Whittaker Corp. v. Edgar

• Decision Date: 25 February 1982
• Docket Number: No. 82 CR 443.,82 CR 443.
• Citation: 535 F. Supp. 933
• Parties: WHITTAKER CORPORATION and BC Holdings, Inc., Plaintiffs, v. Jim EDGAR, Secretary of State of the State of Illinois; Brunswick Corporation; K. Brooks Abernathy; Jack F. Reichert; Sidney Davidson; John L. Hanigan; George D. Kennedy; Ian Macgregor; Charles P. Neidig; J. Donald Rauth; John T. Rettaliata; Pierre A. Rinfret; Edmund A. Stephan; and American Home Products Corporation, Defendants. BRUNSWICK CORPORATION and Jack L. Meyerhoff, Counterplaintiffs, v. WHITTAKER CORPORATION; BC Holdings, Inc.; Joseph F. Alibrandi; Harry S. Derbyshire; and Daniel J. Hofmann, Counterdefendants.
• Court: U.S. District Court — Northern District of Illinois

535 F. Supp. 933

WHITTAKER CORPORATION and BC Holdings, Inc., Plaintiffs, v. Jim EDGAR, Secretary of State of the State of Illinois; Brunswick Corporation; K. Brooks Abernathy; Jack F. Reichert; Sidney Davidson; John L. Hanigan; George D. Kennedy; Ian Macgregor; Charles P. Neidig; J. Donald Rauth; John T. Rettaliata; Pierre A. Rinfret; Edmund A. Stephan; and American Home Products Corporation, Defendants.

BRUNSWICK CORPORATION and Jack L. Meyerhoff, Counterplaintiffs, v. WHITTAKER CORPORATION; BC Holdings, Inc.; Joseph F. Alibrandi; Harry S. Derbyshire; and Daniel J. Hofmann, Counterdefendants.

No. 82 CR 443.

United States District Court, N. D. Illinois, E. D.

February 25, 1982.

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Mayer, Brown & Platt, Chicago, Ill., for plaintiffs.

Jenner & Block, Chicago, Ill., Kramer, Levin, Nessen, Kamin & Soll, New York City, Alan D. Jacobson, Los Angeles, Cal., for defendants.

MEMORANDUM OPINION

FLAUM, District Judge:

This matter comes before the court on Whittaker Corporation's ("Whittaker") motion for a preliminary injunction to enjoin Brunswick Corporation ("Brunswick") from disposing of the stock or assets of Brunswick's subsidiary Sherwood Medical Industries, Inc. ("Sherwood") and Brunswick's motion for a preliminary injunction to enjoin Whittaker from proceeding with a tender offer for shares of Brunswick. The court has held a hearing in open court from February 8, 1982 to February 22, 1982, received into evidence extensive documents and deposition testimony, and considered hundreds of pages of memoranda submitted by the parties in support of and in opposition to the cross-motions for injunctive relief. Based upon all of the evidence submitted to the court and for the reasons set forth below, the court denies Whittaker's motion for a preliminary injunction and denies Brunswick's motion for a preliminary injunction. Accordingly, the court enters the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52.

FINDINGS OF FACT

1. Plaintiff and counterdefendant Whittaker is a California corporation with its principal place of business in California. Whittaker is a diversified manufacturer and distributor of products in the fields of life sciences, metals, technology, marine, and chemicals.

2. Plaintiff and counterdefendant BC Holdings, Inc. ("BC Holdings") is a wholly-owned subsidiary of Whittaker which was incorporated in Delaware on January 21, 1982 for the purpose of making the tender offer for Brunswick shares.

3. Counterdefendant Joseph Alibrandi is the president and chief executive officer of Whittaker.

4. Counterdefendant Harry Derbyshire is the executive vice-president of Whittaker.

5. Counterdefendant Daniel Hofmann is a vice-president of Whittaker.

6. Defendant and counterplaintiff Brunswick is a Delaware corporation with its principal place of business in Illinois. Brunswick is a diversified manufacturer and distributor of products in the fields of energy, transportation, defense, aerospace, chemical processing, health care, and leisure.

7. Defendant and counterplaintiff Jack Meyerhoff ("Meyerhoff") is a Brunswick shareholder.

8. Defendant K. Brooks Abernathy ("Abernathy") is chairman of the board and chief executive officer of Brunswick.

9. Defendant Jack F. Reichert ("Reichert") is president and chief operating officer of Brunswick.

10. Defendants Abernathy, Reichert, Sidney Davidson, John Hanigan, George Kennedy, Ian MacGregor, Charles Neidig, Donald Rauth, John Rettaliata, Pierre Rinfret, and Edmund Stephan are directors of Brunswick.

11. Davidson, Hanigan, Kennedy, MacGregor, Neidig, Rauth, Rettaliata, Rinfret, and Stephan are independent directors of Brunswick. Stephan is a partner in the law firm of Mayer, Brown & Platt. Hanigan is a former officer of Brunswick.

12. Defendant Jim Edgar is the Secretary of State for the State of Illinois.

13. American Home Products Corporation ("American Home") is a Delaware corporation with its principal place of business in New York.

14. This court has subject matter jurisdiction over this cause of action pursuant to section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa (1980); section 16 of the Clayton Act, 15 U.S.C. § 26 (1980); 28 U.S.C. § 1331 (1980); 28 U.S.C. § 1337 (1980); and principles of pendent jurisdiction.

15. Venue is proper in this case under section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa (1980); section 12 of the Clayton Act, 15 U.S.C. § 22 (1980); and 28 U.S.C. § 1391(b), (c) (1980).

16. On January 26, 1982, Whittaker commenced a tender offer to purchase up to 10,400,000 shares of Brunswick common stock for $26.50 per share and up to $30,000,000.00 of Brunswick's 10% convertible subordinated debentures due in 2006 for $1,234.28 per $1,000.00 principal amount of debentures ("the original Whittaker offer"). Whittaker reserved the right to increase the number of Brunswick common shares sought in the tender offer to 12,600,000 and to increase the number of debentures sought in the tender offer to all outstanding 10% convertible subordinated debentures. Whittaker made the tender offer through an offer to purchase ("the offer"). Whittaker mailed the offer to holders of Brunswick common stock and 10% debentures.

17. Whittaker values the Sherwood portion of Brunswick at $350,000,000.00. The value of Whittaker's offer for all of Brunswick is approximately $685,000,000.00.

18. Under the terms of the original Whittaker offer, the tender offer was to expire on February 23, 1982 unless extended by Whittaker. The withdrawal period was to expire on February 16, 1982 and the proration period was to expire on February 4, 1982. If more than 10,400,000 common shares of Brunswick were tendered as of the proration date of February 4, 1982 and not subsequently withdrawn, Whittaker was to purchase shares on a pro rata basis according to the number of shares tendered by each shareholder. Shares tendered after the proration date would not be purchased in the Whittaker offer. If more than $30,000,000.00 principal amount of debentures were tendered prior to the proration date and not withdrawn, Whittaker would purchase debentures on a pro rata basis according to the principal amount of debentures tendered by each holder as of the proration date. Debentures tendered after the proration date would not be purchased in the Whittaker offer. The original Whittaker offer was oversubscribed as of the proration date of February 4, 1982.

19. Under the terms of the offer, if Whittaker acquires all of the stock and debentures for which it has tendered, Whittaker will own approximately 49% of the outstanding common shares of Brunswick.¹ The tender offer states that, if Whittaker gains control of 49% of Brunswick's common shares, Whittaker intends to propose a merger between BC Holdings and Brunswick. Under the proposed merger, each Brunswick shareholder other than Whittaker² would exchange each share of Brunswick common stock for three-tenths of one share of a new Whittaker preferred stock which Whittaker contemplated that it would issue to Brunswick shareholders upon such a merger. The new Whittaker preferred stock would have a liquidation preference of $100.00 per share and would have been redeemable at Whittaker's option, at $100.00 per share or $30.00 per share of Brunswick stock exchanged in the merger following the third anniversary of issuance or at any time thereafter. Whittaker stated in the offer that the value of the new preferred stock exchanged for each share of Brunswick stock in the merger would be "more or less than $26.50."

20. While the original offer states that the value of the new preferred stock exchanged for each share of Brunswick in the proposed merger may be "more or less than $26,50," the value of the new preferred stock in Whittaker's view was approximately $24.00.

21. Whittaker's business operations with the Government of Saudi Arabia ("Saudi Arabia") generated approximately 46% of Whittaker's 1981 pre-tax profits.

22. In the original Whittaker offer, Whittaker states that it "administers health care programs for the Governments of Saudi Arabia and Abu Dhabi." The offer also states that "Whittaker's Saudi Arabian health care program, which commenced in the summer of 1974 and presently extends through August 1983 .... represents a significant portion of Whittaker's life sciences business and operating profits, and its loss would have a material adverse effect on Whittaker." The offer then refers the reader to the "Foreign Sales" subheading of the offer wherein Whittaker states that sales to Saudi Arabia included in the "Life Sciences" segment amounted to approximately $278,000,000.00 in fiscal 1981. Whittaker further states that approximately one-third of its sales are to customers outside the United States and that approximately 90% of foreign sales are accounted for by foreign operations. Whittaker's offer also states that such operations are "subject to certain special risks, including currency fluctuations, currency control regulations, settlement of contract disputes under foreign law, and the effect of international relations and the domestic affairs of foreign countries on business arrangements." The Whittaker offer further states that in 1980 Whittaker agreed with Khalid bin Abdullah bin Abdulrahman Al Saud ("Khalid"), the minority stockholder of Whittaker's Saudi Arabian subsidiary known as Whittaker Saudi Arabia Limited ("WSAL"), that Khalid's interest in Whittaker's future operations in Saudi Arabia in which he elects to participate, including a recent extension of the existing health care program, would be increased from 30% to 49%. The offer further states that, in "accordance with this agreement, Whittaker expects to sell shares representing 19% of the equity of the Saudi Arabian subsidiary to Khalid at book value during the second half of fiscal 1982." In appendix...