Nicholson File Company v. HK Porter Company, Civ. A. No. 4876.
| Decision Date | 13 April 1972 |
| Docket Number | Civ. A. No. 4876. |
| Citation | 341 F. Supp. 508 |
| Court | U.S. District Court — District of Rhode Island |
| Parties | NICHOLSON FILE COMPANY v. H. K. PORTER COMPANY, Inc., et al. |
COPYRIGHT MATERIAL OMITTED
Matthew W. Goring, George M. Vetter, Jr., Stephen J. Carlotti, of Hinckley, Allen, Salisbury & Parsons, Providence, R. I., for plaintiff.
Carl F. Barger, C. Arthur Wilson, Jr., of Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., and Peter L. Kennedy and Edward L. Maggiacomo, of Adler, Pollock & Sheehan, Providence, R. I., for defendants.
The plaintiff seeks preliminary injunctive relief praying that the defendants and each of them be enjoined from acquiring or attempting to acquire any shares of the plaintiff's stock; soliciting from any of its stockholders any proxy and from voting any stock now held, acquired or tendered, citing as reasons therefore violations of Section 13(d) (1) and Rule 10b-5 (adopted pursuant to Section 10) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(d) and 78j.
An evidentiary hearing was held commencing on April 10, and concluding on April 12, 1972.
Jurisdiction is founded on Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa.
Anticipating an immediate appeal from this court's holding and a request by the unsuccessful litigants for an emergency hearing by the appellate court I will recite the findings of fact in somewhat of a detailed fashion.
The plaintiff, ("Nicholson") a duly incorporated Rhode Island company with its principal place of business within the jurisdiction of this Court has issued an outstanding 584,108 shares of one dollar par value stock and is engaged in the manufacture of files, saws and allied implements.
The defendant, H. K. Porter Company, Inc. ("Porter") a Delaware corporation is a conglomerate which prior to 1972 was engaged in the saw business through its Disston Division, so-called, and as of the date of this action, holds 32,406 shares of the plaintiff's stock. The other defendants are not entirely strange to "Porter" since Thomas M. Evans is chairman of its Board of Directors as well as President of Evans & Company, Inc., a New York stockbrokerage house which is the owner of 2,000 shares of the plaintiff's stock; while the defendant Reb & Co., a partnership, which owns 11,400 shares of the plaintiff's stock has Mr. J. S. Morrow, President of "Porter", as one of its partners.
Mr. Evans owns 51% or more of the "Porter" stock which company is also the beneficial owner of the 11,400 Reb & Co. shares while Mr. Evans personally is the beneficial owner of the Evans & Company, Inc. 2,000 shares.
On March 3, 1970 Mr. Evans caused to be incorporated in the State of Delaware a company called Industrial Saw Company which name on December 29, 1971 was changed to Disston, Inc. and on or about January 1, 1972 transferred to Disston, Inc. all of the assets in the Disston Division of "Porter" in return for its common stock.
On February 2, 1972 "Porter" filed with the Securities and Exchange Commission a registration statement (amended February 22, 1972) stating that the offering of Disston, Inc. stock was to afford "Porter" an opportunity to ".. utilize the proceeds of the offering in a variety of ways including ... the possible future acquisition of other businesses by Porter."
On February 25, 1972 "Porter" held a Board of Directors meeting and as it might pertain to this case I find it was voted that on the assumption the sale and public offering of the Disston, Inc. stock was successful certain proposals with respect to the reduction of the Company's debt and the development of plans for improvement in existing facilities be implemented and that the proposal "... for making a tender offer for outstanding stock of Nicholson File Company be tabled until the various obstacles to such action were resolved, and that if and when these obstacles were removed, a special meeting of the Directors could be called, if necessary, for the purpose of further considering this matter."
The sale and public offering of all the Disston, Inc. stock was accomplished on March 2, 1972 and on March 3, 1972 "Porter" held a special meeting of its Board of Directors at which it was voted to "execute, deliver and promulgate" to the common shareholders of Nicholson File Company a "Request For Tenders for all or any part of the outstanding shares of Common Stock of the said Nicholson File Company ..." Pursuant to this Board's resolution a statement of information, Schedule 13D, was filed by "Porter" with the SEC on March 6, 1972 and copies delivered to Nicholson on March 6, 1972, the day on which the "Tender Offer," (expiring April 4, 1972) was mailed to "Nicholson" stockholders. This "Tender Offer" advised that stock deposited in the mail prior to 4:00 p. m. Eastern Standard Time as of April 4, 1972 would be deemed to have been received by the Depository as of said date.
From this point on there was a veritable flood of correspondence to the stockholders and in an attempt to channel this deluge in some meaningful way I will list these seriatim by dates:
At this point I add, however, that this court entered a temporary restraining order against "Porter" on March 30, 1972 effective as of 10:00 a. m. March 31, 1972 and scheduled a hearing for April 10, 1972; the expiration date of the tender offer was extended to noon April 14, 1972 by letter of April 4, 1972 from "Porter" to the stockholders.
Letters from "Nicholson" to the stockholders
March 22, 1972 — advised stockholders "Nicholson" had been contacted by a number of substantial corporations desirous of discussing mergers; that it "stands to reason that if Porter is willing to pay $42 per share for your stock it must see a value higher than its offer ...."; that the price offered was substantially less than book value — that it was less than the market high as "recently as 1968."
Other portions of the letter strongly discourage acceptance of the "Porter" offer.
March 28, 1972—Advised the stockholders that "Walco National Corporation yesterday proposed a merger between Walco and Nicholson on the basis of 1 2/3 shares of Walco common stock for each share of Nicholson common stock"; that the "Nicholson" Board had met and endorsed the preliminary merger as a better alternative than the "Porter" tender offer and that, "The Board is therefore recommending that Nicholson stockholders not turn in their shares to Porter."; the letter then went on to recite the benefits of Walco over Porter.
March 29, 1972—Announced the signing of a merger agreement between Walco and "Nicholson."; that "Your Directors have endorsed the Walco merger as a better alternative to the Porter tender offer and have stated that none of them intends to tender a single share to Porter."; that no member of the Nicholson family and their relatives intended to tender any of their 86,000 shares and, "We hope you will follow our lead."; that Nicholson had filed a suit in the Federal District Court believing and alleging that "Porter" had committed serious violations of the federal securities laws in connection with its tender offer; other portions of the letter strongly recommend against acceptance of the Porter offer.
March 31, 1972 — This correspondence was headed "Porter Tender Offer Blocked."; — it recites that this court had entered a restraining offer and emphasized it prohibited "Porter" from purchasing shares and that
April 3, 1972 — Announcing the receipt of a merger proposal from VLN Corporation and in part what it offered; that Walco was in the process of making a revised offer; that VLN in 1971 had sales of $100 million dollars.
April 3, 1972 — Concerned the VLN merger proposals and that "Porter's latest letter to Nicholson stockholders, mailed after Nicholson brought its law suit, permits any stockholder who turned his stock in to Porter between March 25 and April 3 to immediately withdraw his stock."; With the new merger proposals Mr. Williams (President of "Nicholson") expected Porter to be flooded with demands to return tendered shares.
April 5, 1972 — stated that stockholders representing 14,000 shares advised they were demanding the return of their stock from Porter and in addition stockholders of 11,000 shares indicated they were considering the same action; and ; that on the basis of a conversation ratio
April 4, 1972 — Advising that the First Circuit Court of Appeals in Boston declined to rule on the H. K. Porter Company motion to stay the temporary restraining order.
Letters from "Porter" to the shareholders
March 24, 1972 — states in part:
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