US SUPREME COURT DECISIONS

During a tender offer campaign, respondent bought more than 10% of the outstanding stock of petitioner's predecessor (Old Kern). Respondent was blocked in its takeover efforts by a defensive merger between Old Kern and Tenneco, in which Old Kern stockholders were to receive new Tenneco stock on a share-for-share basis. Less than a month after its initial tender offer, respondent thereupon negotiated a binding option to sell to Tenneco at a date over six months after the tender offer expired all the new Tenneco stock to which respondent would be entitled when the merger took place. Sale of the post-merger stock yielded respondent a profit of some $19 million, which petitioner sought to recover by a suit under § 16(b) of the Securities Exchange Act of 1934, prohibiting profitable short-swing speculation by statutory insiders. The District Court's summary judgment for petitioner was reversed by the Court of Appeals.

Held: The transactions, which were not based on a statutory insider's information and were not susceptible of the speculative abuse that § 16(b) was designed to prevent, did not constitute "sales" within the meaning of that provision. Pp. 411 U. S. 591-604.

(a) There was nothing in connection with respondent's tender offer acquisition of Old Kern stock or the exchange thereof for the Tenneco stock that gave respondent "inside information," and once the merger, which respondent did not engineer, was approved, the Old Kern-Tenneco stock exchange was involuntary. Pp. 411 U. S. 596-600.

(b) The option agreement was not of itself a "sale"; the option was grounded on the mutual advantages to respondent as a minority stockholder that wanted to terminate an investment it had not chosen to make and Tenneco, whose management did not want a potentially troublesome minority stockholder; and the option was not a source of potential speculative abuse, since respondent had no inside information about Tenneco or its new stock. Pp. 411 U. S. 601-604.

450 F.2d 157, affirmed. chanrobles.com-red

Page 411 U. S. 583

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J.,and MARSHALL, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. DOUGLAS, J., filed a dissenting opinion, in which BRENNAN and STEWART, JJ., joined, post, p. 411 U. S. 605.