## Facts

- Brascan Limited was a publicly held Canadian company whose shares traded on multiple exchanges, including the American Stock Exchange (AMEX).
- After Brascan announced the cash sale of a major subsidiary, Edper-related entities formed Edper Equities Ltd. to seek control or a major position in Brascan.
- By late March 1979, Edper held about 5% of Brascan’s outstanding shares.
- On April 5, 1979, Edper proposed a friendly acquisition; Brascan rebuffed the approach and pursued a large tender offer for another company.
- Edper sought regulatory approval in Ontario for a conditional offer tied to Brascan abandoning its planned transaction; the Ontario Securities Commission denied permission on April 20, 1979.
- Edper then focused on U.S. market purchases and, through a broker, contacted institutional and large individual holders about buying Brascan shares at a premium.
- On April 30, 1979, Edper bought over 3.1 million Brascan shares on the AMEX and issued a press release stating it had no present intention to make further purchases.
- On May 1, 1979, Edper resumed aggressive AMEX buying and acquired an additional approximately 3.2 million shares, without issuing a new statement qualifying or correcting the April 30 release.
- Brascan sued in federal court alleging violations of § 14(e) of the Securities Exchange Act of 1934 (Williams Act) and Rule 10b-5, seeking preliminary injunctive relief including restraints on further purchases and divestiture.

## Issues

1. Whether Edper’s failure to correct its April 30 public statement, after deciding to resume heavy purchases on May 1, was a material misstatement or omission actionable under Rule 10b-5.
2. Whether Edper’s acquisition program—including broker-assisted contacts and rapid open-market buying—constituted a “tender offer” triggering Williams Act obligations and liability under § 14(e).
3. Whether Brascan satisfied the standards for preliminary injunctive relief, and what interim remedy was appropriate.

## Decision

- The court held Brascan showed a viable Rule 10b-5 theory that the April 30 “no present intention” statement could become misleading when Edper resumed large purchases the next day without updating the market.
- The court declined to order broad preliminary relief such as divestiture or a sweeping bar on purchases, viewing corrective disclosure as the appropriate interim response to the alleged misleading omission.
- The court held Edper’s conduct did not constitute a “tender offer” under the Williams Act and therefore could not support § 14(e) injunctive relief on that theory.
- The court tailored relief to the limited securities-fraud concern identified at the preliminary stage rather than restructuring ownership positions formed through market trading.

## Legal Principles

- A statement that is accurate when made may become misleading if the speaker later acts inconsistently and fails to correct or update the market when the omission is material.
- Rule 10b-5 can reach a material omission where prior public communications create a misleading impression for market participants in a control contest.
- Rapid, large-volume open-market purchases, even when coordinated and preceded by some directed contacts, are not necessarily a Williams Act “tender offer” absent key features such as active and widespread solicitation and uniform, firm terms offered to shareholders.
- Preliminary injunctions in securities disputes require a showing tied to likely merits and equitable need; where the injury can be addressed through prompt disclosure, courts may deny disruptive remedies like divestiture.

## Conclusion

The court treated Edper’s uncorrected “no present intention” statement as potentially misleading under Rule 10b-5 once Edper resumed heavy buying, but refused to characterize the acquisition program as a Williams Act tender offer and limited preliminary relief to a disclosure-focused approach rather than divestiture or broad trading restraints.


Brascan Ltd. v. Edper Equities Ltd., 477 F. Supp. 773 (S.D.N.Y. 1979)