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Revlon, Inc. v. Pantry Pride, Inc.
United States District Court for the District of Delaware
621 F. Supp. 804 (1985)
Chemical Bank (Chemical) financed an attempt by Pantry Pride, Inc. (defendant) to acquire Revlon, Inc. (plaintiff) in a $1.85 billion leveraged buyout. Chemical extended a $500 million loan, which Pantry Pride agreed to directly secure with the Revlon stock that Pantry Pride intended to acquire. To raise more cash for the takeover, Chemical arranged for Pantry Pride to offer up to $900 million in debt securities. This public debt offer set a $2.5 million minimum-purchase requirement and was indirectly secured by Revlon stock. Revlon sued in federal district court, claiming that Pantry Pride and Chemical violated the margin restrictions in the forerunner to Federal Reserve Board Regulation U. That regulation implemented the tender-offer disclosure requirements of § 7 of the Securities Exchange Act of 1934, as added by the Williams Act. Regulation U prohibited banks or other lenders from extending margin-purchase credit worth more than $200,000 in any calendar quarter if that credit was worth more than 50 percent of the margin stock’s market value. Banks could also be held liable for arranging credit transactions that violated this prohibition. Revlon petitioned for an injunction blocking both Chemical’s loan and the debt offering.
Rule of Law
Holding and Reasoning (Farnan, J.)
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