CINCINNATI, FEB. 22 -- A federal judge today blocked as unconstitutional an Ohio takeover statute aimed at thwarting Campeau Corp.'s attempted hostile takeover of Federated Department Stores Inc.
U.S. District Judge Carl Rubin granted Campeau's request for a preliminary injunction against the new statute, which was passed as an addition to the state's existing takeover law.
Rubin said the law unconstitutionally discriminated against certain businesses and was an improper regulation of interstate commerce.
Mike Webb, a spokesman for the Ohio attorney general's office, said state officials had not decided whether to appeal the ruling. A Federated spokesman declined comment.
Federated stock rose 50 cents to $60.75 a share in active New York Stock Exchange trading.
Ruling just 10 days after Gov. Richard Celeste signed the Ohio legislation, Rubin barred the state from enforcing the law which, among other things, required foreign companies to file detailed descriptions of takeover bids with the Ohio Development Department.
The department then would have 50 days to review the bid and determine if the takeover would be detrimental to the residents of Ohio.
"A state may not enact laws which discriminate against foreign commerce or which may adversely affect interstate commerce by creating a risk of inconsistent state regulation," Rubin said in his decision.
The judge also noted the law exempted certain foreign firms such as Honda, a company that Ohio officials have encouraged to expand in the state. "The Ohio act, which seeks to regulate only takeovers by businesses organized in countries other than the United States, and then only certain of those businesses, is discriminatory," said the judge.
Rubin said it is clear that the Ohio law "fails to regulate commerce evenhandedly, as required by Supreme Court decisions."
Federated officials helped legislators draft the law in a hurry. Raider Robert Campeau, chairman of the Canadian company, announced his takeover bid, initially $47 a share, on Jan. 25, and the Ohio antitakeover legislation was signed into law less than three weeks later.
The judge said the Ohio law "also fails to pass muster" because it could lead to violation of federal laws protecting businesses from "inconsistent obligations in different states."
Rubin said the Ohio law "gives rise to an impermissible risk that many states could seek to regulate the acquisition of control of a national company, such as Federated, which has substantial assets and principal places of business in states other than Ohio. These other states would likely impose different requirements."
Federated, which operates about 676 stores in 36 states, has its corporate headquarters in Cincinnati, but is incorporated in Delaware. Delaware recently passed a tough antitakeover law, but Rubin's decision did not deal with that state's law.
"He's won in Ohio for now, and he has to go to Delaware," New York analyst Monroe Greenstein of Bear, Stearns & Co. said of Campeau, who also is challenging the Delaware legislation in the courts.
The Ohio law required foreign firms seeking takeovers to give the state details about financing and the impact on the state.