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Lenient US and spare cash spur a spate of mergers

Norman Weinger is a vice-president at Oppenheimer & Co., a firm that has presided over its share of big corporate mergers over the years. And even he is a bit surprised at what is happening in the merger business these days.

"I've never seen so many mergers as I've seen lately," he says. "And we're going to see a lot more."

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With hundreds of millions of dollars burning holes in their pockets and clear indicacations of a more lenient attitude toward mergers coming from the Reagan administration, corporate suitors are busily shopping for companies to acquire or to complete a merger.

Also, the state of the financial markets is seen as an important contributor to increased merger activity. With the prime rate at 20 percent and inflation still moving along at a jaunt (although at a bit slower pace), it is often easier and cheaper for companies that want to expand into new fields to buy existing businesses rather than try to start these ventures themselves.

The activity is keeping investors and brokers on their toes, as they watch out for companies on the prowl, as well as possible takeover targets. A company that is cash rich is also a tempting takeover target, because the buyer also gets the loose money.

Last week, a number of large companies were seen pushing their shopping carts around the merger market.

The Seagram Company announced it planned to purchase 41 percent of Conoco Inc. for $2.55 billion, thwarting an attempt by Cities Service Company to merge with Conoco.

Earlier in the week, the Wall Street Journal reported that the Bendix Company chairman, William M. Agee, armed with $500 million in ready cash, had been looking for a high-technology firm to add to his company. Mr. Agee came by the and several smaller operations.

Analysts say last November's election started a change in the rules of the merger game. Because of the new administration in Washington, said Frank Parrish, vice-president of the Fidelity Fund, "There's a feeling that this is a good time to make acquisitions and mergers." Businessmen sense that Reagan administration officials will not be so fast to raise objections that proposed mergers are anticompetitive, Mr. Parrish said.

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That sense was clearly affirmed in a speech last week by Attorney General William French Smith, in which he argued that "bigness in business does not necessarily mean badness, and that success should not automatically be suspect."

In the speech before the District of Columbia Bar Association, Mr. Smith noted that ". . . some have argued that competition is synonymous with a large number of competitors. Economic reality, however, is more complex. In some industries, competition yields a large number of competitors -- in others, only a few -- depending on the economies of scale, distribution costs, and other factors."

Saying that "efficient firms should not be hobbled under the guise of antitrust enforcement," Mr. Smith reported the Justice Department is taking steps to revise the guidelines that govern when it will challenge corporate mergers.

"This is a big change in policy," Mr. Parrish said. Several companies that "have gathered a good deal of cash" could now be expected to use that cash more aggressively."

Among companies that have large pools of cash or have announced plans to sell parts of their firms to gather the money needed for acquisitions, Mr. Parrish listed American Can, which has announced it is planning to sell assets to raise cash; Brascan of Canada; Canadian Pacific, which he said "has a huge pile of cash and has said it would like to buy an American company"; Esmark, with substantial holdings left over from the sale of oil assets; Gould Inc., which gained some $300 million from the sale of manufacturing facilities and, like Bendix, is looking for a high-tech firm; Northwest Industries; and MCA Corporation.

In addition to energy and high-tech firms, these cash-rich companies are on the prowl for some industrial companies, financial services companies, and natural resources firms, said Carl Ferenbach, head of the mergers and acquisitions unit at Merrill Lynch, Pierce, Fenner & Smith Inc.

Trading on Wall Street last week reflected this situation, as some of the most active issues included Conoco, Seagram, Diamond Shamrock, and Amax, an energy issue. The most active stock on the American Stock Exchange was Dome Petroleum.

The stock market spent some more time playing the Waiting Game last week.

For what seemed like the umteenth week, investors were waiting to see which way interest rates would go, before doing much moving in any direction. About all they had to go on were the words of Henry Kaufman, resident guru at Salomon Brothers, who ventured that the 20 percent prime rate will decline to about 18 percent in the near future.

But then, he said, the prime will later zoom past its all-time high of 21 1/2 percent set last December.

Thus, it was only the profit takers and institutions adjusting portfolios for the third quarter that were able to have much effect on the market as a whole, and the Dow Jones industrial average slipped 3.22 points to close the week at 992.87

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