Hundreds of major corporations will become potential victims of lightning takeover raids if the tactics by The Sun Co. to buy shares in Becton Dickinson Corp. are not declared illegal, Securities and Exchange Commission lawyers argued today.
As a 15-day trial growing out of the Sun-Becton Dickinson fight drew to a close, lawyers on all sides called on U.S. District Court Judge Robert Carter to write new rules for corporate power struggles.
Sun bought about 34 percent of the stock of Becton Dickinson in a series of telephone deals in a single afternoon last January, by offering big institutional investors a large premium over the price of the shares on the New York Stock Exchange.
The telephone takeover falls outside the usual definitions of permissible corporate power plays but Sun attorneys argued that it was legal.
The purchases were private transactions not covered by the Williams Act, the federal law governing most corporate takeovers, Sun lawyers contended. The lawyers represent Sun and its associates in the deal, Soloman Brothers, and F. Eberstadt and Co. and others.
SEC attorney Theodore Sonde contended the telephone calls amounted to a tender offer and were illegal because not all B-D shareholders got the same offer.
Few of the facts in the case have been disputed during the three week trial and the legal arguments aired yesterday will be elaborated upon in written briefs before Carter makes a decision. The case is being heard without a jury and the eventual ruling is expected to be appealed.
Lawyers on both sides say the eventual ruling will probably become a decisive case in corporate takeover law.
In addition to the tender offer issue, the court must also decide whether securities laws were violated by Fairleigh Dickinson Jr. and by Soloman Eberstadt and others. The SEC charges they formed a group to sell a large block of B-D shares without reporting their plans to the public. The Sun Co. is not involved in that part of the case.
The fight for control of Becton Dickinson began after Fairleigh Dickinson Jr. -- son of the founder of the New Jersey medical supply maker -- was ousted as chairman of the company, then sought revenge. After several other companies refused to get involved in an unfriendly merger attempt an offer was made by Sun, the former Sun Oil Company.
Testimony during the trial has revealed that Sun lawyers rated the risk of a legal fight as "three plus" on a scale of 1 to 5. The result has been separate law suits by the SEC, Becton Dickinson, and shareholders of B-D.
One of the cases was settled in the midst of the trial when J.H. Fitzgerald Dunning of Baltimore, a 75-year-old former B-D board member, signed a consent order with the Sec. w/ithout admitting any wrongdoing, Dunning agreed not to violate securities laws in the future and to pay damages of $375,000 -- about 25 percent of the profits he made selling B-D shares to Sun.
The settlement was a victory for the government and Carter indicated that he believed an illegal selling group had been formed. Since that time attorneys for the various defendants have sought to show that their particular clients were not part of that group.
On the more complex and far-reaching tender offer issue Judge Carter has given no clues about his feelings.
Attorney Arthur Lyman, who represents B-D, warned that the tactics used to control that company's stock could be used against any other corporation whose shares are widely held by institutional investors such as banks, mutual funds and insurance companies.
Any firm with 25 to 30 percent of its shares held by institutions is a potential target Lyman said, "It can be done with no more than that and indeed could be done with companies like American Airlines, CBS, ABC, Bethlehem Steel and even mighty IBM."