Glazer v. Formica Corp., 1292

Citation964 F.2d 149
Decision Date18 May 1992
Docket NumberNo. 1292,D,1292
PartiesFed. Sec. L. Rep. P 96,804 Malcolm I. GLAZER, Farmington Mobile Home Park, Inc., Fabri Development Corp., Valley-Ho Mobile Home Park, Inc., Lakeview Mobile Home Park, Inc., Avram Glazer, Bryan Glazer, Darcie Glazer, Edward Glazer, Joel Glazer, Kevin Glazer, Plaintiffs-Appellants, v. FORMICA CORPORATION, Vincent P. Langone, Defendants-Appellees. ocket 91-9298.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

William G. Bauer, Rochester, N.Y. (Gordon E. Forth, Woods, Oviatt, Gilman, Sturman & Clarke, Rochester, N.Y., on the brief), for plaintiffs-appellants.

Laurence A. Silverman, New York City (Robert A. Alessi, Silda Palerm, Cahill Gordon & Reindel, New York City, on the brief), for defendants-appellees.

Before KEARSE and MAHONEY, Circuit Judges, and RESTANI, Circuit Judge *.

KEARSE, Circuit Judge:

Plaintiffs Malcolm I. Glazer, et al., appeal from a final judgment of the United States District Court for the Western District of New York, Michael A. Telesca, Chief Judge, dismissing their claims against defendants Formica Corporation ("Formica" or the "company"), et al., under § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1988), and Rule

                10b-5, promulgated thereunder, 17 C.F.R. § 240.10b-5 (1991), in connection with a management-led leveraged buyout ("LBO") of Formica in May 1989.   The district court granted summary judgment dismissing the amended complaint ("complaint") on the grounds that there was insufficient evidence that statements made by defendants were untrue or misleading or that any failure to disclose was material.   On appeal, plaintiffs principally challenge the court's ruling that certain of Formica's press releases were not untrue or misleading and contend that there were genuine issues of fact as to the materiality of the company's nondisclosures.   For the reasons below, we reject plaintiffs' contentions and affirm the judgment of the district court
                
I. BACKGROUND

Formica is a corporation that produces high-pressure decorative laminates and other surfacing products. At all pertinent times, defendant Vincent P. Langone was its president and chief executive officer. The plaintiffs (collectively "Glazers") are self-employed private investor Malcolm I. Glazer ("Malcolm"), six of his children, and four companies wholly owned by him. The present lawsuit arises out of overtures made by Glazers in 1988 for the purchase of Formica. Many of the events are not in dispute.

A. Glazers' Unsuccessful Proposal To Acquire Formica

On August 4, 1988, Glazers filed a Schedule 13D with the Securities and Exchange Commission to report their acquisition of 9.9% of Formica stock. The Schedule 13D stated that Glazers "may seek to acquire a controlling interest in [Formica's] Shares or obtain representation on [Formica's] Board of Directors." It also stated that Malcolm's wholly-owned First Allied Investors Corporation ("First Allied") would be the investment vehicle for Glazers' future Formica dealings. With the filing of Glazers' Schedule 13D, Malcolm issued a press release. On the following day, the price of Formica stock rose 2.375 points to close at $15.375.

On August 19, Formica's board met and discussed, inter alia, Glazers' Schedule 13D. After receiving a presentation from the company's investment bankers, the directors concluded that Glazers were not a serious potential suitor because they lacked the financial wherewithal to consummate an acquisition of Formica.

On September 29, after unsuccessful telephone attempts to arrange a meeting, Malcolm sent Langone a letter setting out an offer by First Allied to acquire Formica for $20 per share in a friendly transaction that would include unspecified "customary" provisions. The offer was conditioned on, inter alia, First Allied's obtaining the necessary financing. The letter did not describe what financing, if any, had already been secured.

On September 30, Formica issued two press releases (the "September Releases"). The first stated that the company had rejected Glazers' proposal:

Formica Rejects

Leveraged Acquisition Proposal

.... Formica Corporation ... announced that First Allied Investors Corporation has informed Formica that it is prepared to make an offer to acquire Formica at $20 per share, not all of which would be cash. The proposal is subject to various conditions including due diligence and First Allied's ability to obtain financing for the transaction. First Allied stated that its proposal assumes a friendly transaction endorsed by the Board of Directors of Formica.

Mr. Vincent P. Langone, President and Chief Executive Officer of Formica, stated that it is the position of Formica that it is in the best interests of the Company and its stockholders for Formica to continue as an independent public company and that First Allied has been so advised.

In August, 1988 a group including Mr. Malcolm I. Glazer, the President of First Allied, filed a Schedule 13-D stating that the group beneficially owned approximately 9.9% of the outstanding common stock of Formica.

The second September 30 release stated that though Formica believed it best to remain independent, it would consider any legitimate acquisition proposal:

....Formica Corp[.] will consider any legitimate proposal to acquire the company, a company official said.

"Any legitimate offer will have to be evaluated by our board of directors," said Charles A. Brooks, the company's chief financial officer. He said Formica believes the best thing for the company and its stockholders is to remain independent.

On September 30, Reuters described Formica's releases and financial industry reactions as follows:

Earlier today, Formica said it received and rejected a 20 dlrs per share offer to be acquired by [First Allied Investors Corp], saying it prefers to remain independent.

Later, traders said they expected another offer for Formica, even though the stock was trading below the offer price. "We're saying there's going to be a little bit higher offer," one trader said.

Traders said Formica's takeout value could be as high as 23 dlrs per share.

On October 1, "The Daily Telegraph," in an article entitled "Formica for sale," reported that Formica "put itself up for sale yesterday when, while rejecting a ... ($20 per share) bid from First Allied, an investment group, it said it would evaluate any legitimate offers." The article reported that arbitrageurs anticipated an eventual purchase price of about $23 per share.

On October 4, First Allied issued its own press release, quoting Malcolm as "not[ing] that Formica's refusal to participate in discussions regarding the [First Allied] proposal is totally contradictory to Formica's recent announcement that it will consider any legitimate proposal to acquire the company." On October 11, Malcolm called Langone to discuss the possibility of acquiring Formica, but he and his investment group soon abandoned their efforts and sold their stake in Formica.

In the wake of the September Releases, the closing price of Formica stock, which had been $13.25 on September 29, promptly rose some four points, to $17.125 on September 30 and $17.375 on the next trading day, October 3. Between September 30 and November 4, the closing prices of Formica stock fluctuated between $17.375 and $15.625 per share.

On November 4, Glazers arranged to sell all of their Formica holdings to Great American Realty, Inc. ("GAR") for $15.875 per share. In addition, GAR agreed to pay Glazers a premium if, before May 10, 1989, it either sold these holdings at a profit or purchased additional Formica stock at a higher price and gained a 15% or larger share of the company.

B. Formica's LBO Discussions

In the meantime, in August and September 1988, Langone considered acquisitions of and mergers with other manufacturing companies, and he received inquiries from three investment banks concerning possible acquisition scenarios. With respect to two of the latter inquiries, from The First Boston Corporation and Bass Group, respectively, the discussions were quickly discontinued. The third such inquiry, from Dillon Read & Co., Inc. ("Dillon Read" or "Dillon"), led to continued discussions that ripened into the eventual 1989 LBO agreement.

The Dillon courtship began on September 30, when, at the suggestion of one of Formica's outside directors, Dillon telephoned Langone to state that it had taken an initial look at Formica and to ask whether Langone would be interested in discussing the concept of an LBO. A meeting was arranged, and on October 4, Langone and Dillon met briefly to discuss the feasibility of an LBO. On or about October 18, they again met briefly, and Langone indicated his interest in further exploration. On October 22, members of Formica's management and Dillon held a substantive meeting to discuss the LBO possibility. Dillon indicated that, though it had the financial ability to effect a buyout, it would have to do substantial due diligence before even drafting a proposal. Thereafter, Formica began to furnish Dillon with financial information Eventually, an LBO tender offer closed on May 3, 1989, at a price of $19 per share. GAR did not tender its shares and hence did not pay Glazers any premium.

                in connection with the due diligence review.   In January 1989, Formica consulted its attorneys and investment bankers with respect to the Dillon negotiations.   On February 6, 1989, the Formica board of directors conditionally accepted a management-led proposal for an LBO at $18 per share
                
C. The Present Suit and the Decision Below

Glazers commenced the present action in May 1989 principally under Rule 10b-5, contending that defendants had intentionally withheld information about Formica's LBO plans in order to depress the price of Formica's stock and to deter potential acquirers. They asserted that as of September 30, Formica considered itself an acquisition candidate, and that...

To continue reading

Request your trial
195 cases
  • In Re Synchronoss Securities Litigation.
    • United States
    • U.S. District Court — District of New Jersey
    • April 7, 2010
    ...or [there was] an inaccurate, incomplete or misleading disclosure [requiring a corrective statement]. See Glazer v. Formica Corp., 964 F.2d 149, 157 (2d Cir.1992); Backman v. Polaroid Corp., 910 F.2d 10, 12 (1st Cir.1990) en banc ); General Motors Class E Stock Buyout Sec. Litig., 694 F.Sup......
  • In re Intelligroup Securities Litigation
    • United States
    • U.S. District Court — District of New Jersey
    • November 13, 2007
    ...or [there was] an inaccurate, incomplete or misleading prior disclosure [requiring a corrective statement]. See Glazer v. Formica Corp., 964 F.2d 149, 157 (2d Cir. 1992); Backman v. Polaroid Corp., 910 F.2d 10, 12 (1st Cir.1990) (en banc); General Motors Class E Stock Buyout Sec. Litig., 69......
  • Algie v. RCA Global Communications, Inc.
    • United States
    • U.S. District Court — Southern District of New York
    • April 12, 1994
    ...v. Jacoby, 981 F.2d 1372, 1379 (2d Cir.1992), cert. denied, ___ U.S. ___, 113 S.Ct. 2338, 124 L.Ed.2d 249 (1993); Glazer v. Formica Co., 964 F.2d 149, 154 (2d Cir.1992); Aldrich v. Randolph Cent. School Dist., 963 F.2d 520, 523 (2d Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 440, 121 L.Ed.......
  • Weiner v. Quaker Oats Co., Civil Action No. 94-5417 (AJL).
    • United States
    • U.S. District Court — District of New Jersey
    • May 23, 1996
    ...keep negotiations concerning an acquisition confidential "to avoid a `bidding war' over the target"); see, e.g., Glazer v. Formica Corp., 964 F.2d 149, 155-57 (2d Cir.1992) ("we agree that the mere fact that exploration of merger or LBO possibilities may have reached a stage where that info......
  • Request a trial to view additional results
1 firm's commentaries

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT