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REP. MARKEY (D-MASS.) MONITORING REVLON BID FOR GILLETTE; HOSTILE TAKEOVERS AND INSIDER TRADING ATTRACT CONGRESSIONAL INTEREST IN OVERSIGHT AND LEGISLATION

Executive Summary

Rep. Markey (D-Mass.) is following the litigation and government regulatory activity in the takeover wars -- especially Revlon's attempt at a hostile takeover of Boston-based Gillette. Other members of the of the Massachusetts delegation are also watching the Gillette v. Revlon case. Aides to Sen. Kennedy (D) and Rep. Atkins (D) say the legislators are examining the dispute and are eager to participate in any oversight and legislative activity as it develops. Gillette's corporate headquarters are located in Boston, and a major plant is situated in Andover, Mass. Markey has a broader interest in the takeover issue as well: he is in line to chair the Telecommunications, Consumer Protection, & Finance Subcommittee of the Energy & Commerce Committee. Formerly chaired by Senator-Elect Wirth (D-Colo.), the subcommittee is in the position to conduct hearings and propose legislation on the general issue of hostile takeovers and insider trading. Capitol Hill pressure occasionally can influence a takeover fight -- particularly when wider public attention is being focused on the activity. In 1977, for example, Becton Dickinson successfully brought congressional aid in its fight versus Sun Oil. The broader issue at that point was the reinvestment of oil profits from the shortage years. Several other legislators have also expressed concern about the recent wave of reports regarding insider trading and hostile takeover bids and have indicated that legislative activity will begin early in the 100th Congress. In fact, the lead House player on the issue is Rep. Dingell (D-Mich.), who has directed his Energy & Commerce Committee staff to follow the Securities & Exchange Commission investigations into alleged cases of corporate raiding and insider trading. The chairman hopes to hold hearings as promptly as possible after the start of the new Congress without jeopardizing the investigations. The timing of Revlon's offer makes the case almost certain to be included in any hearings Dingell conducts on the general issue. The Michigan Democrat will consider legislation to remedy any inadequacies revealed by the investigations in regulation, penalties, or procedures involved in corporate takeovers, his staff said. Dingell feels takeovers and junk bonds are "clearly under-regulated." Hearings are certain to be scheduled in the Senate, where Sen. Metzenbaum (D-Ohio) is expected to chair an Antitrust Subcommittee of the Judiciary Committee. The Ohio Democrat has expressed particular concern about Sir James Goldsmith's bid to acquire Goodyear, which is based in Akron. Rep. Rodino (D-N.J.) also has gotten involved in the hostile takeover issue. On Nov. 18, the chairman of the Monopolies & Commercial Law Subcommittee of the House Judiciary Committee held a hearing on Sir James Goldsmith's attempt to seize control of Goodyear. The congressman is said to be considering further hearings next year, although he is not expected to hold additional hearings before the new Congress convenes. However, the Goldsmith case is now moot, since the British takeover specialist dropped his bid for Goodyear on Nov. 20. Rodino's interest is not limited to investigative hearings. He asserted that "Congress will not stand idle" if the Administration does not take action against takeover abuses. The New Jersey Democrat reportedly has retained interest in a bill he introduced in the spring of 1985. The bill would establish a study commission to examine current laws, business practices, and leislative options over a two-year period, during which a moratorium would be placed on hostile takeovers. During hearings on the unsuccessful Cooper bid for Rorer last year, Rodino asserted that "consumers, employees, and stockholders are all best served if management is able to focus on its primary task: maximizing a firm's income potential through innovation and investment in areas in which the firm has expertise." On the other hand, Rep. Foley (D-Wash.), who is expected to become House majority leader next year, said "it is doubtful we will pass new legislation." The $100 mil. in fines levied on Boesky indicate that the SEC has sufficient enforcement authority, Foley said. In addition, he continued, Congress usually demonstrates "reluctance in trying to interfere in the acquisition and merger problem." Even with bipartisan interest among legislators, any bill to restrict hostile takeovers would face strong opposition from the White House. The Administration has expressed an aversion to legislation that would interfere with corporate mergers and has said such activities make corporations leaner, strengthen and consolidate them, and better prepare them for international competition.
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