1986 : Buyouts, Layoffs and Tremors on Wall Street
JANUARY Occidental Petroleum buys Midcon, an energy pipeline firm, for more than $3 billion. Union Carbide fights off GAF with a debt-heavy restructuring plan. Pennzoil and Texaco tussle in court over an $11-billion judgment against Texaco arising from its previous purchase of Getty Oil. BankAmerica suffers huge blows: a $4.75-million fine for failing to report large cash transactions, a $178-million fourth-quarter loss and elimination of its dividend. Former American Express President Sanford Weill and his “rescue” plan are spurned. FEBRUARY Wells Fargo agrees to buy Crocker National Bank for $1.08 billion. Japan extends auto export quotas in the face of growing protectionist sentiment in Congress. Coca-Cola agrees to buy Dr Pepper for $470 million--a month after Pepsico announces that it will buy Seven-Up for $380 million. Federal Trade Commission quashes both deals in the summer.
MARCH Airline merger mania takes off: Texas Air will buy Eastern Airlines for $600 million. TWA will buy Ozark for $225 million. Exxon and Chevron follow Atlantic Richfield in slashing their capital spending budgets in the face of tumbling oil prices. In the summer, Chevron says it will cut staff by 12%. Preston Martin says he’ll quit in April as vice chairman of the Federal Reserve Board. APRIL As oil prices continue to tumble, Vice President George Bush stirs up controversy by signaling that he’ll tell Saudi Arabia of the need for action on propping up oil prices. Bush on his trip said he only discussed the need for price stability. The advertising business sees its biggest merger to date: Needham Harper, BBDO and Doyle Dane Bernbach all agree to combine. MAY Burroughs offers to buy Sperry, which gives in only when price is raised to $4.8 billion. Merger creates nation’s second-largest computer company. Britain’s Saatchi & Saatchi ad agency will acquire Ted Bates Worldwide for $450 million, creating world’s largest agency. Wall Street is stunned by insider trading charges against prominent investment banker Dennis B. Levine for accumulating $12.6 million in illegal profits. Levine later pleads guilty. Lorimar agrees to pay $1.4 billion for six television stations from Kohlberg Kravis Roberts & Co. and an additional $405 million for a station from Wometco. Deals fall through in the fall. Pacific Lighting gets into retailing, agreeing to pay $886 million for Thrifty, West’s biggest drugstore chain. JUNE Ted Turner won’t be a movie mogul: He sells most of MGM Entertainment for $300 million back to Kirk Kerkorian and United Artists, which sold MGM to Turner in 1985. Turner retains the film library. Another rescue plan is assembled for Mexico, which will get $6 billion in loans from the IMF and World Bank. Marriott pays $501 million for food-service operator Saga. Famous Gimbels stores in New York are closed. May Department Stores makes a $2.7-billion run at Associated Dry Goods, which owns J. W. Robinson and Lord & Taylor. Associated caves in within a month. JULY Lockheed will pay $1.2 billion for Sanders Associates, a military electronics business. Dart goes after Safeway, bidding $3.6 billion, but yields to buyout by Kohlberg Kravis Roberts & Co. Knudsen Foods, West’s largest dairy, can’t pay milk suppliers and threatens to file for Chapter 11 bankruptcy protection. In September, Hughes Markets and Kraft agree to buy most of its operations in California and Nevada. The Supreme Court strikes down automatic spending cuts mandated in the Gramm-Rudman budget-balancing law, leaving it up to Congress rather than the comptroller general to enforce the bill’s provisions. LTV seeks protection from creditors in largest Chapter 11 bankruptcy filing ever. BankAmerica discloses a stunning $640-million loss for the second quarter. Director Charles Schwab bolts, seeks to buy back his discount brokerage. The Interstate Commerce Commission rejects proposed $2.6-billion merger of Santa Fe and Southern Pacific. Faced with charges of unfair trade practices, Japan agrees to raise the price of semiconductor chips.
AUGUST Hunt brothers of Texas put their Placid Oil into Chapter 11. General Motors kicks off low-interest financing war, offering 2.9% rates on three-year loans. SEPTEMBER Peat Marwick will merge with Klynveld Main Goerdeler to form world’s largest accounting firm. Campeau offers $2.47 billion for Allied Stores, operator of Brooks Bros. and Ann Taylor. Allied caves in when Canadian retailer in November offers $3.6 billion after acquiring a majority of Allied’s stock. Dow Jones industrial average falls a record 86.61 points. Debate mounts about volatility inspired by computerized program trading. Delta and Western Airlines will merge in $860-million deal. In CBS management shake-up, Thomas Wyman is forced to quit as chairman and chief executive. William S. Paley, founder and former chairman, and Laurence A. Tisch, whose firm is CBS’ largest shareholder, split the two top posts. Texas Air will buy troubled People Express and Frontier Airlines in deal ultimately set at about $280 million. Texas Air will become nation’s largest airline company. Coca-Cola sells its operations in South Africa to black South Africans. It is followed in the next few months by a wave of large corporations--GM, IBM, Kodak and Exxon among them--which pull out in varying degrees. A landmark tax reform bill passes both the House and Senate. It eliminates a host of deductions, reduces the number of tax brackets while lowering the top individual rate. Individuals will generally pay less in taxes; businesses will pay more. OCTOBER First Interstate kicks off $2.77-billion bid for BankAmerica. B of A rejects bid, dumps Chief Executive Samuel H. Armacost and brings back ex-chief A. W. Clausen as his replacement. As First Interstate presses its offer and raises it to $3.4 billion, bid turns more hostile. B of A rapidly sheds assets. Carl C. Icahn bids $8 billion for all of USX after assembling more than 11% of its shares. USX, formerly U.S. Steel, is already besieged by a steelworkers strike that has lasted three months. Lucky Stores will restructure to fend off raider Asher B. Edelman. Its Gemco unit will be closed, putting 14,000 employees out of work, and most of the stores will be sold to Target. IBM’s earnings tumble more than 25% in the third quarter, knocking stock for a loop. By December, IBM reports that 10,000 people have agreed to take early retirement. Sheik Ahmed Zaki Yamani is removed as Saudi Arabia’s oil minister. Replacement is Hisam Nazer. Rate on U.S. savings bonds is cut to 6% from 7.5%--the first change since 1982. London launches “Big Bang” deregulation of its securities market. Lear Siegler gets the first of several buyout bids from AFG Partners. After a subsequent deal with Wickes falls through, it settles on $2.1-billion buyout by Forstmann, Little & Co. NOVEMBER General Motors will shut 11 plants in the United States, laying off up to 29,000 workers. Plant in Van Nuys is spared. Sir James Goldsmith makes a run at Goodyear, offering $4.6 billion. He withdraws in November with a $93-million profit after Goodyear restructures. Wall Street speculator Ivan F. Boesky is charged with illegally making $50 million by trading on inside information. To settle, he pays a $100-million fine, is barred from securities business and agrees to plead guilty to one felony count. American Airlines will buy AirCal for $225 million. Ronald Perelman’s Revlon bids $4.1 billion for Gillette but pulls out later in the month after Gillette pays $558 million for his shares. Wickes Cos. agrees to buy textile maker Collins & Aikman for $1.2 billion. Deal follows unsuccessful bids earlier in the year for National Gypsum and Owens-Corning Fiberglas. The Limited, which had sought to buy Carter Hawley Hale in 1984, teams up with developer Edward J. DeBartolo Sr. to try again with a $1.8-billion bid. Suitors abandon the bid when Carter Hawley splits into two companies, one for specialty stores and the other for department stores. DECEMBER General Motors and Texas maverick H. Ross Perot part company. Perot, who joined GM’s board when he sold EDS to the auto maker, gets $700 million for his stock. Pacific Southwest Airlines agrees to merge with USAir for $400 million. Texas watches as its troubled banks merge--first Texas Commerce with Chemical New York for $1.19 billion, then RepublicBank with InterFirst for $571 million. By 1988, AT&T; will cut 27,400 jobs, 8.5% of its work force, and take a $3.2-billion charge. Record volume of 244.68 million shares are traded on the New York Stock Exchange. Manville Corp.’s plan for emerging from four years of bankruptcy protection receives court approval. Company control will be transferred to trustees for asbestos disease victims. Greyhound gets out of the bus business. OPEC agrees to cut production by 7% in first half of 1987, but dissenter Iraq is exempted. Despite accord, many wonder whether OPEC can achieve target of $18 a barrel. President Reagan announces drastic retaliatory duties on some European farm exports.
