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Holding Mickey Mouse to greenmail

greenmail vt. - to take a large stock position in a corporation and threaten radical restructuring of said corporation in order to prompt a lucrative buyout of your stock. Financial journalese coined from the term ''blackmail.''

The specter of financier Saul P. Steinberg taking over the wonderful world of Walt Disney Productions Inc. and casting its family-oriented business ventures to the four winds has put ''greenmailing'' in the spotlight.

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Disney purchased Steinberg's 11.1 percent stake in the company on Monday, paying $70 a share plus expenses for it. Disney stock has fallen from its recent Steinberg and his backers.

Economists and lawmakers are wrestling with the cost-and-benefit analysis of such deals: Do they add to or take away from the economy? Are they just a pitfall of doing business in corporate America?

Bernard M. Markstein III, senior financial economist of the Chase Econometrics consulting firm of Bala-Cynwyd, Pa., notes that ''greenmail'' is one of those areas where actions of the ''real world'' conflict with the theory of economic efficiency. Ideally, he says, a company represents its shareholders' interests. But conflicts of interest can arise among individual shareholders, management, and other creditors.

The Disney buyout of Steinberg amounts to a transfer of wealth that is not particularly detrimental to the economy, Dr. Markstein says. ''We tend to see takeovers as moving towards greater efficiency. They occur when a company is underperforming. The problem, however, is that an offer to buy out one shareholder (at a premium) would seem a violation of the interests of all shareholders.''

If management buys out a shareholder to protect itself, says James Walter, a finance professor at the University of Pennsylvania's Wharton School, ''presumably that would be a loss to the profits of existing shareholders. On what grounds can management justify that?''

Barry Bosworth of the Washington-based Brookings Institution points out that many of these types of challenges are based on ''threats to cause chaos'' in order to prompt management to make a payoff. Like the spate of huge mergers that are occurring now, Dr. Bosworth sees greenmail as ''faddish'' and of little economic value.

The House subcommittee on telecommunications, consumer protection, and finance, headed by Rep. Timothy E. Wirth (D) of Colorado, is scheduled to mark up a bill this month that would prohibit corporations from buying out shareholders with more than a 3 percent premium unless the majority of the corporation's shareholders agreed.

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A subcommittee aide notes that ''the Disney case provides some sense of urgency'' to a bill that before had not drawn much interest. But he admits that the parent House Energy and Commerce Committee has a full agenda, and he suggests it could be late this year or early next before action is taken.

Dr. Markstein calls the bill reasonable. An offer made to one stockholder should be made to all, he says; otherwise, ''how do you protect someone with 100 or 500 shares?'' Moreover, giving a special price to one set of investors ''causes the market mechanism to break down.''

In a typical greenmailing operation, a financier buys what he perceives to be undervalued stock - but not simply as a quiet shareholder who enjoys purchasing a piece of a good company at a low price. He lines up backers and buys a large position in the company. Often he enlists a specialist to win the proxies of other shareholders.

The greenmailer's strategy looks as if it can't lose: If he gathers enough stock and proxies, he can push his way onto the corporation's board of directors. From there he could try to control the company and perhaps engage in a major restructuring - one that could involve selling major parts of the company.

If a company fears this prospect enough, it is possible that it will attempt to buy out the financier, paying a premium for his stock and having him sign an agreement that he will not try to a similar move.

Not all such incidents are greenmail, however, and not even financiers who have been involved in a string of these would characterize themselves as greenmailers. Greenmailing depends on motive. Often this can be difficult to determine. A financier may legitimately argue that a corporation is not being run properly and perhaps has assets that it would be better off selling.

''It is not fair to say all such investments are detrimental to society,'' says Dr. Walter. ''As an investor, if a company's stock is undervalued, why shouldn't you take a position in it?'' But one of the costs of such takeover attempts, he observes, is that they ''take away from productive management time if management is spending hours worried that somebody will acquire the firm. That constitutes an inefficiency.''

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