing use of cash tender offers as a means for achieving corporate takeovers. Prior to the 1960's, corporate takeover attempts had typically involved either proxy solicitations, regulated under Sec. 14 of the Securities Exchange Act, 15 U.S.C. Sec. 78n, or exchange offers of securities, subject to the registration requirements of the 1933 Act. Sec. 77e. The proliferation of cash tender offers, in which publicized requests are made and intensive campaigns conducted for tenders of shares of stock at a fixed price, removed a substantial number of corporate control contests from the reach of existing disclosure requirements of the federal securities laws. See generally S.Rep.No.550, 90th Cong., 1st Sess., 2-4 (1967) (hereinafter Senate Report); H.R.Rep.No.1711, 90th Cong., 2d Sess., 2-4 (1968) (hereinafter House Report); U.S.Code Cong. & Admin.News 1968, p. 2811.

To remedy this gap in federal regulation, Senator Harrison Williams introduced a bill in October 1965 to subject tender offerors to advance disclosure requirements. The original proposal, S. 2732, evolved over the next two years in response to positions expressed by the SEC and other interested parties from private industry and the New York Stock Exchange. 113 Cong.Rec. 854 (1967) (remarks of Sen. Williams). As subsequently enacted, the legislation requires takeover bidders to file a statement with the Commission indicating, among other things, the "background and identity" of the offeror, the source and amount of funds or other consideration to be used in making the purchases, the extent of the offeror's holdings in the target corporation, and the offeror's plans with respect to the target corporation's business or corporate structure. 15 U.S.C. Sec. 78m(d)(1).

In addition to disclosure requirements, which protect all target shareholders, the Williams Act provides other benefits for target shareholders who elect to tender their stock. First, stockholders who accept the tender offer are given the right to withdraw their shares during the first seven days of the tender offer and at any time after 60 days from the commencement of the offer. Sec. 78n(d)(5). Second, where the tender offer is for less than all outstanding shares and more than the requested number of shares are tendered, the Act requires that the tendered securities be taken up pro rata by the offeror during the first 10 days of the offer. Sec. 78n(d)(6). This provision, according to Senator Williams, was specifically designed to reduce pressures on target shareholders to deposit their shares hastily when the takeover bidder makes its tender offer on a first-come, first-served basis. 113 Cong.Rec. 856 (1967). Finally, the Act provides that if, during the course of the offer, the amount paid for the target shares is increased, all tendering shareholders are to receive the additional consideration, even if they tendered their stock before the price increase was announced. Sec. 78n(d)(7). See generally 1 A. Bromberg, Securities Law: Fraud Sec. 6.3(551), p. 120.2 (1975).

Besides requiring disclosure and providing specific benefits for tendering shareholders, the Williams Act also contains a broad antifraud prohibition, which is the basis of Chris-Craft's claim. Section 14(e) of the Securities Exchange Act, as added by Sec. 3 of the Williams Act, 82 Stat. 457, 15 U.S.C. Sec. 78n(e), provides:

"It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation."

This provision was expressly directed at the conduct of a broad range of persons, including those engaged in making or opposing tender offers or otherwise seeking to influence the decision of investors or the outcome of the tender offer. Senate Report 11.