FTC Chairman Sees Benefit in Hostile Takeovers
The U.S. economy has benefited from corporations absorbing other companies through hostile takeovers, despite complaints that the mergers cause companies to break up and throw people out of work, the Federal Trade Commission chairman told Congress on Thursday.
FTC Chairman Daniel Oliver also told a congressional subcommittee that he was not disturbed by the estimated $177 billion spent on corporate takeovers last year and did not believe the presence of foreign goods in American markets was a problem.
“If it’s cheaper for consumers, then why should we pay more for goods made in America?” Oliver asked.
“In the case of a hostile takeover, for all the crying that may go on . . . the fact is that the share prices normally go up,” Oliver told the House Energy and Commerce subcommittee on transportation, tourism and hazardous materials.
Companies acquired in takeovers become more efficient, and no evidence has been produced to show that the prices of their products have gone up because of the mergers, Oliver said.
“The fact of the matter is that’s good for America,” Oliver said. “Our economy’s booming.”
That differed sharply with the opinion of Sen. Terry Sanford (D-N.C.), sponsor of a Senate bill restricting corporate takeovers, who told the subcommittee: “I don’t know of any worthwhile, redeeming feature of a hostile takeover.”
Sanford’s bill would restrict a corporate raider’s ability to finance the deal by using the target company’s assets. It also would limit access to the target’s pension funds, require repayment of quick profit gained from the sale of stock and demand the submission of an “economic impact statement” examining the effects a proposed merger would have on a company’s employees and bondholders.
“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 said.
“Frequently only the incumbent managers are hostile, and that is often because they expect to lose their jobs if the takeover succeeds.”
He objected to the use of such terms as “greenmail,” “junk bonds” and “raiders,” because of their “unsavory image.”
Oliver said takeovers frequently resulted in layoffs as the merged companies consolidated operations, sold off newly acquired subsidiaries and sought to become more efficient.
