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Published online by Cambridge University Press: 27 February 2017
Minorco, S.A., a Luxembourg mining company allegedly controlled by South African interests, commenced a tender offer for Consolidated Gold Fields, PLC (Gold Fields), a British mining company. Gold Fields, together with its partially owned American subsidiary, Newmont Mining Corp. (Newmont), filed suit in U.S. federal district court to enjoin the tender offer. The district court held that Newmont, the affected American subsidiary, had standing to raise an antitrust claim and issued a preliminary injunction restraining the tender offer. The district court dismissed a claim based on alleged violation of U.S. securities laws for lack of subject matter jurisdiction and held that Gold Fields, as the target company, did not itself have standing to raise an antitrust claim. On appeal, the Court of Appeals for the Second Circuit (per Newman, J.) reversed in part and affirmed in part, holding that: (1) Newmont had standing under the U.S. antitrust laws to object to the tender offer; (2) Gold Fields also had antitrust standing (by 2-1); and (3) the U.S. courts did have subject matter jurisdiction over Gold Fields’s U.S. securities law claims. Accordingly, the court of appeals upheld the injunction and returned the case to the lower court for further proceedings. On remand, the district court found that inasmuch as Gold Fields had not demonstrated a likelihood that its U.S. securities law claims would be successful on the merits, those claims did not merit an injunction. The court also ruled that Minorco had failed to demonstrate that its plan to hold separate and sell the assets of Gold Fields posing the possible antitrust problem would provide adequate protection, and so kept the injunction against the tender offer in place. As a result, even though a majority of the Gold Fields shareholders had tendered their shares to Minorco and both British and European Communities regulatory authorities had approved the transaction, Minorco was forced to abandon its tender offer.
1 698 F.Supp. 487 (S.D.N.Y. 1988).
2 Anglo American and De Beers were named as codefendants in the suit; however, they originally declined to appear and were found to have defaulted. Despite its assertion that the U.S. court lacked jurisdiction, Minorco did appear before the U.S. court to defend the case.
3 In less than an hour on Feb. 12, 1980, De Beers and Anglo American bought 16.4 million (29.4%) of the outstanding shares of Gold Fields—an event described by Gold Fields as “the Dawn Raid.” 713 F.Supp. 1457, 1469; 698 F.Supp. at 491.
4 Minorco argued that the relevant market for gold production includes Communist countries and scrap gold; obviously, this definition would have broadened the relevant market, and decreased the extent to which its tender offer would have concentrated control over that market. Gold Fields presented evidence, however, that these other sources of gold do not substantially vary their output with changes in market prices, and therefore should not be considered part of the relevant market, an analysis with which the courts agreed. 698 F.Supp. at 499-500.
5 United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 363–64 (1963). On the basis of the more sophisticated model for antitrust analysis developed in recent years by the U.S. Department of Justice, the Minorco tender offer would have been presumed anticompetitive if the relevant market for gold production were defined solely as Western producers, but would have passed muster if Eastern bloc and scrap gold producers were included.
6 To this end, Minorco mailed the tender offer documents to the British trustees of U.S. beneficial holders and to the British nominees, for the Gold Fields ADRs, aware that under British law these persons and institutions were required to forward the documents to the U.S. holders.
7 This fact was arguably material because Gold Fields shareholders would receive Minorco securities as part of their compensation in the tender offer, and because factors harming Minorco’s postmerger business prospects would tend to decrease the value of these securities. Gold Fields’s theory as to the inadequacies of Minorco’s disclosures evolved over the course of the case, but, as discussed below, was ultimately found to be without merit.
8 871 F.2d 252, 262–63 (citing Restatement (Third) of Foreign Relations Law of the United States §416 comment a and Reporters’ Note 2 (1987)). The court may also have been suggesting that the precautions taken by Minorco excused it from the detailed U.S. tender offer disclosure regulations promulgated pursuant to section 14(a) of the Securities Exchange Act of 1934. See Plessy Co. v. General Elec. Co., 628 F.Supp. 477 (D. Del. 1986) (holding that one British company need not make U.S. securities law disclosure filings in contest for control of a second British company).
9 871 F.2d at 262.
10 Id. at 263.
11 See, e.g., Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (“indirect purchasers” do not have standing to claim damages); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) (competitor does not have standing to enjoin merger of rivals).
12 The court of appeals adhered to its earlier precedent in Grumman Corp. v. LTV Corp., 665 F.2d 10 (2d Cir. 1981), and held that targets have standing to object to hostile takeover attempts.
13 This represents an exception to the general rule that competitors do not have standing under the U.S. antitrust laws to object to a merger. See, e.g., Cargill Inc. v. Montfort of Colo., Inc., 479 U.S. 104, 116(1986).
14 On May 9, 1989, the British Panel on Takeovers and Mergers ordered Gold Fields to drop its U.S. opposition to the Minorco offer since a majority of Gold Fields shareholders had by that date indicated that they favored the offer. Newmont remained, however, as a plaintiff opposing Minorco. See Wall St. J., May 10, 1989, at A15, col. 3.
15 The court held that while Gold Fields had shown that the tender offer, if successful, would unreasonably reduce competition, it had not made a particularly strong showing on this fact. The court also found that its shareholders would be significantly harmed by the drop in price of Gold Fields stock if the offer did not go forward.
16 Minorco had argued that the court should defer to the judgments of the British Monopolies and Mergers Commission and the Commission for the European Communities, which concluded that a successful tender offer would not reduce competition in the world gold market.
17 After the district court issued its order of Apr. 17, 1989, Anglo American and De Beers belatedly attempted to enter an appearance in the case so as to agree to abide by a hold-separate order binding Minorco. On Apr. 24, 1989, the court rejected this last-ditch effort to save Minorco’s tender offer. The court held that Anglo American and De Beers’s cooperative effort came too late, and in any case was inadequate, since the court would be unable to detect violations even if Anglo American and De Beers were bound by such a hold-separate order. After reargument on May 16, 1989, the court reiterated this conclusion. 713 F. Supp. at 1479.
18 See N.Y. Times, May 17, 1989, at D1, col. 3; Wall St. J., May 17,1989, at A5, col. 1. Under British law, unless a tender offer succeeds within a given amount of time, the offeror must drop the offer and cannot make another offer for that target for a year. Minorco has appealed the injunction against the tender offer a second time, so that it will be free to make a second offer after the British waiting period is over. See N.Y. Times, May 31, 1989, at D8, col. 3. Gold Fields, however, has since agreed to be acquired by Hanson Trust PLC for approximately U.S. $5.5 billion. See N.Y. Times, July 5, 1989, at D1, col. 6.
19 See Securities and Exchange Commission, Internationalization of the Securities Markets, at 11-73 (1987).
20 See, e.g., Grunenthal GmbH v. Hotz, 712 F.2d 421 (9th Cir. 1983) (holding that alleged misrepresentations during execution of agreement in United States confers U.S. securities law jurisdiction, even though transaction had no other contacts with United States); Kohn v. American Metal Climax, Inc., 458 F.2d 255 (3d Cir.), cert, denied, 409 U.S. 874 (1972) (accepting jurisdiction over claim that disclosure accompanying Zambian merger was inadequate, despite prior holding to the contrary by Zambian court).
21 See also DeYoung v. Beddome, 707 F.Supp. 132 (S.D.N.Y. 1989) (Mukasey, J.) (declining to accept jurisdiction over claimed inadequacy in Canadian proxy disclosure, where Canadian court had previously held disclosure adequate). U.S. courts in securities cases for some time have been willing to consider concerns of international comity in resolving discovery issues. See, e.g., Minpeco, S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517 (S.D.N.Y. 1987) (declining to compel discovery from Swiss banks in violation of Swiss banking secrecy law, where plaintiffs had already obtained a significant amount of discovery, and banks had not acted in bad faith). But see SEC v. Banca della Svizzera Italiana, 92 F.R.D. 111 (S.D.N.Y. 1981) (bank compelled to honor SEC subpoena in insider trading investigation despite bank’s argument that to do so would violate Swiss law).
22 See G. Born & D. Westin, International Civil Litigation in United States Courts 447–65 (1989) (discussing application of comity and jurisdictional rule of reason in antitrust context).
23 See, e.g., Cira, The Challenge of Foreign Laws to Block American Antitrust Actions, 18 Stan. J. Int’l L. 247 (1982); Debate: Extraterritorial Application of U.S. Antitrust Law, 50 Antitrust L.J. 617 (1981); Davidow, Extraterritorial Antitrust and the Concept of Comity, 15 J. World Trade L. 500 (1981).
24 The order of the British Panel on Takeovers and Mergers that Gold Fields drop its U.S. efforts to enjoin the Minorco tender offer recalls similar antisuit, antidiscovery and clawback provisions that other countries have adopted to frustrate U.S. antitrust actions. See Laker Airways v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984); British Airways Bd. v. Laker Airways, 1985 App. Cas. 58 (H.L. (E)); In re Uranium Antitrust Litig., 480 F.Supp. 1138(N.D. Ill. 1979).
25 An indication that such vital U.S. interests were not at stake in the Minorco case is the fact that, while the U.S. government agencies involved in securities and antitrust regulation examined the proposed transaction, none chose to express any objection to the tender offer.