US tries to stall trend toward mergers
Congress, regulatory agencies, and the Reagan administration are taking a hard look at what they should do to control the growing corporate urge to merge. This hightened interest in corporate mergers was triggered by some $36.1 billion worth of oil company combinations in the last two months. The latest merger announcement came Sunday when Mobil Corporation said it had engineered a
On Tuesday, House Judiciary Committee chairman Peter W. Rodino (D) of New Jersey proposed a ban on so-called hostile mergers. Under his plan, a deal could not go through unless a merger was approved by a majority of a company's outside directors. An outside director is one who is not an employee of the company in question.
''We have yet to see any important benefits from unfriendly takeovers to justify the enormous expense'' of such activity, Representative Rodino said. Hearings will be held next week on his plan and another Rodino bill that requires public review of very large friendly acquisitions.
One of the recent big oil-company mergers, the $13.2 billion purchase of Gulf Corporation by Standard Oil Company of California, was the result of Gulf's effort to avoid an unfriendly takeover by T. Boone Pickens Jr., chairman of Mesa Petroleum Company.
Meanwhile, the Senate Judiciary Committee will hold hearings Thursday on merger activity. The sessions previously had been scheduled for a later date. And committee member Howard Metzenbaum (D) of Ohio said the Mobil-Superior Oil announcement would give a boost to antimerger legislation.
Once such bill was introduced by Sen. J. Bennett Johnston (D) of Louisiana. It calls for a temporary ban on mergers between the nation's 50 largest oil companies. That would include Standard Oil's takeover of Gulf. But it would not affect Texaco Inc.'s purchase of Getty Oil Company for $10.1 billion. That deal already has preliminary appoval from the Federal Trade Commission.
It is not clear that President Reagan would sign such a bill if supporters were able to get one out of Congress. White House spokesman Larry Speakes says that the President has not expressed any concern or opposition to the mergers. He adds that the President favors marketplace competition and that it's up to the US Justice Department to determine whether a merger is good for competition.
On the regulatory front, the Securities and Exchange Commission (SEC) Tuesday began consideration of a variety of steps to limit the tactics used in corporate takeovers. Among other things, the proposed rules would bar the secret accumulation of a large number of shares in a company targeted for takeover.
The Reagan administration's position on merger activity in the steel industry is the subject of debate within the administration. Economists contend that the steel industry is more concentrated than the oil industry and thus presents tougher antitrust issues.
Last month, J. Paul McGrath, chief of the Justice Department's antitrust division, said the government would move to block a proposed merger between LTV Corporation and Republic Steel Corporation if the parties tried to proceed with the deal. The companies are the third and forth largest steel makers in the United States. Mr. McGrath found that the plan, as proposed, would lead to undue concentration - and pricing power - in the markets for key products such as sheet steel, which is used in cars and appliances.
During the weekend, Commerce Secretary Malcolm Baldrige said the decision was ''a world-class mistake'' and argued that mergers were needed to let the industry compete effectively in world markets.
He also took exception to McGrath's decision to exclude European steel imports from his calculations on market concentration.
Outgoing Attorney General William French Smith defended McGrath Monday, saying that ''law enforcement decisions in the Department of Justice will be made in the future, as they have in the past, on the basis of the facts and the law, without regard to how popular they may be inside or outside the government.''
On Tuesday, LTV and Republic were scheduled to present a revised merger plan to the Justice Department.
But last Friday another proposed steel merger, between United States Steel Corporation and National Intergroup Inc. was called off. US Steel chairman David M. Roderick blamed the decision on ''the Justice Department's inflexible posture.''
He claimed in a New York Times interview that the deal had to be canceled because the Justice Department ''put such onerous, economically punitive conditions on a solution that we obviously couldn't proceed.''