The Supreme Court in a 6-3 decision ruled that an Indiana law aimed at protecting companies from hostile takeovers by out-of-state businesses is constitutional. The high court justices reversed a ruling by a U.S. Court of Appeals in Chicago that struck down the 1986 control-share acquisition law. The case involved a hostile takeover bid by Dynamics Corp of America against CTS Corp based in Elkhart Ind. Dynamics made a tender offer in 1985 for one million shares to bring its holdings of CTS stock to 27.5 pct of the companys total. After CTS invoked the state law Dynamics filed a lawsuit challenging the constitutionality of the measure. One effect of the law is to impose a 50-day delay on the tender offer at the option of the target company. It also requires that the acquisition for control shares in an Indiana corporation does not include voting rights unless a majority of all pre-existing shareholders so agree at their next regularly scheduled meeting. Justice Lewis Powell writing for the court majority held that the state law was not pre-empted by federal securities law. The Indiana Act protects independent shareholders from the coercive aspects of tender offers by allowing them to vote as a group he said. He acknowledged that the law may delay some tender offers and may decrease the number of successful tender offers for Indiana corporations. But he said the law does not discriminate against interstate commerce and was justified by the states interests in protecting shareholders.
SUPREME COURT UPHOLDS INDIANA TAKEOVER LAW