Full opinion text
MEMORANDUM OPINION AND ORDER SEALS, District Judge. The attempted acquisition of Texas-gulf, Inc. by the Canada Development Corporation, through the use of a public tender offer, came as a complete surprise and shock to the target company, according to the secure and well entrenched management of Texasgulf. Although the acquiring company, the Canada Development Corporation (CDC), did, and understandably so, plan and execute in secret and in haste their tender offer, it is somewhat surprising that Texasgulf was so surprised. Especially is this true when the evidence in the case indicates that the bulk of the income and sales of Texasgulf come from Canada predominantly and, also, because of the increasing use of the tender offer as a modern means of corporate acquisition. The notice of the tender offer given to the management of Texasgulf by CDC late in the afternoon of July 24, 1973, was in the words of Texasgulf’s lead trial attorney, William C. Harvin, Esq., a Pearl Harbor like attack with the avowed purpose of stunning Texasgulf and overwhelming them. But, Texas-gulf, the target company, was not so surprised, stunned dr overwhelmed as to cause the management to hesitate or falter. The Board of Directors of Texas-gulf began to convene on the next day and during July 25 and 26, 1973, rejected any negotiated truce or peace and placed its whole defense and counterattack in the hands of their attorney and a fellow Board member, Thomas M. Phillips, Esq., of the law firm of Baker & Botts of Houston, Texas, who had been representing Texasgulf for over a quarter of a century. In his closing argument to the Court, Phillips expressed in poignant words, which the Court feels represents the sentiments of Texasgulf’s management, “ . . . and so it must be obvious to Your Honor, that much of my career and much of my personal life has been identified with Texasgulf. The Texasgulf management immediately marshalled their forces for the impending struggle. The first skirmishes were fought in press releases appealing to the good sense of the common shareholder, along with the filing of this lawsuit in Houston, Texas, the issuing of a Temporary Restraining Order by this Court, and the use of expedited discovery by both parties. . The first engagement, the face to face confrontation in the courtroom, has now been concluded. It is fair to say at this stage that before a final victory is secured there will be other battles. To better understand this struggle for the control of Texasgulf, one must look to the events leading up to this lawsuit. Simply stated, this suit arises out of a cash tender offer made by Defendant CDC to purchase 10,000,000 of the approximately 30,385,000 outstanding shares of Plaintiff Texasgulf’s common stock. The Plaintiff, Texasgulf, is a Texas corporation whose stock is registered with the Securities and Exchange Commission and listed on the New York, Toronto, Boston, Cincinnati, Detroit, Midwest and Pacific Coast Stock Exchanges. It is a multinational, natural resource company which as indicated by Article II of the company’s Restated Articles of Incorporation engages in the production and marketing of metals, potash, sulphur, fertilizers, oil and gas, forest products and various other materials. Among the countries where Texasgulf has substantial assets and operations are the United States, Canada, Australia and Mexico. Texasgulf’s assets exceed $700,000,000; its sales exceed $300,000,000 annually, and it has more than 80,000 shareholders. CDC is a corporation incorporated by an Act of Parliament of Canada in 1971 and at the present all of its outstanding common shares are beneficially owned by the Government of Canada. It is the intention of the Act of the Canadian Parliament and of the Directors of CDC that up to 90% of the voting shares of CDC ultimately be held by Canadian citizens and residents. The principal objects of CDC, as evidenced by the statute creating it, are: “A) To assist in the creation or development of businesses, resources, properties and industries of Canada; B) To expand, widen and develop opportunities for Canadians toxparticipate in the economic development of Canada through the application of their skills and capital; C) To invest in the shares of securities of any corporation owning property or carrying on business related to the economic interests of Canada; and D) To invest in ventures or enterprises, including the acquisition of property likely to benefit Canada; The statute further states that these objects “shall be carried out in anticipation of profit and in the best interests of the shareholders as a whole.” The final events of the attempted acquisition of Texasgulf by CDC occurred in a brief period of time beginning on Monday, July 23, 1973 when the Executive Committee of the CDC, meeting in Toronto, Ontario, Canada determined to recommend to the Board of Directors of CDC the tender offer plan to acquire shares of Texasgulf. Mr. Gene M. Woodfin of Loeb, Rhoades & Co., the dealer-manager for the offer, notified his office to prepare the necessary papers. He also called the office of Mr. Claude 0. Stephens, Chairman of the Board of Texasgulf, to request an appointment for the next day, July 24, 1973, and was told by Stephens’ office that Stephens would be able to see him at 4:00 P.M. on that day. On the next morning, the Board of Directors «of CDC met in Fredericton, New Brunswick and approved the tender offer. Woodfin and the executives of CDC flew immediately to New York. There they were met at the airport by representatives from Loeb, Rhoades & Co. with the tender offer documents. These were immediately executed and the representatives flew on to Washington to make the necessary filing with the Securities and Exchange Commission (SEC). That same day, July 24, 1973, at approximately 4:40 P.M., Eastern Daylight Time, CDC filed with the SEC a Schedule 13D statement in compliance with Section 14(d) of the Securities and Exchange Act, 15 U.S.C. § 78n(d), describing its tender offer to acquire 10,000,000 shares of Texasgulf common stock at a price of $29.00 (U.S.) per share, and at approximately 5:30 P.M. (EDT) issued a press release for publication on July 25 announcing the tender offer. The President of CDC, Mr. H. Anthony Hampson, the Chairman of the Board of CDC, Mr. Marshal A. Crowe, and Mr. Gene M. Woodfin, in person, advised the President of Texasgulf, Dr. Charles F. Fogarty, and Mr. Charles O. Stephens of CDC’s decision to make the tender offer at the previously arranged meeting in Stephens’ office at approximately 4:05 P.M. (EDT) on July 24, 1973. Texasgulf immediately summoned the members of its Board of Directors to the Company’s New York offices to determine what action the Company should take. At the same time, Mr. David M. Crawford, the Corporate Secretary of Texasgulf, began to respond to inquiries from various press and other sources by stating that news of the tender offer had been a “bomb-shell” and “had come as a complete surprise.” On July 25, 1973, Texasgulf issued a press release stating that its Board would meet later that day to study carefully all aspects of the tender offer. Furthermore, throughout the course of that day, Crawford, rather than advising the shareholders who telephoned the company for advice that the company had not yet reached a decision, instructed the shareholders not to be “hasty” in their decision to tender and instead to act “prudently.” The meeting of the Board of Texas-gulf held on the evening of July 25, 1973, was, according to the minutes, “convened to consider the best course of action for the company to follow.” From the evidence it is apparent that no one at the meeting spoke in favor of the offer and most of the discussion centered around objections to it. According to one of the Directors present, the Directors did not at the July 25 Board meeting, or at any subsequent Board meeting, take exception to the adequacy of the price proffered by CDC nor did they raise* any legal objections to the adequacy of the offer. The general consensus of the meeting was that they needed to “stop the clock” to give them time to investigate the deal. To this end, they determined that any legal proceedings by the corporation should be taken in Texas because the company was incorporated there, had major assets in Texas, substantial shareholdings and shareholders in Texas. At this Board meeting the Directors instructed management to get in touch with Tom Phillips, Esq., a Director and an attorney for Texasgulf, and to write him a blank cheek, including authority to institute legal proceedings if he found grounds to do so and by all means to stop the clock. That decision to “stop the clock” was never reflected in the Board minutes of the July 25, 1973 Texasgulf meeting or at any subsequent meetings. Neither was a filing made pursuant to Section 14(d) of the Securities and Exchange Act with the SEC disclosing any such decision, nor were the shareholders so advised. Instead, from July 25 until this suit was filed, the shareholder public was allowed to continue to believe that the management of Texasgulf had either taken no position with respect to the tender offer or had not yet decided what to do. Throughout that' time the public bought and sold the stock of Texasgulf necessarily relying upon that studied silence of management. As late as 3:59. P.M., EDT, on July 27, 1973 with trading still in progress on the Pacific Coast Stock Exchange, the Dow-Jones broad tape carried the report that management of Texasgulf, while having now reached a decision, still would not announce it. No mention was made of the decision two days earlier by management to give their attorney carte blanche to do whatever they could to stop the progress of the tender. The evidence reflects that the Board of Directors of Texasgulf has not met since July 26, 1973. Late in the afternoon of Friday, July 27, 1973 Texasgulf filed in this Court a Complaint seeking a permanent injunction, a temporary restraining order and a date for an evidentiary hearing for a preliminary injunction. Texasgulf requested that the Court enjoin CDC from proceeding with and consummating the tender offer and enjoin CDC from engaging in any other illegal acts aimed at consummation of the tender offer or the acquisition of effective control of Texasgulf. The Original Complaint alleged that CDC’s tender offer violated Section 14(e) of the Securities and Exchange Act of 1934, 15 U.S.C. §§ 78n(d) and 78n(e), 1970, commonly called the Williams Act, in that it failed to disclose: 1. The possibility that consummation of this tender offer would place Texasgulf in violation of Tex. Civ.Stat.Annot. Art. 1527 (1962), and the consequences which could flow from such a violation. 2. The purpose for which CDC was organized and the resulting conflicts between its interests as controlling stockholder of Texasgulf and those of the stockholders who are not Canadian residents. 3. ' CDC’s plans and proposals with respect to changes in Texasgulf particularly as to management and possible spin-off of assets. The Complaint also alleged that the tender offer is discriminatory and contrary to the policies underlying Section 14(e), in that the offer is not open to Canadian residents. On the same day the Complaint was filed, after hearing counsel in chambers, the Court granted the temporary restraining order and further granted Texasgulf’s motion for a preliminary injunction hearing for Monday, August 6, 1973 at 2:00 P. M. and ordered the filing of briefs and proposed findings by both parties. On Monday, July 30, 1973 CDC filed its original answer and counterclaim for injunctive relief charging Texasgulf with violations of Section 10(b) and 14(e) of the Securities and Exchange Act of'1934, 15 U.S.C. §§ 78j(b) and 78n(e), and of its fiduciary duty to its shareholders to advise them of the company’s position with respect to the tender offer. The Court directed that CDC’s counterclaim would also be heard on August 6. CDC also made a motion to modify Plaintiff’s Temporary Restraining Order to allow depositories to continue to receive and hold, subject to the terms of the tender, any shares or tenders proffered to them, provided that those shares would be held pending further order of the Court. The Court granted this motion and the Temporary Restraining Order was modified. The Court also granted CDC’s motion for accelerated discovery. Then on Monday, August 6, 1973, one and one-half hours prior to the commencement of the hearing on Texas-gulf’s request for a preliminary injunction, Texasgulf filed a motion for leave to file an amended complaint. In this proposed amended complaint, Texasgulf alleged more information which it felt was material and should have been disclosed by CDC in its tender offer. In addition Texasgulf radically altered the nature of this case by alleging that there were sufficient grounds for the issuance of a preliminary injunction independent and apart from the disclosure problem. The Court, in light of the motion for leave to file the amended complaint, and CDC’s vigorous opposition to the motion, reset the case for one day in order to give counsel sufficient time to prepare arguments. The new matters alleged in the First Amended Complaint are as follows: 1. CDC and Noranda Mines Limited, a Canadian mining and manufacturing corporation, along with others unknown, secretly and fraudulently entered into a plan, combination and conspiracy to acquire shares of Texasgulf with the aim of obtaining control by the use of illegal, improper, secretive, and fraudulent acts and practices. This conspiracy is in violation of Section 14(e) of the Exchange Act, Sectión 13(d) of the Exchange Act, which requires a group holding in excess of 5% of the outstanding shares of an issuer to file a Schedule 13D which must contain information with respect to each member of the group, and Section 14(d) of the Exchange Act which requires a group that commences a tender offer to file a Schedule 13D containing full information with respect to each member of the group. 2. Acquisition of a controlling interest by CDC would violate Section 1 of the Sherman Act and § 7 of the Clayton Act. 3. Upon consummation of the tender offer Texasgulf would cease to be eligible for the insurance, finance, and various other programs afforded with respect to investments in certain less developed countries by the Overseas Private Investment Corporation (OPIC). 4. Consummation of the tender offer would jeopardize a host of radio licenses held by Texasgulf. 5. Control of Texasgulf by CDC would jeopardize Texasgulf’s Australian mining ventures. In its First Amended Complaint Texasgulf is urging that all of these matters, including those set forth in the Original Complaint, should have been disclosed by CDC. In addition, Texas-gulf contends that the “Conspiracy,” “Antitrust,” “Article 1527,” and “Conflict of Interest” matters are sufficient grounds for the issuance of a preliminary injunction independent of any disclosure issue. Texasgulf also brought several new parties into the suit as Defendants and co-conspirators with CDC. These included Noranda Mines, Limited, a Canadian corporation engaged in mining manufacturing; Marshal A. Crowe, Chairman of the Board of CDC; H. Anthony Hampson, President and Chief Executive Officer of CDC; J. Douglas Streit, President of Yellowknife Bear Mines, Limited, a Canadian corporation; Alfred Powis, President and Chief Executive Officer of Noranda; and E. Kéndall Cork, Vice-President and Treasurer of Noranda. All of the named individuals are residents and citizens of Canada, and at the time of this hearing service has been completed only as to Mr. Crowe and Mr. Hampson, in addition to CDC, with the result that the rest of the parties are not before the Court at this time. On August 7, 1973 after a hearing was held in chambers, the Court granted leave for the Amended Complaint to be filed. The Court also entered a Temporary Restraining Order enjoining Texas-gulf from communication with the stockholders of Texasgulf with respect to the tender offer and this action other than in open court. The Court began hearing evidence in this ease on Wednesday, August 8, 1973. On August 9, 1973, CDC filed a motion to dismiss Texasgulf’s First Amended Original Complaint against individual Defendants Hampson and Crowe as provided by Rule 12, F.R.Civ. P. The Court determined to carry that motion along with the case. On August 10, 1973 at a conference in chambers prior to the resumption of the hearing the Court signed an Order allowing the CDC to extend the tender offer for one week, and to make a press release, the wording of which was approved by the Court, announcing the extension. A second ofle-week extension of the tender offer was approved by the Court on August 17, 1973 and the Court granted CDC permission to make a press release announcing it. On August 20, 1973 CDC asked permission of the Court to issue a press release announcing the number of shares tendered as of 5:00 P.M. EDT, Friday, August 17, 1973. The Court granted CDC’s request and ordered that both sides draft a release. The release, agreed to as to form by Texasgulf, was made the following day. A third one-week extension of the tender offer was approved by the Court on Friday, August 24, 1973 and the Court granted CDC permission to make a press release announcing it. At the end of the evidentiary hearing on August 23, 1973, the Court ordered final briefs and oral arguments on Monday, August 27, 1973, (one month from the day of the filing of the suit), and Texasgulf'filed its final findings of fact and conclusions of law on August 30, 1973. With respect to determining which parties are before the Court, the Plaintiff advised the Court in chambers on Thursday, August 16, 1973 that service had been made on Defendants Noranda Mines, Limited, J. Douglas Streit, Alfred Powis and E. Kendall Cork by service on the Secretary of State of the State of Texas pursuant to Article 2031(b) of the Texas Statutes. Because none of these parties have answered, and indeed the time in which they have to answer has not yet expired, the Court finds that the parties who are presently before it and who will be bound by whatever relief it determines to be at this time appropriate are Texasgulf, Inc., Canada Development Corporation, H. Anthony Hampson, and Marshal A. Crowe. It appears to the Court that the thrust of Texasgulf’s case is twofold. Texasgulf contends that the Schedule 13D statement filed with the SEC and its soliciting materials were false and misleading, contained untrue statements of material facts, and omitted to state material facts necessary in order to make the statements made under the circumstances in which they were made not misleading in violation of the Securities and Exchange Act of 1934, §§ 14(d) and 14(e), 15 U.S.C. §§ 78n(d) and 78n(e), in the following respects: 1. Nature and identity of the group acting in concert. 2. Violations of federal antitrust laws that would result from successful consummation of CDC’s tender offer. 3. Violation of Article 1527, Tex. Rev.Civ.Stat.Annot. which would result from consummation of the tender offer and which would threaten the continued existence of Texasgulf. 4. The inherent conflict of interest which would result from CDC’s acquisition of Texasgulf. 5. Plans and proposals of CDC to dispose of assets and to make major changes in the business and management of Texasgulf once it acquires control. 6. Adverse effect that CDC’s acquisition of control of Texasgulf would have on Texasgulf’s Australian operation. 7. Loss of eligibility to participate in Overseas Private Investment Corporation, 22 U.S.C. §§ 2191, et seq., if CDC acquired control. 8. Violations of the Communications Act, 47 U.S.C. § 310, which would result from consummation of the tender offer. Texasgulf further contends that more is involved in this case than just disclosure violations of the securities laws. It claims that many of the facts alleged not only should be disclosed but are themselves independent grounds for issuance of an injunction, specifically, conspiracy, antitrust violations, violation of Article 1527, and inherent conflict of interest. THE ALLEGED CONSPIRACY Texasgulf contends that a plan, combination and conspiracy existed between CDC, Noranda Mines and others to gain control of Texasgulf and that this constituted a course of conduct in violation of Sections 13(d) and 14(d) of the Securities and Exchange Act and of that portion of Section 14(e) of the Act which provides that “It shall be unlawful for any person ... to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer . . . ” Texas-gulf further maintains that disclosure of such acts or practices does not cure the violations. In order to understand the Texasgulf conspiracy allegations we have to look at the way it says this conspiracy develops. To begin with Texasgulf observes that Noranda is a natural partner for CDC to have in seeking control of Texasgulf because should they be successful CDC would need the expertise that Noranda possesses in the mining field to operate Texasgulf. Furthermore, Noranda already held substantial shares of Texas-gulf stock that it had previously acquired. The Plaintiff contends that the conspiracy had its beginnings in discussions between Hampson, President of CDC, and Kendall Cork, Vice-President of Noranda, and one of the named individual defendants who is not presently before the Court. The first part of the agreement was that Noranda would obtain for CDC shares of Texasgulf stock in a street name and that they would give each other the first refusal on their shares if for some reason they determined not to go through with their plan. They also allegedly determined to enter into a joint tender offer for the stock of Texasgulf once they had acquired a basic position in Texasgulf, and that once they had effective control of the company they would spin off non-Canadian assets of Texasgulf in order to help finance the purchase of more mining properties with the view of concentrating on Canadian mining as the purpose of the company or in order to liquidate debts incurred in conjunction with the tender offer. In furtherance of this plan, Texasgulf contends, Noranda proceeded to acquire Texasgulf stock from March of this year until mid-June when they realized that their joint holdings were very close to reaching the five percent point at which time they would have to make a filing with the SEC disclosing their holdings and the intentions that they had with respect to the stock of Texasgulf. So they stopped purchasing stock on the open market. About this same time the Plaintiffs allege one J. Douglas Streit, also a Defendant but not before the Court at this time, acting under the direction and control of Noranda attempted by false representation to the Texasgulf management to obtain by a shareholder’s list of Texasgulf shareholders. Texasgulf maintains that as the conspirators discussed the joint tender offer for Texasgulf, they came to the realization that if a prominent mining company such as Noranda was identified with the venture, they would probably have to pay more for the stock. So they embarked upon a plan to conceal Noranda’s involvement by determining that the offer would be made in the name of CDC only, and to this end they constructed a record of correspondence beginning with a letter dated July 4, 1973 which indicated that the two companies had severed all relationships and had no further joint plans with respect to Texasgulf. Now as to this alleged conspiracy the Court is convinced that the credible and competent evidence shows the facts are substantially as follows: CDC first began considering the possibility of investing in a company engaged in mining or natural resources in February or March of 1972. While the directors did at first consider the possibility of entering de novo they quickly concluded that CDC could enter the field only by an acquisition since, inter alia, profitable mining properties do not simply materialize, and neither did CDC and its sixteen employees have the requisite mining expertise. A list of some thirty companies was prepared for comments of the directors. At that time, CDC’s Board had in mind an investment that would be in the range of fifty to seventy-five million dollars. Although Texas-gulf was listed among the companies for identification purposes, it was not at that time ■ considered a likely company for investment because of the financial range for investment set by the Board, and because other companies then under consideration appeared to be more logical. CDC proceeded with discussions with the controlling stockholders of the other, companies under consideration. By October of 1972, these possibilities had been exhausted and once again Texasgulf came back into consideration with several other companies in which such an investment possibility might exist. However,, again it was shelved for the reasons it had been in March of 1972. In March of 1973, Texasgulf once again came to the forefront in the considerations of the GDC Directors. At the March 27, 1973 meeting of the CDC Board, Hampson presented to the Board a somewhat hastily prepared memorandum based upon information then at his disposal, concerning a number of possibilities for investment in the mining field. Among the companies then discussed was Texasgulf. The information in the memorandum with respect to Texasgulf was based both on publicly available data and on information obtained during the immediately preceding few days from officials of Noranda Mines, Ltd When CDC first became interested in the mining field, it talked to various people in the mining business to get an idea of what role CDC might take in investing in that field. Among those to whom CDC talked was the President of Noranda, Defendant Alfred Powis. Shortly before the March 27, 1973 CDC Board of Directors meeting, Hampson met with Powis to discuss these potential investments, and particularly, whether at a management level (as opposed to director’s decisional level), Noranda would be interested in at least looking at Texas-gulf with CDC. Powis indicated that Noranda had at that time significant shareholdings in Texasgulf and that at a “management level” Noranda would be prepared to look at the possibilities of a joint investment. While Powis indicated that he would of course have to think about such a venture further, Noranda’s management representatives undertook, however, to furnish and did furnish to CDC, some information which had been compiled by Noranda concerning Texas-gulf, and it was that information which served as the prime source for the data embodied in the Hampson report concerning Texasgulf which was considered at the Mai’ch 27, 1973 meeting. The general thrust of the March 27, 1973 memorandum to the Board was that CDC’s management believed that CDC “would have very little to lose and much to gain in buying Texasgulf shares up to say 1,000,000 shares” because of its investment potential and ready marketability. However, it was urged by management of CDC that no “major” purchasing program be undertaken “until a satisfactory joint venture has been agreed with Noranda and approved by the CDC Board.” At the March 27 meeting, the CDC Board approved the purchase of stock in Texas-gulf and one other mining company then under consideration in an amount of up to $10,000,000 each. On April 2, 1973, CDC agreed with Noranda that Noranda would act as agent for CDC in the purchase of shares of Texasgulf on CDC’s behalf and subject to CDC’s instructions. They also agreed informally to give each other the right of first refusal should either decide to sell the Texasgulf stock they held. Furthermore, Noranda agreed that during the time when it was purchasing Texasgulf stock on behalf of CDC under no circumstances would it purchase stock on its own behalf. The procedure utilized was that Noranda would instruct its stockbroker to purchase the shares through the vehicle of an “Account 5000” opened at the stockbroker’s office and Noranda would then pay for the stock, CDC thereafter reimbursing Noranda for its actual expenses. No provision was made for any kind of fee for Noranda for acting as agent, but in light of the fact that both parties were at the time considering the possibility of a joint venture that does not seem unreasonable. Likewise the informal first refusal arrangement in the event either side determined to dispose of its stock is not irregular since each side at different levels was contemplating significant purchases of Texasgulf stock and the possibility of doing it together. CDC was very determined that its purchases of Texasgulf stock should be handled with the utmost secrecy since it was not yet prepared seriously to consider the making of any bid for control of Texas-gulf. In addition, it did not want to broadcast that it was in the market and thereby increase the price of the stock, and it was also afraid that the public would draw an erroneous conclusion that, in light of CDC’s general policy to make a significant investment only, that CDC had embarked upon such a program at a time when CDC had clearly not determined thus to proceed. By the time of the next Board meeting of CDC, held May 22, 1973, CDC had acquired some 338,000 shares of Texasgulf stock in the open market. The Noranda .management representative still had not determined whether to recommend to the Noranda Board to join with CDC as a “potential partner” in the purchase of a significant block of Texasgulf stock, but had already indicated that they were not interested in taking as significant a role therein as they had originally indicated they would, and promised to let CDC know by July what posture they would take. At the CDC Board of Directors meeting on May 22, 1973 two memorandums were presented to the Board concerning Texasgulf. One was prepared by a CDC staff member and reviewed by Hampson. It set forth favorable views concerning Texasgulf management and concluded “that Texasgulf had made a strong effort to become a diversified natural resource company during the last decade. Its success in doing so has been somewhat understated by the poor financial performance of the past several years which is, in a large measure, due to the cyclical nature of the company’s markets rather than to internal company weaknesses.” The second memorandum was prepared by an analyst at the request of the management of CDC reflecting his opinions as to the operation of Texasgulf and concluding that there were some weaknesses in management. This was an opinion with which Hampson disagreed, but which he felt should be before the Board nevertheless. CDC management recommended to the Board that the Board authorize additional purchases of Texasgulf stock of a size which “could ultimately be disposed of profitably if the Board decided not to proceed, while giving us a worthwhile start towards a successful tender off if that were the Board’s decision in July.” The CDC Board gave that approval but subject to the limitation that not more than 5% of Texasgulf stock be purchased and subject to the further limitation that no action on a tender could be taken without both CDC Executive Committee action and the approval of the Board of Directors. On June 14, 1973 CDC, having at that time a total of 748,800 shares of Texas-gulf, made its last purchases of stock and then determined that it should stay out of the market. That decision was made with a conscious view toward insuring compliance with the requirements of the Securities Act, especially Section 13(d) since at that time Noranda’s management representatives still had not decided whether to recommend to Noranda’s Board that Noranda should join with CDC in a venture encompassing the purchase of Texasgulf stock, and together, CDC and Noranda would, if they proceeded together, be approaching the 5% trigger of Section 13(d). At that point CDC held approximately 2%% of Texasgulf stock. On June 27, 1973 Noranda’s management representatives informed CDC that at the management level they were not prepared even to recommend any kind of joint venture with CDC in relation to Texasgulf to their Board in the light of a number of other projects, and that they wanted to be free to go their own way. That termination was reflected by Noranda in its July 4, 1973 letter to CDC’s President, Mr. Hampson. This was followed by a letter of July 9, 1973 from the Assistant Treasurer or Noranda to Hampson which included the broker’s- contracts and indicated that the shares were to be held for CDC’s account. At the same time Noranda sent a letter to the Bank of Nova Scotia where the shares were deposited instructing them that the shares and any dividends were to be transferred to the account of CDC pending their further instructions. On July 10, 1973 CDC confirmed receipt of Noranda’s July 4 letter and the -termination of the first refusal arrangement and all discussions with respect to Texasgulf . Thus from the meeting of June 27 CDC was left in the position where if it chose to proceed, it would have to do so alone. At this point CDC could once again have entered the market to purchase shares of Texasgulf at the market price to increase its holdings to the 5% point authorized earlier by the Board of Directors but they determined to continue with the decision made on June 14, 1973 not to make any further purchases of Texasgulf stock. CDC did so because it wished to continue its compliance with United States securities laws, because it did not wish to expose itself to suit by selling shareholders should it later determine to proceed with the tender offer and because it wanted to give the market an opportunity to find its own level so that if they should decide to make an offer they could easily determine a fair offer price. Especially in light of the Board’s May 22 decision to decide at the July meeting on the question of making a tender offer, this appears to be an exercise of reasonable and conservative business judgment. During the time that Noranda was purchasing Texasgulf stock on behalf of CDC, one J. Douglas Streit of Yellowknife Bear Mines, Ltd., and a shareholder of Texasgulf, wrote to the President of Texasgulf requesting to examine the record of shareholders of the company pursuant to Article 2.44, Texas Business Corporation Act, V.A.T.S., for the purpose of soliciting proxies. This was on May 18, 1973. On June 6, 1973 Fogarty wrote Streit advising him that Texasgulf would not provide him with a list unless he indicated a more specific reason for his request. On July 9, 1973 an attorney for Streit wrote another letter to Texasgulf reiterating Streit’s request to examine the shareholder’s list and again delineating the purpose for which Streit desired it as required by the statute. On July 10 Texasgulf responded that such a list was available only to shareholders of record who have been so for at least six months and that Mr. Streit did not qualify since he held his shares beneficially, and furthermore they would need a more specific statement of the purpose than had been provided. No further communication was received by Texasgulf prior to the filing of this lawsuit. This series of correspondence is important in the Plaintiff’s theory because early in May Noranda reported to Hampson that it was attempting to obtain a shareholder’s list and expected to accomplish it although with some difficulty. On May 17 Hampson reported to the CDC Board of Directors that they first wanted to obtain an up-to-date shareholders’ list. The Plaintiff contends that Streit was working for Noranda to obtain the shareholders’ list and the fact that he was still trying to get the list after the supposed termination of the agreement between Noranda and CDC proves that the letters signifying termination of the agreement were a sham and that the partnership between Noranda and CDC still exists. The Plaintiff further maintains that Mr. Streit never renewed his request for the list because by the time he received the letter from Texasgulf, Noranda and CDC had already determined to go ahead with the offer, and no longer needed the list. Plaintiff has shown that Noranda said that they would try to obtain a shareholders’ list, and that a man named J. Douglas Streit tried to get a shareholders’ list; that is all. They have failed to convince the Court that Streit was or is linked with either Noranda or CDC. The evidence indicates that CDC itself made no attempt to get a shareholders’ list and that they did not know through whom Noranda was trying to get a list. The Plaintiff has seized on the fact that Streit was attempting to get a list during the time in question and tried to convince this Court that because he was obtaining a list, the only one he could be obtaining it for is Noranda and that therefore an agreement still exists between Noranda and CDC with respect to Texasgulf and that the letters of July 4 and July 10 are of no effect or import. The Court is not convinced. It is clear from the evidence that Streit could just have easily been acting for Anglo-American Company, who had also expressed an interest in Texasgulf; for himself; or for someone else. The fact that he was trying to obtain a list at this time was pure coincidence and casts no doubt on the veracity of the letters of July 4 and July 10. Especially is this true in face of the denials of Hampson and others in a position to know. The Plaintiff has failed to raise a question in the Court’s mind that the letters between Noranda and CDC dated July 4 and July 10, respectively mean anything other than what they say or are designed for any purpose other than that of terminating the relationship between the two companies with respect to discussion of any plans relating to Texasgulf. Furthermore, the actions taken by CDC following the June 27 meeting with Noranda emphasize that from that point on CDC was acting alone in its decisions with relation to the tender offer for Texasgulf stock. At the July 6, 1973 Executive Committee meeting of CDC, initial consideration was given to the formulation of a plan to be presented to the Board of CDC with a view toward the making of a tender offer for the stock of Texasgulf and shortly thereafter, on July 9, 1973, Mr. Gene Wood-fin, of Loeb, Rhoades & Co., an investment banking firm, was approached with an inquiry as to whether Loeb, Rhoades & Co. would be willing to act as an investment banker and dealer-manager in connection with a proposed tender offer. Mr. Woodfin met on July 11, 1973 with representatives of CDC to discuss such essentials and at that point, unresolved considerations of the tender offer as the number of shares sought, the price range, availability of funds, procedure to be followed, the timing and other critical mechanics of an offer. It was concluded that the issue as to whether or not a tender would be made would be presented to the CDC Executive Committee at a meeting to be held by it on July 23, 1973, and if approved, the matter would be presented to a meeting of the CDC Board scheduled for July 24, 1973. CDC first began its approaches to the Toronto-Dominion Bank on July 16, 1973 to secure from it the bulk of the required financing. At that meeting the Bank was not advised as to the identity of Texasgulf and was simply asked if it would advance a line of credit to permit unspecified stock purchases. The bank, which was relying solely on the credit of CDC did not on July 16, 1973, want to know the identity of the company whose stock CDC proposed to purchase. The bank did not agree until July 23, 1973 to make available the $160,000,000 line of credit. Likewise, the Government of Canada did not agree to provide the additional $75,000,000 of equity financing until July 23,1973. At the Executive Committee meeting of CDC on July 23, 1973 Woodfin urged the members to accelerate the tentative time table for the proposed tender offer because Texasgulf had released its earnings statement on July 20, 1973, a date earlier than usual. He also made recommendations to the CDC Executive Committee as to the price to be paid for the stock under the tender offer. Woodfin noted that Texasgulf stock was then selling at around $24.00 (U.S.) per share and he suggested a range of a low of $28.00 (U.S.) per share to a high of $30.00 (U.S.) per share as the proposed tender offer price. Selection of that range was made upon considerations as to how large a premium over the market price of the stock would be required in order to make the tender offer successful. The compromise figure reached, of $29.00 (U.S.) was felt to be a very generous price-earnings multiple for this kind of a stock. The CDC Executive Committee on July 23, 1973 recommended that the proposal be placed before the CDC Board at its July 24, 1973 meeting. At both the July 23, 1973 CDC Executive Committee meeting and at the July 24, 1973 CDC Board meeting there was placed before those present a memorandum prepared by management recommending the proposed tender offer. With reference to Noranda, the memorandum noted management’s express recommendation “that this transaction be proceeded with on our own.” Further, the memorandum set forth the definite views of CDC management concerning Texasgulf, which differed somewhat from earlier views tentatively expressed by various members of the staff and by the analyst who prepared a report at the request of management. For example, while some questions previously had been raised by the analyst as to the profitability of Texasgulf’s Agricultural and Chemical division’s operations, the memorandum prepared for the July 24, 1973 CDC Board meeting now concluded that it was expected that that division would “make a major contribution to Texasgulf’s income and cash flow over the next several years.” Likewise while the analyst had in May expressed his reservations concerning Texasgulf’s management, the CDC management memorandum of July 24, 1973 concluded that no intention then existed on the part of CDC to disturb Texas-gulf’s management, although conditions which might develop after the tender offer might require it. Thus the tender offer was worded to reflect that possibility. The July 24, 1973 memorandum also set forth the legal reasons why the recommended tender offer could not be made to Canadians, and detailed the financing vehicles to be employed, including alternative methods such as CDC share issuances and long-term borrowings to cover interest payments. On July 24, 1973 the CDC Board approved the proposed tender. The Board in so doing was specifically advised of all of the facts set forth in the tender offer, including the absence of any contemplation of spin-offs, management changes or continued relationship with Noranda. The rest-of the facts as to what transpired following approval are as set out previously beginning on page 383 of this Opinion with a few additions. On the flight to New York City after the CDC Board had approved the tender offer, Hampson repeated to Woodfin the suggestion that he had made to Woodfin on the prior day that at the meeting scheduled for later that day (July 24, 1973) with Plaintiff’s management an offer of employment contracts be made to Texas-gulf’s management to further reassure them. However, as he had done on the prior day, Woodfin advised Hampson not to make any such proffer since it might be misconstrued by Plaintiff’s management and treated as an insult or an attempt to buy their support. Hampson accepted his advice, although he was not sure it was the right advice. Woodfin now says this was a mistake and that if he had the same advice to give over he would reverse it. Here it is necessary to expound on the events at the meeting on the afternoon of July 24, 1973 in the office of Mr. Stephens at Texasgulf with Hampson, Crowe, Woodfin and Fogarty present. Briefly, it was explained to the Texas-gulf representatives that there had been no prior communication with them with respect to the tender offer or any consideration thereof because of both the requirements of the Securities and Exchange Act and because there was some serious concern that the history of this company had shown that it was accident-prone in terms of litigation. The CDC representatives further explained ' to Fogarty and Stephens that CDC had a consistent policy of long term investments, reliance upon existing self-contained management and that what it sought was simply an effective voice in the policy of the company as exhibited by such representation on the Board of Directors of the company as would be appropriate to CDC’s shareholdings. In that regard the parties to the meeting have testified that the meeting was in all respects a cordial one and that the CDC representatives left believing that management of Texasgulf might be kindly disposed to the tender offer. The CDC representatives volunteered to stay in New York and be available to meet with any members of the Texasgulf Board or with any of its officers desirous of meeting with them and desirous of obtaining additional information, and to that end they remained in New York for two days. However, Texasgulf never made any effort to communicate with them. It is clear to the Court that CDC did everything reasonable and possible under the circumstances and in 'light of Texasgulf’s unhappy history when previously possessed of advance information to make this tender offer a “friendly one” and that any aura of unfriendliness which it might possess now is directly a result of the Plaintiff’s action. The attorneys for Texasgulf have pointed to some circumstances and events, that they say could convince the Court that there was a conspiracy and that it still exists. Looking at all the circumstances as a whole and not just only by examining its dismembered and separate parts, and drawing logical inferences and deductions, it is clear to this Court that these events do not point to an unlawful conspiracy. The Court accepts the account given by the witnesses on behalf of CDC of the facts of the case. The Court finds that Hampson, Woodfin and Crowe, who knew as much about the transactions as anyone, are very credible witnesses. The affidavits of Paul Britton Paine, President of Montreal Trust Co.; Ross Arnold Perigoe, Financial Vice-President of The Imperial Life Assurance Company of Canada; Louis R. Desmarais, Vice-Chairman of the Board of CDC and President of Power Corporation of Canada, Ltd.; John H. Moore, Director of CDC; John P. Gallagher, Director of CDC and President of Dome Petroleum Ltd.; and Simon S. Reisman, Deputy Minister of Finance for Canada and ex officio member of the Board of Directors of CDC, corroborate in every respect the account given by these three participants. The sum total of this series of events is that while Noranda did handle the preliminary stock purchases for CDC using CDC’s money and that some of the top executives of both companies did consider and discuss the possibilities of such a joint venture, when it came down to decision making time the decision on the part of Noranda was not to engage in any such venture, and there is no credible evidence to indicate that decision was anything but final. Texasgulf has failed to make the clear showing necessary of probable success on the merits or even serious, substantial questions in relation to the allegations of a plan or conspiracy in violation of Section 14(e) of the Securities and Exchange Act of 1934 to entitle it to preliminary injunctive relief. From the credible and competent evidence the Court is convinced that CDC, its officers, and directors did not engage in any fraudulent conspiracy as alleged by Texasgulf. Texasgulf further alleges in relation to its conspiracy allegations that CDC, Noranda and the other named Defendants violated Section 13(d) of the Securities and Exchange Act of 1934 in that they constituted a group within the meaning of that statute that held more that 5% of the outstanding shares of a security, namely Texasgulf, prior to making the tender offer and that they failed to make any filing with the SEC disclosing that fact. The filing requirements of Section 13(d)(1) are triggered by an individual or a group acquiring in excess of 5% of any class of equity security. A group is defined in Section 13(d) as an aggregation of persons or entities who “act . . . for the purpose of acquiring, holding or disposing of securities . . .” Each member of a statutory group is deemed to acquire the shares beneficially owned by the other members upon formation of the group. As a result, if, after the group is formed, the aggregate beneficial holdings of its members exceed 5%, the requirement of Section 13(d)(1) is triggered even without additional purchases of stock by any of its members. See GAF Corporation v. Milstein, 453 F.2d 709 (2nd Cir. 1971), cert. denied, 406 U.S. 910, 92 S.Ct. 1610, 31 L.Ed.2d 821 (1972). It takes more than the arithmetic of adding up shares to determine that a statutory group exists and that a filing must be made. Two criteria must be met: (1) The members must agree to act together for the purpose of acquiring, holding, or disposing of securities; and (2) once the members agree to act, they must own beneficially or acquire beneficially in excess of 5% of a class of equity security. Mere relationship, among persons or entities,' whether family, personal or business, is insufficient to create a group which is deemed to be a statutory person. There must be agreement to act in concert. GAF Corporation v. Milstein, supra. Texasgulf admits throughout its pleadings that the aggregate total shares of CDC and Noranda while approaching five percent, never hit five percent of the total shares outstanding. But it alleges that there are the individual Defendants and others connected with the two companies that own shares of Texasgulf and thus constitute part of the group. For example, Texasgulf adds to the shares held by Noranda and CDC those held by Streit. It also includes shares held of record by Montreal Trust Company and Imperial Life Assurance Company of Canada as stock belonging to the “group.” How Texasgulf arrives at this connection is worth elaborating. Mr. Louis R. Desmarais is Vice Chairman, a Director and member of the executive committee of CDC. He owns no Texasgulf stock, either beneficially or of record. Desmarais is President of Power Corporation of Canada, Ltd. which owns a controlling stock interest in Montreal Trust Company which according to Plaintiff is the record owner of 112,004 shares of Texasgulf, and also Imperial Life Assurance Co. of Canada, Ltd., which according to Plaintiff, owns 36,600 shares of Texasgulf. The evidence indicates that Desmarais is neither an officer nor a director of Montreal Trust or Imperial Life. Throughout the record it is evident that CDC was aware of the five percent filing trigger of 13(d) and that they purposely stopped purchasing stock at around 2 %% of shares outstanding because they knew Noranda had close to that amount. Thus if they did decide to enter into some kind of joint tender offer plan with Noranda they would be in danger of triggering thé filing requirement and having to file a 13(d) before they were ready to announce their tender. It was specifically because, between 1968 and 1970, some offerors consciously limited their purchases to just under the then 10% triggering point to avoid filing, that Congress in 1970, amended the Williams Act to provide for disclosure at 5%. From the legislative history of the amendment it is clear that Congress recognized that conscious avoidance of the disclosure requirements by keeping below the triggering point is not violative of the law. “The reduction for [sic] 10 to 5 percent would provide public disclosure of impending corporate takeovers at a more meaningful level. The Securities and Exchange Commission has informed your committee that in some instances persons or companies undertaking an acquisition have limited their purchases of stock in the open market to 8 or 9 percent as a means of avoiding the disclosure requirements of Public Law 90-439. This practice deprives investors of the material information which is necessary to enable them to make a decision whether to accept or reject the tender offer. “An investment of between 5 and 10 percent of the securities of a company can have a significant impact on the public market for that company’s stock. Shareholders of the target company are entitled to full disclosure when over 5 percent of their company’s stock is to be acquired by an outside group. These acquisitions may lead to important changes in the management or business of the company and the shareholders should be fully informed . . .” 1970 U.S.Code Cong. & Admin.News at pp. 5027-5028. Thus, it is evident that CDC’s undisclosed purchases and conscious avoidance of the 5% triggering requirement, whether alone or together with Noranda, are not a violation of the law. The Court is convinced that Texasgulf has failed to make a clear showing of serious questions with reference to this allegation such as to make it fair ground for litigation, much less has it shown a reasonable probability of succeeding on the merits of this claim in light of the Court’s finding that no conspiracy exists between CDC and Noranda, and that Streit is not connected with either one of them. Without Noranda and Streit, it would take even more shareholders to constitute a group over 5%. Yet CDC has proved that even more of the alleged group — for example, Mr. Desmarias and Mr. John Gallagher of Dome Petroleum, Ltd. — were neither the beneficial or record owners of stock in Texasgulf. Furthermore, Texasgulf has failed to make any showing that the persons constituting the alleged group had ever agreed to act, let alone acted together as required by Section 13(d) “for the purpose of acquiring, holding or disposing of securities.” Without some indication of concerted activity required to bring the statute into play this Court is compelled to find that no group exists within the meaning of Section 13(d). Finally, Texasgulf alleges that under Section 14(d) of the Securities and Exchange Act of 1934 a group that commences a tender offer must file a Schedule 13D (as set out in Section 14(d) of the Securities and .Exchange Act) regardless of its holdings; that such schedule must contain full information with respect to each member of the group; and that Noranda, CDC, other named Defendants, and others at present unknown, constitute such a group and have failed to make the required filing. In light of the Court’s holding that Texasgulf has failed to establish the existence of a conspiracy between Noranda, Streit and others, and has further failed to establish the existence of any group within the meaning of Section 13(d) who have previously acted together or might be doing so now, it is evident that Texasgulf must also fail on this allegation. CDC acted alone in the making of the tender offer; the Schedule 13D filed by CDC reflects that fact and contains full information with respect to CDC; the filing required by Section 14(d)- has been made. THE ANTITRUST ISSUE Independent of the allegations of securities law violations, Texasgulf alleges that the proposed acquisition of stock by CDC would violate Section 1 of the Sherman Act and Section 7 of the Clayton Act and that therefore this Court should grant it injunctive relief as authorized by Section 16 of the Clayton Act. Specifically, Texasgulf contends that in light of the conspiracy between CDC, Noranda and others, the acquisition of a controlling stock interest in Texasgulf would eliminate actual competition between Texasgulf and Noranda in violation of Section 1 of the Sherman Act because Noranda and Texasgulf are major competitors in such,, metal markets as potash, slab silver and zinc. Thus the acquisition of Texasgulf by the CDC-Noranda group would constitute a restraint on trade in that it would eliminate the competition between Texasgulf and Noranda and would result in them being the dominant force in the market. This would also constitute a violation of Section 7 because the effect would be to substantially lessen competition and to create a monopoly because of the market position the Texas-gulf/Noranda combination would occupy. Even without the conspiracy, Texas-gulf maintains that the acquisition would lessen competition in violation of Section 7 in that it would eliminate future competition between CDC and Texasgulf. Texasgulf bases this position on the premise that CDC, having decided to enter the mining industry, became at that point a competitor of great significance, and that it therefore should enter the industry de novo or via the toehold approach of acquiring one of the smaller .mining companies and developing it to be a substantial competitor in the field. CDC takes the position that with respect to the Sherman Act, the Act is inapplicable because there is no conspiracy or any kind of agreement between CDC, Noranda and others to acquire Texas-gulf. Furthermore, CDC argues, that even if Texasgulf could show such a conspiracy, under United States v. Aluminum Company of America, 148 F.2d 416, 443-444 (2d Cir. 1945), it has failed to state a claim upon which relief can be granted because in order for an alleged conspiracy between solely foreign persons or entities to be actionable, it must have already resulted in substantial anticompetitive effects in the United States. In response to Texasgulf’s Section 7 allegations, CDC reiterates that there is no conspiracy or relationship with Noranda or others to acquire Texasgulf that could result in a lessening of competition. Moreover, CDC argues,, it is not a potential competitor of Texas-gulf. It has sixteen employees, it is not engaged in any line of commerce much less lines similar or related to the mining industry, and the very nature of the natural resource business being governed by the availability of those resources makes entry de novo an enormously expensive and speculative undertaking and therefore unrealistic for a company with sixteen employees. At this point in the litigation the Court is not required to determine whether in fact the Plaintiff, Texasgulf, has proven violations of Section 1 of the Sherman Act and Section 7 of the Clayton Act. Our role is limited to deciding whether the evidence before .us demonstrates that Plaintiff’s allegations are of sufficient substance to warrant an examination of the other requirements necessary to the grant of preliminary injunctive relief. Gulf & Western Industries, Inc. v. Great Atlantic and Pacific Tea Company, 476 F.2d 687 (2d Cir. 1973). The standard for evaluating mergers and acquisitions under the Sherman Act as announced by the Supreme Court in United States v. First National Bank and Trust, 376 U.S. 665, 84 S.Ct. 1033, 12 L.Ed.2d 1 (1964), provides : “Where merging companies are major competitive factors in a relevant market, the elimination of significant competition between them, by merger or consolidation itself constitutes a violation of § 1 of the Sherman Act.” 376 U.S. at 671-672, 84 S.Ct. at 1037. The standard to be applied in evaluating the merits of a Section 7 Clayton Act allegation is “whether the probable future effect of the transaction will be substantially to lessen competition.” Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). While it may be that as to the Sherman Act allegations, under the Alep a case, Texasgulf has failed to state a claim on which this Court can grant relief because the companies involved are both foreign entities and there have not been any actual anticompetitive effects, in light of the broad reach and interpretation given the antitrust laws by the co