The Minnesota Legislature on Thursday passed, and Gov. Rudy Perpich signed, a bill to help thwart a threatened hostile takeover of Dayton Hudson Corp., the giant retailer based in Minneapolis.
"The Legislature has crafted a bill that is balanced among the interests of shareholders, management, employees and the community," Perpich said at the signing ceremony.
The bill cleared the House on a 120-5 vote and the Senate by 57-0.
"I would characterize this as an emergency," said Senate Majority Leader Roger Moe before the afternoon opening of a special session to consider the bill.
Moe said the situation confronting Dayton Hudson probably was the most serious since the Legislature was called to its first special session in 1862, to deal with an Indian uprising.
Perpich called the special session Wednesday night, six days after it was requested by officials of Dayton Hudson, which employs 34,000 Minnesotans.
Dayton Hudson sought the session after learning that Dart Group Corp., a Landover, Md.-based retail group, had acquired a substantial stake in the company.
Perpich required agreement by key lawmakers from the Democratic-Farmer-Labor Party, which controls both legislative chambers, and Independent-Republicans before he would call the session.
After three days of hearings on proposals advanced by Dayton Hudson and supported by other corporations and business and labor organizations, lawmakers agreed late Wednesday on legislation that borrows heavily from an Indiana law, which was upheld by the Supreme Court in April, and other states' laws.
One major provision in the bill prohibits an investor that takes control of a company in a hostile takeover from selling any of the target company's assets for five years. That is expected to make lenders reluctant to finance such takeovers, which would be paid off by the sale of assets.
The bill also allows a company's board considering a takeover bid to take into account the interests of employees, customers, suppliers, the community and society, as well as the interests of stockholders.
Those provisions are retroactive to June 1.
The bill also includes two provisions that were not requested by Dayton Hudson but were endorsed by Commerce Commissioner Michael Hatch and Atty. Gen. Hubert H. Humphrey III.
One provision restricts the practice of "greenmail," the use of corporate funds to buy back stock from corporate raiders at premium prices. That provision, effective next March 1, would prohibit a company that is trying to buy out a raider from offering a premium price for more than 5% of its voting shares unless it got shareholder permission at a meeting or unless it offered the same price to all shareholders.
The other provision would prohibit the target company's executives from negotiating lucrative severance packages, called "golden parachutes," while they were considering a tender offer. That provision is effective the day after enactment.
Dayton Hudson, which owns the Target and Mervyn's chains, is one of the nation's largest general retailers, with sales of about $9.05 billion in its 1986 fiscal year.
In another development, federal officials reportedly are investigating whether stockbroker P. David Herrlinger, whose bogus offer for Dayton Hudson shocked Wall Street on Tuesday, told his stockbroker brother of the offer beforehand.
The Securities and Exchange Commission is trying to determine whether David Herrlinger told his brother, Thomas Herrlinger of Albuquerque, N.M., of the phony offer before it was announced, the Cincinnati Enquirer reported.
Separately, three New York investors filed a federal lawsuit Thursday seeking unspecified damages from Herrlinger on the grounds they lost money because of gyrations in Dayton Hudson's stock price after the phony offer.
In the class-action lawsuit filed against David Herrlinger, the three investors, Jacob and Sandra Elbogen, of Brooklyn, N.Y., and Joseph Pascal, listed as a resident of New York State, said they purchased a total of 600 Dayton Hudson shares Tuesday after hearing of Herrlinger's takeover attempt.