The Constitutionality of the Maine Takeover Bid Disclosure Law

With the March 24, 1978 enactment of the Maine Takeover Bid Disclosure Law, more than two-thirds of the states purported to regulate the making of corporate tender offers. The Maine Act, which is by and large typical, requires that persons making tender offers (or takeover bids), by which the offeror attempts to control the target company through purchase of its shares, disclose certain specified information fully and accurately so as to guarantee adequate time for the dissemination and consideration of the disclosed information. During the 1960's, tender offers became a popular method of acquiring control of publicly traded corporations. Sound corporations with equity securities lower than the book value of their stock were natural targets for the competitive tender offerors, prosperous corporations with great amounts of retained earnings and working capital to invest. Although the lack of competition and resistance made acquisition by merger easier and less expensive, a merger's success depended upon obtaining a favorable recommendation from the often-unresponsive management of the target company. Accordingly, offerors shifted their concentration toward the tender offer, which could be made to all shareholders of the target corporation despite the unfriendly posture of its management. The country is now experiencing a resurgence of corporate take-overs; while in number they do not match the wave of the 1960's, they have surpassed it in terms of the average dollar volume of each takeover. Because the takeover climate is so competitive, and because existing federal legislation offers so few safeguards to the tendering investor, the states have moved to provide shareholders adequate protection from the abuses that may accompany takeover offers.