Crouse-Hinds Co. v. Internorth, Inc.

518 F. Supp. 416, 1980 U.S. Dist. LEXIS 9595
District Court, N.D. New York·Decided December 5, 1980·No. 80-CV-772·Published·Cited by 7 cases

Opinion

MUNSON, Chief Judge.

MEMORANDUM-DECISION AND ORDER

I.

Presently before the Court are two motions made by plaintiff Crouse-Hinds Company which are aimed at blocking a take over attempt by defendants InterNorth, Inc., and I N Holdings, Inc. [hereinafter referred to jointly as InterNorth]. While both motions seek injunctive relief, they differ as to the grounds upon which such relief should be granted. The first motion asks that the Court declare InterNorth’s tender offer null and void because it violates the summary advertisement and “twenty day” rules of the Securities Exchange Act, 17 C.F.R. §§ 240.14d-6(a)(2), and 240.14e-l(a). Crouse-Hinds’ second motion for injunctive relief is based on other alleged violations of the securities laws— principally disclosure requirements- — and the antitrust laws. Plaintiff has requested the Court to first resolve the summary advertisement and “twenty day” rule issue, since a favorable ruling for Crouse-Hinds would be dispositive of its request for injunctive relief. Upon examining the basis of these arguments, however, the Court is *419 not convinced of their merits. A more detailed analysis of these claims will be found in the securities portion of this opinion. 1 The Court will begin its consideration of plaintiff’s entitlement to injunctive relief with an assessment of its antitrust allegations. Yet before doing so, a brief background of the events leading up to this dispute will prove useful.

II.

To fully appreciate the factual circumstances surrounding the instant motions, intimate familiarity is assumed with this Court’s related Memorandum-Decision and Order, dated October 25, 1980. By way of introduction to the matters at hand, the pertinent facts are as follows. On September 12,1980, InterNorth publicly announced a tender offer for 6,600,000 shares of Crouse-Hinds’ common stock, or approximately 54% of the total shares outstanding, at a price of $40 a share. InterNorth planned to follow this offer with a “second step” merger in which the remaining Crouse-Hinds’ shareholders would be issued InterNorth preferred stock in exchange for their Crouse-Hinds’ common stock. 2

News of InterNorth’s tender offer was not favorably received by Crouse-Hinds’ board of directors, who had, only three days before, announced a merger agreement with the Belden Corporation. The reasons for the Crouse-Hinds board’s unreceptive attitude seemed to stem primarily from its belief that the InterNorth offering price was inadequate, and that the central condition of the tender offer — the termination or shareholder rejection of the Crouse-Hinds/Belden merger agreement— worked a disservice to the interests of Crouse-Hinds because it put the success of the proposed Belden merger in doubt. 3 Consequently, on September 16, 1980, the board of directors of Crouse-Hinds recommended that its shareholders reject Inter-North’s offer.

In the meantime, Belden moved to put an end to what it considered to be a threat to its interests by filing a lawsuit against InterNorth in Illinois Circuit Court on September 15, 1980. Belden asserted that InterNorth’s offer tortiously interfered with the Crouse-Hinds/Belden merger and it sought to enjoin InterNorth’s tender offer for Crouse-Hinds stock. A preliminary injunction was ultimately granted by the Circuit Court on October 1, 1980. It enjoined InterNorth from pursing its tender offer, pending a vote by Crouse-Hinds and Belden shareholders on their proposed merger agreement, or until December 1, 1980, whichever was earlier. 4 Subsequently, on November 10, 1980, an Illinois Appellate Court vacated the injunction, and remanded the matter to the Circuit Court.

On September 22, 1980, Crouse-Hinds responded to the InterNorth tender offer with this lawsuit for injunctive relief, alleging that the InterNorth offer violated the federal securities laws. Later by amendment to its complaint, Crouse-Hinds also asserts that, if consummated, an Inter-North/Crouse-Hinds merger would violate the antitrust laws. Crouse-Hinds promptly moved for injunctive relief, 5 and on October *420 7, 1980, this Court commenced an extensive hearing on this motion. 6 The hearing produced approximately one thousand pages of testimony, and a host of witnesses, exhibits, affidavits, and legal briefs.

While a hearing on plaintiff’s motion for a preliminary injunction was completed on October 31, 1980, events continued to unfold. On November 12, 1980, InterNorth announced an amended offer. One of the principal differences between the amended offer and the original was that InterNorth modified its stance on the Belden/CrouseHinds merger. In its amended offer, Inter-North retained its original $40 offering price, but it stated that this price was conditional on the shareholders’ rejection of the Belden/Crouse-Hinds merger. However, InterNorth stated further that, should that merger be approved by the shareholders of those companies, then InterNorth was prepared to pay $37 for each share of CrouseHinds stock. The legality of the terms of the amended offer was the subject of additional briefing and affidavits of the parties. In addition, on November 18, 1980, the Court heard oral arguments on this subject. The Court will begin its examination of the issues raised by plaintiff, by first considering its antitrust claims.

III.

The thrust of plaintiff’s antitrust claims is that a Crouse-Hinds/InterNorth merger will cause a drastic alteration in the market structure for certain Crouse-Hinds products, and thereby substantially lessen competition in those markets in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Crouse-Hinds manufactures electrical, construction and lighting equipment, as well as aviation lighting, and traffic control signal equipment. InterNorth is a major energy company which is engaged in acquiring, transporting, and marketing, of natural gas and liquid fuels; the processing and production of petrochemicals; natural gas and oil exploration; and coal mining. According to Crouse-Hinds, InterNorth intends to use its “power” as both a purchaser of goods, and as a monopolist in the transportation and sale of natural gas, to coerce sales of Crouse-Hinds’ products, and foreclose competition.

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Crouse-Hinds Co. v. Internorth, Inc., 518 F. Supp. 416, 1980 U.S. Dist. LEXIS 9595 (N.D.N.Y. 1980).

518 F. Supp. 416 (Crouse-Hinds Co. v. Internorth, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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