A federal judge has ruled that Tennessee’s anti-takeover laws are unconstitutional and cannot be used to stop Tyson Foods’ bid to buy out Holly Farms.
“These acts violate the commerce clause of the U.S. Constitution to the extent they apply to target corporations organized under the laws of states other than Tennessee,” U.S. District Judge Thomas A. Wiseman wrote in a memorandum.
Wiseman on Wednesday enjoined the state from enforcing the laws to prevent a takeover of Holly Farms.
Tyson of Springdale, Ark., the nation’s largest poultry producer, last month made a $52-per-share takeover offer for the Memphis-based food producer. It has extended the offer until mid-December.
Holly Farms has rejected Tyson’s bids and struck up a deal to merge with ConAgra Inc. of Omaha through a stock swap. ConAgra is the fifth-largest poultry processor in the nation.
Wednesday’s ruling came just days after Tyson sued Holly Farms and ConAgra in chancery court in Wilmington, Del., where the three companies were chartered.
The suit, filed Monday, seeks to invalidate the proposed Holly Farms-ConAgra merger as well as an option the Holly Farms board granted to ConAgra allowing the Nebraska producer to purchase Holly Farms’ top poultry assets in the event the merger fails.
Wiseman said Tennessee’s laws violate the commerce clause because they regulate interstate commerce, risk inconsistent regulation and place an excessive burden on interstate commerce in relation to local benefits.
The state laws passed March 11 include the Investor Protection Act, which regulates takeover offers for corporations that are incorporated or have principal offices in Tennessee and substantial assets in the state.
The other three laws require an investor to wait five years or more after acquiring 10% of a company’s stock to make a takeover offer, strip voting rights from a potential buyer and regulate corporations not incorporated in Tennessee.
State Atty. Gen. Charles Burson said he had not yet decided whether to appeal Wiseman’s decision.