Consolidated Gold Fields v. Anglo American Corp.

• Decision Date: 24 April 1989
• Docket Number: No. 88 Civ. 7191 (MBM).,88 Civ. 7191 (MBM).
• Citation: 713 F. Supp. 1457
• Parties: CONSOLIDATED GOLD FIELDS, PLC, Newmont Mining Corporation, Newmont Gold Company, and Gold Fields Mining Corporation, Plaintiffs, v. ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LIMITED, De Beers Consolidated Mines Limited, and Minorco, S.A., Defendants.
• Court: U.S. District Court — Southern District of New York

713 F. Supp. 1457

CONSOLIDATED GOLD FIELDS, PLC, Newmont Mining Corporation, Newmont Gold Company, and Gold Fields Mining Corporation, Plaintiffs, v. ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LIMITED, De Beers Consolidated Mines Limited, and Minorco, S.A., Defendants.

No. 88 Civ. 7191 (MBM).

United States District Court, S.D. New York.

April 17, 1989.

On Motion for Reargument April 24, 1989.

COPYRIGHT MATERIAL OMITTED

Lewis A. Kaplan, Lewis R. Clayton, Charles R. Chase, Daniel G. Cort, Robert Epstein, Steven Fasman, Bruce Handler, Elizabeth J. Holland, Doreen Le Pichon and Alexander M. Vasilescu, Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for plaintiffs Consol. Gold Fields, PLC and Gold Fields Mining Corp.

Richard J. Holwell, Ronald W. Davis and James Perkins, White & Case, New York City, for plaintiffs Newmont Mining Corp. and Newmont Gold Co.

Jeremy G. Epstein, Rachel E. Deming, Kenneth A. Freeling, Edward Han, Jennifer S. Bard, Alan S. Goudiss, Idelle R. Abrams and Karen S. Hart, Shearman & Sterling, New York City, for defendant Minorco, S.A.

OPINION AND ORDER

MUKASEY, District Judge.

Defendant Minorco, S.A., has moved pursuant to Fed.R.Civ.P. 60(b)(5) to modify the preliminary injunction that prevents it from acquiring shares in Consolidated Gold Fields Ltd. ("Gold Fields") so it can proceed with the acquisition, while holding separate pending divestiture within one year Gold Fields' minority shareholdings in Gold Fields of South Africa ("GFSA"), Newmont Mining Corp. ("Newmont") and Renison Goldfields Ltd. ("Renison") In a memorandum and order dated March 24, 1989,¹ I found that the Second Circuit's decision, Consolidated Gold Fields PLC v. Anglo American Corp. of South Africa Ltd., 871 F.2d 252 (2d Cir.1989), affirming this court's preliminary injunction on antitrust grounds, 698 F.Supp. 487, did not foreclose consideration of a less drastic remedy such as a hold separate order. I instructed the parties to brief this question. Because the Second Circuit also found subject matter jurisdiction over the securities claims and remanded them, I asked the parties also to brief the propriety of issuing an injunction ordering corrective disclosure of misleading statements or omissions in Minorco's tendering documents. As explained more fully below, I find that a hold separate order would not be appropriate in this case. I find also that plaintiffs' allegations of securities violations are without merit and, accordingly, refuse to order any corrective disclosure.

I. Background

The facts underlying this hotly fought litigation are reported in both my October opinion, 698 F.Supp. at 490-93, and the Second Circuit's opinion, at 255-56. Therefore, I need only sketch the pertinent facts. In October 1988, Minorco made its offer for 70% of Gold Fields' outstanding shares, having purchased approximately 30% some years earlier. Gold Fields promptly sued, seeking both injunctive relief under § 16 of the Clayton Act, 15 U.S.C. §§ 18, 26 (1982), and corrective disclosure for alleged misstatements and omissions in Minorco's offering documents pursuant to §§ 10(b) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78n(e) (1982), and S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5 (1988), promulgated thereunder.

Gold Fields, a British corporation engaged primarily in the exploration, mining, and sale of natural resources, most notably gold, wholly owns Gold Fields Mining Corporation ("GFMC"), a Delaware corporation headquartered in New York with gold mining operations in California and Nevada. Gold Fields also has a 49.3% stake in Newmont, a Delaware corporation headquartered in New York. Newmont, in turn, owns 90% of Newmont Gold, the largest gold producer in the United States. Gold Fields owns as well a 48% interest in Renison, an Australian gold mining corporation, and 38% of Gold Fields of South Africa Ltd., the second largest gold producer in South Africa. Gold Fields and its associated companies account for 12% of the non-communist world's gold production, making it the second largest gold producer in that part of the world.

Minorco, a Luxembourg corporation, is allegedly controlled by codefendants Anglo American Corp. ("Anglo"), a South African corporation, which owns 39.1% of Minorco, and De Beers Consolidated Mines Ltd. ("De Beers"), also a South African corporation, which owns 21% of Minorco. The Oppenheimer family of South Africa owns 7% of Minorco. Considered together, the Anglo group is the largest producer of gold in the non-communist world, accounting for 20.3% of such gold production.

This court enjoined the takeover because the resulting combination would control 32.3% of the non-communist world gold market. The tender offer was also stayed initially by the British Monopolies and Mergers Commission. On January 23, 1989, that Commission determined that Minorco's bid for Gold Fields would not harm the public interest, and lifted its stay. Accordingly, on February 20, 1989, Minorco renewed its offer for Gold Fields' shares, conditioned on the modification or vacatur of this court's injunction. That tender offer expires on April 26 unless Minorco can acquire at least 50% of Gold Fields' shares. Minorco has now asked the court to consider on an expedited basis a less drastic remedy in order to let the acquisition proceed. Minorco proposes a hold separate order for Gold Fields' minority stock interests in GFSA, Newmont and Renison, which together account for 96% of Gold Fields' gold production in 1987.² (McAnneny Aff. at ¶ 3; McAnneny Reply Aff. at ¶ 10) This hold separate order would prevent Minorco from exercising any control over those companies. Indeed, Minorco would be required to vote the shares during this interim period strictly in proportion to the votes of the other shareholders. Within a year, Minorco would have to sell these minority interests to entities unaffiliated with Anglo, De Beers or the Oppenheimer family. To ensure compliance, Minorco proposes that the court appoint a special master or trustee with broad supervisory and investigative powers to determine that Minorco is not interfering with the entities being held separate and that all sales are conducted in accordance with the order. Minorco also offers to put up a substantial bond, $100 million, to ensure compliance with its proposed order.

In support of its request, Minorco notes that, since this matter was first argued to this court, four government agencies have examined the antitrust claim made here and have determined that this takeover will not impair competition. The United States Department of Justice conducted a pre-acquisition review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and, after 30 days of scrutiny, did not request further information before discontinuing its investigation. The Committee on Foreign Investment in the United States, whose members include the heads of five cabinet departments, reviewed this transaction for five months and also took no steps to block it. The British Monopolies and Mergers Commission, which conducted a three-month study, concluded that Minorco's acquisition of Gold Fields would not diminish competition in the world gold market. Finally, the Commission for the European Communities, which has antitrust jurisdiction over all of the Common Market countries, reached a similar conclusion after a four-month study.

Minorco also notes the adverse consequences of injunctive relief for Gold Fields' shareholders. Approximately 15% of the market value of Gold Fields, nearly three-quarters of a billion dollars, was wiped out in one day's trading on the London Stock Exchange on March 23, the day following the Court of Appeals' decision affirming the injunction. Although plaintiffs note that Gold Fields' stock has since risen in price, there is no question that, if this injunction is continued, Gold Fields' shares will once again plummet.

II. Propriety of a Hold Separate Order

Both sides vigorously dispute the applicable burden of proof in determining whether a hold separate order is warranted here. Minorco, citing two cases, FTC v. Dean Foods Co., 384 U.S. 597, 86 S.Ct. 1738, 16 L.Ed.2d 802 (1966) and FTC v. PepsiCo, Inc., 477 F.2d 24 (2d Cir.1973), argues that a preliminary injunction is appropriate only when it has been shown that "an effective remedial order, once the merger is implemented, would otherwise be virtually impossible, thus rendering the enforcement of any final decree of divestiture futile." Dean Foods, 384 U.S. at 605, 86 S.Ct. at 1743; see also PepsiCo, 477 F.2d at 28-29 (applying virtual impossibility test). Thus, Minorco contends, this court is under an affirmative obligation to consider less extreme relief pending a trial on the merits.

Plaintiffs correctly note that Minorco made this same argument to the Court of Appeals when it claimed this court erred in refusing to consider remedies less drastic than a preliminary injunction. In affirming this court's issuance of a preliminary injunction, the Circuit Court expressly rejected this contention, noting that "a preliminary injunction is ... the remedy of choice for preventing an unlawful merger." At 261. Moreover, Dean Foods and PepsiCo are inapplicable to the situation at hand. The issue in Dean Foods was whether the Federal Trade Commission could obtain a preliminary injunction in a merger case despite lack of statutory authority. The Supreme Court found authority for such injunctions in the All Writs Act, 28 U.S.C. § 1651; the statement quoted above reflected a view that such authority must be used sparingly. That holding was applied in PepsiCo. By contrast, § 16 expressly authorizes private plaintiffs to seek injunctions.

Plaintiffs brandish the Second Circuit's statement that an injunction is "the remedy of choice" as evidence, not only that the Circuit Court found consideration of less drastic remedies not mandatory, but also that the Court meant to foreclose the...