75,000 shares of the common stock of Liquidonics at a price of $75 per share through February 28, 1974, subject to certain adjustments. Liquidonics also agreed to pay an additional placement fee of $175,125 at the time of payment of the notes which were to mature on October 31, 1969. After deducting from the 40 million dollar loan the amount of the commitment fee and the portion of the placement fee payable upon the making of the loan, the net proceeds available for the offer were to be $36,870,250. The shares purchased by Liquidonics pursuant to the offer through the use of the proceeds of the loan and other available corporate funds were to be pledged to the bank as security for the loan together with certain additional collateral comprised of securities of a subsidiary of Liquidonics. The offer further reported that Liquidonics (together with a wholly owned Netherland Antilles subsidiary) owned beneficially 941,300 shares of common stock of UMC which was approximately 18% of the outstanding stock. The offer advised that, assuming the purchase by Liquidonics of 1,158,700 shares pursuant to the offer, it would then own approximately 40% of all the UMC common stock outstanding and that it intended to vote such shares with a view to obtain control of UMC. Pursuant to this offer, 2,300,000 shares of UMC stock were actually tendered. On February 25, 1969 Liquidonics announced that it would purchase 1,674,900 of the shares tendered, which required additional financing. Liquidonics then obtained a loan from Irving Trust Company for $15,000,000 after Banque de Paris agreed to subordinate its position in the UMC shares. The loans made to Liquidonics were not collateralized to the extent which would have been required had the loans been made by domestic lenders. The first $27,000,000 of the bank loans came due on October 31 and was not paid. Under the terms of the loan agreements, the UMC shares, representing 51% control of that company, stood as collateral for the loans. On December 29, 1969, Liquidonics announced that it sold its entire interest in UMC to Overseas International Corp., S. A., Luxembourg, a subsidiary of the Banque de Paris for $57.8 million, representing a $16.6 million loss. Liquidonics stated that it needed the money from the sale to repay short-term loans that had been used to finance the aforementioned tender offer for the UMC shares. It is obvious that control of UMC has shifted to the Banque de Paris, however it is not clear whether the Banque de Paris has purchased the stock for itself as principal or is acting as an agent for undisclosed interests. It remains a possibility that some or all these shares could be sold by the Banque de Paris, with possible adverse consequences to the minority stockholders. FOREIGN FINANCING BY MADISON SQUARE GARDEN CORPORATION ET AL. IN THE TAKEOVER ATTEMPT OF ROOSEVELT RACEWAY CORPORATION On Monday, September 22, 1969, Gulf and Western Land Corporation ("Land") issued a press release stating its intention to purchase 400,000 shares of the $1,303,242 outstanding shares of the common stock of Roosevelt Raceway ("Roosevelt") by means of a public tender offer at a net cash price of $46.50 per share. At the time of Land's announcement, Madison Square Garden Corp. ("Madison") owned approximately 344,300 shares of Roosevelt. Madison, aided by other parties (Goldman Sachs, and Harbill Associates), immediately began to purchase and induced others to purchase Roosevelt shares on the AMEX. By an amendment dated September 26 to its previous Schedule 13D filing, Madison disclosed that it had an agreement in principle with Goldman, Sachs & Co. whereby that firm and certain of its institutional clients would hold for one year up to 120,000 shares of Roosevelt stock purchased by them. At the end of the year, the purchasers would have the right to "put" the stock to Madison either for cash, in the amount of 120% of their purchase price, or for Madison stock. Madison has not amended its Schedule 13D to reflect whether this agreement in principle was ever consummated or acted upon. However, in a complaint filed in October in Federal court, the Commission alleged that on September 24, 1969, Irving Felt, Chairman and President of Madison, offered Goldman Sachs an arrangement whereby it and certain institutional clients could purchase on the AMEX a substantial number of shares of Roosevelt and hold them for one year, at which time they would have an option to "put" such shares to Madison at a price equal to 120% of the purchase price. It was further alleged that, as a result of this offer, Goldman Sachs immediately undertook to locate persons who would participate in the acquisition, and by September 25 had lined up seven foreign institutional investors. Finally, it was alleged that, on September 25, Goldman Sachs purchased 18,000 shares of Roosevelt on the AMEX for these investors, and additional shares were purchased on subsequent dates. During the period of the tender offer, the price of Roosevelt rose as a result of these and other purchases, and public investors were dissuaded from tendering their shares to Land, On October 7, the date following the filing of the complaint by the Commission, Madison announcd the acquisition of additional shares of Roosevelt on the AMEX, bringing its total holdings to 431,930 shares. It also indicated that corporate funds used to purchase shares since the announcement of Land's offer had been replaced by a loan of $2,500,000 from the Banque de 1,Union Parisienne of Paris. The loan has an interest rate of 12% and matures initially on April 7, 1970; it is secured by Roosevelt stock and other securities in such a manner that the market value of this stock is always equal to 200% of the outstanding principal amount of the loan. In addition, Madison granted the lender an option to purchase 20,000 of its shares. On November 17, Madison filed an amendment to its Schedule 13D indicating that it has begun discussions with Land concerning the possibility of a point enterprise with regard to their separate holdings of Roosevelt. FOREIGN FINANCING IN TAKEOVER ATTEMPT OF PAN AMERICAN WORLD Resorts International, Inc. ("Resorts"), whose executive offices are located at 375 Park Avenue, New York, New York, was until June, 1968, named Mary Carter Paint Company. It was incorporated in Delaware on October 24, 1958. Resorts common stock is traded on the American Stock Exchange (“AMEX”). As a result of a series of corporate changes, Resorts has evolved into a company primarily engaged in operating resort facilities. In conjunction with six subsidiaries, Resorts conducts operations on two islands in the Bahamas which include gambling activities (the primary source of Resorts' income), the ownership and management of hotels and restaurants, and real estate development and sale, On February 18, 1969, Reports mailed proxy soliciting material to its shareholders requesting the authorization of an additional 20,000,000 shares of the company's Class A common stock, and the confirmation and approval of two agreements to purchase large blocks of Pan American World Airways, Inc. ("Pan Am") common stock from Gulf and Western Industries, Inc. ("G&W") and from the Chase Manhattan Bank N.A. ("Chase Bank") as trustee for 123 employee benefit trusts. Pan Am had 34,044,718 shares outstanding at the time of this mailing. The Resorts agreement with G&W, dated January 9, 1969, provided, in pertinent part, for Resorts to purchase 900,000 shares of Pan Am for $16,000,000 and 500,000 shares of Resorts Class A common. The agreement between Resorts and Chase Bank, dated February 7, 1969, provided for the purchase by Resorts of 1,500,000 shares of Pan Am common for $15,000,000 principal amount of 5% subordinated twenty-five year notes and 15 year warrants to purchase 3 million shares of Resorts Class A common, half exerciseable at $40 per share and half exerciseable at $60 per share. Both agreements required Resorts to obtain shareholders approval on or before April 12, 1969. The Commission conducted an investigation into the circumstances surrounding this agreement to purchase a large block of stock of Pan Am. While we were thwarted in our injuiry with respect to determining the extent of the ownership of Resorts by foreign financial entities because of secrecy laws we did develop information which indicated that the company had engaged in certain violative conduct. As a result on March 31, 1969, the Commission filed a complaint against Resorts alleging violation of certain proxy rules in the aforementioned solicitation. Resorts entered into a consent judgment to this complaint which in effect, stipulated that it would not vote proxies previously received and would include all pertinent and required information in all future proxy materials to be distributed. On the same day, Resorts announced by separate agreement with G&W and the Chase Bank, that it would proceed to re-solicit proxies from stockholders for the approval of the purchase of one-half of the amount of Pan Am stock originally contemplated. Resorts reaffirmed its intention not to seek control of Pan Am or engage in a proxy contest or tender for additional shares. On April 14, 1969, stockholders of Resorts approved this new agreement to purchase 1,200,000 shares of Pan Am. FOREIGN FINANCING OF TRACY INVESTMENT COMPANY'S TENDER OFFER On July 23, 1969, Tracy Investment Company, whose sole stockholder is Kirk Kerkorian, published a tender offer to purchase 1,000,000 shares of the common stock of Metro-Goldwyn-Mayer Inc. ("MGM") at $35 per share. The price of MGM's common stock on July 18 was 274 per share. Originally, the financing for this tender offer was to be supplied in major part by a loan of $30,000,000 from a subsidiary of Transamerica Corporation. However, MGM obtained a preliminary injunction enjoining the transaction as then financed on the ground that Transamerica was affiliated with United Artists Corporation, a major competitor of MGM, and that the loan arrangement would violate Section 7 of the Clayton Act because of the possibility of Transamerica's ultimate control over MGM. On August 4, 1969, Tracy Investment Company filed with the Commission an amendment to its original tender offer reporting a change in the financing. Under these new arrangements, Tracy Investment Company obtained $20,000,000 in Eurodollars from Burkhardt & Co., a German bank, and $12,000,000 in Eurodollars from Burston & Texas Commerce Bank Ltd., a British bank. Both loans were made at the current prime Eurodollar rate of 82% and were secured by pledges of securities in the amount of 150% of the loan principal. Four days following this filling, Tracy Investment Company announced that it would purchase an additional 740,000 shares of MGM stock; the source of funds for the purchase of these additional shares being a $30,000,000 Eurodollar loan from Burkhardt. 1 MGM filed suit seeking to enjoin this tender offer, (MGM v. Transamerica) contending that this offer violated Regulations T and G promulgated under Section 7 of the Securities Exchange Act of 1934 and therefore the plan of financing for the tender offer was illegal. MGM contended that these loans were not secured by collateral five times the value of the loan and Tracy Investment Company was receiving credit in excess of the loan value of the collateral as prescribed for purchasing securities on margin. Judge Tenney of the Southern District of New York disagreed, stating that Regulation G is not applicable to foreign lending institutions; among other things, he noted that the regulation requires lenders subject thereto to register with the Federal Reserve Bank in whose district they are located and that no such district exists outside the United States. The court stated that Regulation T was also not applicable as there was no showing that the foreign banks were broker-dealers within the confines of the 1934 Act. FOREIGN FINANCINGS INVOLVED IN TAKEOVER ATTEMPT BY STOCKHOLDERS OF BATH INDUSTRIES Bath Industries ("Bath") is a diversified corporation with headquarters in Milwaukee, Wisconsin. It is a major defense contractor, as its principal business for the past thirty years has been the construction of destroyers for the United States Navy. Bath has 2,364,168 outstanding common shares and 870,465 outstanding preferred shares. The crux of this problem, which is related in a recent decision of the U.S. District Court for Wisconsin 2 concerns the attempted takeover of Bath's Board of Directors by a dissident group of minority shareholders. In August 1968, Ernest J. Blot, a director of Bath, expressed his view to selected other board members and interested parties that he would like to appoint a new chief executive officer of the company for the purpose of changing certain managerial policies. He was joined by a group including individuals and the following institutions: Madison Fund, Inc., a closed-end investment company registered with the Commission; MAD International, Inc., a Swiss Investment company associated with the Madison Fund; Hambro American Bank and Trust Co., a New York banking corporation which is 50% owned by Hambros Bank, Ltd., a merchant banking corporation with principal offices at London, and Banque de Paris et des Pays-Bas (Swiss). At some point in 1969, upon the direction of Mr. Blot, several of the aforementioned parties undertook a plan to pool their voting interest in Bath stock, to acquire additional shares and to obtain the votes of other large shareholders for the purpose of electing a new chief executive officer. Throughout this period, 1 CCH Federal Securities Law Reporter-Paragraph 92471. 2 Bath Industries v. Blot (E.D. Wis., Nov. 3, 1969). the members of this group owned substantially in excess of 10% of the outstanding common stock of Bath Industries. Beginning March 31, 1969, Madison Fund and MAD International substantially increased their holdings of Bath preferred and common stock; however, these entities never filed the report required under the recent takeover amendments to the Exchange Act-a socalled Schedule 13D reflecting these purchases. In addition, Hambros Bank and various of its representatives, including other foreign banks, increased their holdings significantly. The plaintiffs, who are officers and directors of Bath Industries, filed a complaint alleging that the defendants failed to file a Schedule 13D with the Commission and that the attempt to obtain control of the Board was, therefore, illegal. The Court held that the defendants (including Hambro American Bank, Hambros Bank, Ltd., MAD International and Banque de Paris) constituted a "group" which acted together for the purpose of acquiring or holding the securities of Bath, as such group is defined by Section 13 (d) (3) of the Exchange Act, and which beneficially owned, directly or indirectly, more than 10% of Bath common stock. The Court concluded that members of the group agreed to pool their voting interests in Bath and to act in secrecy to carry out their plans. Since a Schedule 13D filing was not made, the Court enjoined this attempt to take over Bath's Board of Directors. |