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Securities Regulation Keyed to Cox
Eisenstadt v. Centel Corp.
Citation:
113 F.3d 738, 745-746 (1997)Facts
Centel Corporation operated local telephone companies and cellular phone systems and decided to explore strategic alternatives to maximize shareholder value through an auction process. On January 23, 1992, Centel announced it had hired investment banks to explore possible sale of the company, causing its stock price to rise from $37 to $48. On February 17, 1992, Centel formally announced its intention to solicit proposals for purchase of all or part of the company. During the auction process, several major potential bidders, including GTE and Pacific Telesis, publicly announced they would not participate. Despite these setbacks, Centel made various public statements indicating the auction was proceeding well and smoothly. A Chicago Tribune article on April 14, 1992, reported that 35 to 40 parties had explored submitting bids and conducted due-diligence reviews of the company’s books, though only 16 firms had actually visited Centel’s confidential data room. On April 16, 1992, the auction was held but received only seven bids, none for the whole company, and Centel accepted none of them. Instead, Centel negotiated a sale to Sprint announced on May 27, 1992, at $33.50 per share, approximately $9 below the then-current market price. The plaintiff class consists of investors who purchased Centel stock between February 17 and May 27, 1992, and suffered losses when the stock price plummeted following the Sprint announcement.
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