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Vanderbilt Law Review

First Page

1087

Abstract

This Article discusses whether arrangements designed to ensure the success of a favored bidder or simply to defeat an unwanted tender offer are "manipulative acts or practices" barred by section 14(e).' It argues that the critical issue is whether an arrangement significantly obstructs the operation of a fair auction market for a target company's shares. The Article maintains that recent Supreme Court decisions interpreting section 14(e) and other antifraud provisions of the federal securities laws provide substantial support for this approach to interpreting section 14(e). The Article first discusses the definition of section 14(e) manipulation. The recent Marathon decision provides the basis for this discussion. The Article then explores the implications of this proposed definition in takeover situations in which bidders or targets are employing tactics such as lock-ups, two-tier bids, asset or stock sales, defensive acquisitions, and indemnification agreements. The Article emphasizes Marathon because it is the first case subsequent to Santa Fe Industries, Inc. v. Green to raise squarely the question of whether section 14(e) bars only what might best be termed classic market manipulation, such as simultaneous purchases and sales of securities at different prices, or whether it prohibits certain other arrangements as well. Prior to Santa Fe,two federal district courts had enjoined as manipulative defensive arrangements employed in connection with tender offers, but both courts based their conclusions on the notion that section 14(e) embodies a federal fiduciary standard --a rationale that would not appear to survive Sante Fe.

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