Anti-Takeover Bill Opposed by Administration

The Reagan Administration told Congress on Wednesday that it opposes legislation to impose new federal regulations to hinder hostile takeovers of undervalued corporations by corporate “raiders.”

Echoing the arguments of Texas oilman T. Boone Pickens Jr., the foremost raider of recent years, officials argued before the Senate Judiciary Committee that such takeovers enhance “economic efficiency” so long as they do not violate existing antitrust statutes.

“Our basic precept is that competition in the market for corporate control, like competition in other sectors of the economy, yields net social benefits,” said acting Assistant Atty. Gen. Charles F. Rule, temporary head of the Justice Department’s antitrust division.

Rule was seconded by Federal Trade Commission Chairman James C. Miller III, who said: “The correct solution may be less regulation rather than more.” So long as anti-competitive measures are screened out, Miller asserted, “it is clear that takeover activity generates net benefits for the economy.”

Both Miller and Rule said they opposed a measure sponsored by Oklahoma’s two senators, Democrat David L. Boren and Republican Don Nickles, that would impose a moratorium on oil industry takeovers such as the one that Pickens’ Mesa Petroleum attempted last fall against Bartlesville, Okla.-based Phillips Petroleum and the one he is now waging against Unocal.

Pickens himself was a witness, and his spirited defense of what he termed the “rights of stockholders--the real owners of the company” against “entrenched management” dominated the session.

“There is a need to shake these people up,” Pickens said of the managers of corporations whose market value has been allowed to slip below what their assets might bring if spun off and managed separately.

“You need to make them do the things they ought to do for the stockholders, who own the company,” he told Sen. Howard M. Metzenbaum (D-Ohio), an advocate of increased federal regulation of corporate stock tender offers.

Another witness, Michael C. Jensen of the University of Rochester’s Graduate School of Management, presented evidence that recent takeovers have improved efficiency, increased profits and in some cases forced sounder and more far-sighted management practices. Miller and Rule cited Jensen’s research in this field, which reflects the view of some economists that recent mergers have, in fact, been a sign of corporate health in the economy.

Both Administration officials agreed, however, that some of the defensive measures used by the managers of targeted companies to thwart takeovers--”greenmail” or “poison pills,” in Wall Street jargon--are harmful to the value of the company that they are ostensibly designed to defend. But further regulation of takeovers, they argued, would encourage defensive abuses by making more remote the likelihood of a better-run company--”by insulating inefficient and incompetent management from the discipline of the market for corporate control,” Rule said.

Both officials also made the point that more recent mergers are actually the opposite of the drift toward massive corporate conglomerates during the late 1960s and early 1970s.

“This streamlining is quite likely to be in the best interests of the firm and society in general,” Rule noted.