WILMINGTON, Del. -- A federal judge Tuesday rejected Black & Decker Corp.'s petition to halt enforcement of Delaware's new antitakeover statute in the first legal test of the 3-week-old law.
But U.S. District Judge Joseph Longobardi, ruling in a lawsuit filed by Black & Decker in its $2 billion offer to take control of New York-based American Standard Inc., refused to comment on the law's constitutionality.
Black & Decker, of Towson, Md., asked for a preliminary injunction against enforcement of the Delaware law, arguing the measure interferes unfairly with its takeover effort.
Longobardi said the statute does not affect the tender offer. Black & Decker, a leader in the power tool and home appliance industry, has said it intends to change American Standard's board of directors once it acquires more than 50 percent of the company's stock.
Black & Decker also said it intends to take advantage of a provision in the Delaware law allowing corprations to 'opt out' within 90 days of its Feb. 2 enactment.
'A close look at the facts ... indicates the statute may have no practical effect on either Black & Decker's status or its intended merger,' Longobardi wrote in the opinion. 'It is obvious that with or without (Delaware's antitakeover law) Black & Decker's position would be exactly the same.'
R. Franklin Balotti, a lawyer for Black & Decker, had argued that Delaware's anti-takeover statute is creating confusion in the marketplace and should be set aside because it violates the constitutional ban on interference with interstate commerce.
Black & Decker filed the suit minutes after Gov. Mike Castle signed the legislation into law. The statute prevents hostile takeovers of Delaware-chartered corporations for three years after a shareholder acquires more than 15 percent of a corporation's stock.
The law allows takeovers if the shareholder can obtain 85 percent of the stock in one transaction or has the support of the board of directors or two-thirds vote of the stockholders.
The law also included a provision allowing boards of directors to exempt their companies from the law's protection for up to 90 days after it was enacted.
Lawyers for American Standard, a leading manufacturer of plumbing and air-conditioning equipment, argued that the takeover law is moot in this case because Black & Decker has enough time to take control of its board of directors and vote to exempt American-Standard from the anti-takeover statute.
In his ruling, Longobardi said he was not persuaded by Black & Decker's claim that the law has caused 'confusion in the marketplace.'
'Black & Decker has failed to prove by a clear showing that it will suffer irreparable injury if the preliminary injunction were not granted,' Longobardi wrote.
But he refused to rule on the constitutionality of the law, which is similar to legislation in 27 other states.
'A gratuitous discussion of the constitutionality of (the law) could ... upset the balance between the parties in their quest for their respective positions,' Longobardi said.
Black & Decker increased its offer Tuesday for American Standard's 31 million outstanding shares to $68-a-share, or about $2.1 billion.