Nature of the Case
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Facts
Dickinson, Jr., (D) the son of a founder of Becton and a major stockholder of the company. He individually held 802,138 shares of Becton stock (4.2% of the outstanding shares). In addition, D held 140,794 shares (.64%) as a co-trustee and at least 198,922 shares (1%) as a member of the Dickinson family. D personally managed Becton for over twenty-five years. In 1974, Dickinson relinquished his management responsibilities and became Chairman of the Board. On April 20, 1977, after a bitter internal power struggle over the course of several months, the board of directors voted to remove D as its chairman. The next day D met with representatives of Salomon Brothers (Salomon), an investment banking and brokerage business, to obtain advice on how to regain control of Becton. The group of men present discussed several possible strategies. D ultimately agreed to a plan to vote with outside directors as a means of bringing pressure on Becton's management and selling a block of the company's shares, including his own, to a corporation interested in taking over Becton. D hired Salomon to assist him in locating a corporation that would be interested in purchasing his substantial holdings in Becton and those of his friends as the springboard for a complete or partial takeover of the company. It didn’t take long for D to gather a fairly large amount of Becton stock willing to participate in his group. D then began the hunt for a potential suitor. All solicited were told that D’s had a group which would sell their stock in a block. A potential purchaser was assured that approximately 2,500,000 shares (13%) were readily available and that the group's shares of Becton stock would provide a sufficient base from which to launch a more extensive acquisition program for additional shares and a complete takeover of the company. Sun Company, Inc. was solicited. A number of meetings were held between D's and Sun's representatives in late December 1977 and early January 1978 to discuss alternative strategies for acquiring Becton. Sun executives understood that the block of shares in question belonged to D, the Funds, Dunning, and Lufkin. Sun's Executive Committee approved the strategy of limited solicitation of large individual and institutional shareholders and authorized the purchase of approximately 34% of Becton's outstanding shares, provided that the total expenditure not exceeds $350 million. The transaction was contingent, however, upon Sun's obtaining at least 25% (subsequently lowered to 20%) of the outstanding shares of Becton stock. Rounds of individual meetings were held with those owning the group stock to sign them onto Sun’s offer. Once everyone was on board, the Sun solicitation team began telephone solicitations of additional tenders from institutional investors holding large blocks of Becton stock. The team worked in pairs of one caller and one lawyer, who monitored the caller's side of the conversation. The caller solicited offers to sell Becton stock to an anonymous purchaser from at least 20 individuals representing 30 institutions, offering the same two-tier price structure as was extended to D's group. Each solicitee was told that a non-disclosed purchaser was looking for 20% of Becton's stock; that no transaction would be final unless 20% of the shares were acquired; that the $40 option could be accepted without fear of losing the opportunity to obtain a higher price in the event shares were later bought at a higher figure; and that the purchases necessary to reach the desired 20% goal were rapidly being made and that a hurried response was therefore essential. By 5:35 P.M., they reached their goal of 20%. The closing price on the New York Stock Exchange for Becton shares on January 16 was $32-7/8 per share. Sun paid a premium of $12-1/8 per share over market price to those stockholders which accepted the $45 option. Before the end of the evening, Sun officials had realized their objective of obtaining at least 34% of Becton's outstanding shares. On January 17 and 18, couriers were dispatched throughout the country to pay for the stock, to obtain signatures or collect prepared purchase agreements, to take physical possession of the stock certificates, and to have solicitees sign powers of attorney to allow Sun to vote their proxies. Litigation was commenced by just about everybody including the SEC (P) as well as Becton’s current board. The court granted an injunction against the tender offer. D appealed.
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