Antitrust Preliminary Injunctions in Hostile Tender Offers
A routine defensive tactic of targets of hostile tender offers is to seek a preliminary injunction under section 16 of the Clayton Act on the ground that the offeror’s acquisition of the target’s stock would effect a merger violating section 7 of the Act. The litigation costs that an antitrust injunction imposes on an offeror seems unlikely to exceed the offeror’s risk-adjusted expected benefit from the takeover. In this Article, I discuss several reasons why the possibility of delay tendes to discourage a potential offeror from ever making a tender offer. Part II of this Article presents an economic framework for evaluating the costs and benefits of issuing antitrust preliminary injunctions in hostile tender offers. Using this framework, part II concludes that it is unlikely that issuing such an injunction ever would enhance social welfare and that a court therefore never should grant one, even when the tender offer would merge the corporate control of two competitors. Consequently, part III advocates that Congress deny targets of hostile tender offers standing to sue for preliminary injunctions under section 6 of the Clayton Act. Part IV shows how this economic prescription can be reconciled with exisiting law.