States try to build court-proof takeover defenses. Federated, Stop & Shop push Massachusetts into merger news
A Maryland family makes a hostile takeover bid for the Stop & Shop Companies, a major New England grocery and retail company. A Canadian investor gets into a bruising fight to buy Federated Department Stores, the nation's largest department store chain. Yesterday, it appeared that that investor, Robert Campeau, had lost out to R. H. Macy & Co. of New York.Skip to next paragraph
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Another takeover specialist makes a run on the Gillette Company, the giant Boston-based shaving equipment and personal care company.
All of these actions have pushed Massachusetts into the takeover news in recent weeks, and pushed forward the question of what states can - or should - do to protect their local companies from hostile takeovers.
``In considering legislation last year, we tried to be careful about speculative takeover activity and not impede legitimate activity,'' says Joseph Alviani, secretary of economic affairs for Massachusetts. ``We didn't want to act impulsively - striking the balance is incredibly difficult. That's why we're looking at other states' laws.''
While Massachusetts wants to avoid impulsive actions, recent merger activity has turned the spotlight on what other states are doing - and have done. ``These are political people,'' says Martin Sikora, editor of Mergers & Acquisitions magazine in Philadelphia. ``They are quick to react when a fixture in the community is affected. They fear loss of jobs and business.''
As takeover activity increases, these laws will be more prevalent, predicts Allen Michel, an associate professor of finance at Boston University's School of Management. ``Politicians are having their day in the legislature; they believe they can protect the companies in their home states. But the threat of takeovers causes the corporations to become efficient.''
For some observers the issue is clear: Anti-takeover laws entrench management, protect the home-grown industry, and ignore world competition and shareholder opportunities. These laws, they claim, prohibit interstate commerce and may even be unconstitutional.
But supporters of anti-takeover laws say takeovers may harm business and a community, put people out of work, close plants and operations, and demand that managers keep looking over their shoulders, rather than focus on long-range plans.
Yesterday, Federated Department Stores, the owner of Filene's and Bloomingdale's, agreed to merge with R.H. Macy & Company, owner of Macy's department stores. Before this deal, Federated hadn't had time to focus on much of anything except Mr. Campeau, the Canadian developer whose $68-a-share offer was topped by an unexpected $74.50-a-share, or $6.7 billion, offer from Macy.
On Monday, Stop & Shop, which had been resisting a takeover attempt by the Haft family's Dart Group Corporation of Landover, Md., announced it would be taken private through a leveraged buyout with a subsidiary of Kohlberg, Kravis, Roberts & Co., the New York firm that pioneered leveraged buyouts.
The KKR subsidiary offered $44 a share, or $1.2 billion, for the grocery and department store chain, based in Braintree, Mass. The agreement is the latest step in the six-week battle to avoid the Hafts' clutches. Dart offered $37 a share. Stop & Shop shareholders must approve the deal, and the Hafts may counteroffer.