Takeovers Not ‘Hostile’--FTC Chief

The chairman of the Federal Trade Commission today defended so-called “hostile” takeovers, saying such mergers and acquisitions are good for the economy.

But Rep. Thomas A. Luken (D-Ohio) accused FTC Chairman Daniel Oliver of being more concerned with the interests of shareholders and corporate raiders than with those of consumers, employees and communities affected by the takeovers.

“It is a misnomer to call such a takeover effort ‘hostile’; incumbent shareholders are usually happy to sell their shares at a premium to the acquiring firm,” Oliver testified today before the subcommittee chaired by Luken. “Frequently only the incumbent managers are hostile, and that is often because they expect to lose their jobs if the takeover succeeds.”

Luken said $177 billion was spent last year on mergers and acquisitions in the United States and asked Oliver if he was concerned by that.

“No,” Oliver replied.

Oliver said takeovers frequently result in layoffs as the merged companies consolidate operations and try to become more efficient. However, he added that employment is not a concern of the FTC and that undue attention has been paid to that aspect of takeovers.

“The important policy point is rather that free and unfettered competition for the control of corporations and the assets they own is highly desirable, even essential, to a vigorous and healthy economy,” Oliver said. “Takeover attempts are launched because the bidder believes that the value of the target’s stock has been depressed by poor management.”

Oliver’s remarks were addressed to the Energy and Commerce Committee’s subcommittee on transportation, tourism and hazardous materials, which is conducting hearings on mergers and acquisitions.

He objected to the use of such terms as “greenmail,” “junk bonds” and “raiders” because of their “unsavory image.”

Luken pointed out that in his testimony, Oliver referred to consumers as a “special interest,” which also is taken to be a pejorative term.