Big Firms Join Bargain Hunters, Buy Back Shares : Dart Bid for Dayton, Other Merger Proposals Collapse in Wake of Market’s Skid

Dozens of the nation’s largest corporations rushed into the stock market on Tuesday as they announced massive plans to buy back huge volumes of their own stock at bargain prices in the wake of Monday’s unprecedented plunge in stock prices.

It was also a day on which deals fell apart. Dart Group abandoned a $6-billion drive to take over retailer Dayton Hudson. TWA chairman Carl Icahn dropped plans to take the airline private, and a $2-billion cable-TV merger was suspended.

In moves that helped to stabilize share prices, Ford Motor Co., Litton Industries, General Motors, RJR Nabisco, Allegis, Citicorp and MCA, among many others, announced plans to buy back millions of shares.

Defensive in Part

In an interview with reporters in New York, Donald Petersen, Ford Motor chairman, said the auto maker had accelerated its share repurchase efforts because the nose dive in share prices “provided an opportunity to buy (shares) at a good price.”

The moves by corporations to repurchase shares were welcomed by some observers, who expected the efforts to restore some confidence in the stock market. “Stock buybacks are always good news. Obviously these companies are taking advantage of depressed values, but hopefully, it indicates optimism in the long-range potential of the company,” said Tom Aceituno, a Sacramento lawyer who advises a number of pension funds.

“Every company should do it,” said Minneapolis investor Irwin L. Jacobs, chairman of Minstar Corp. “It’s good to restore (investor) confidence, and it’s a good investment for these companies, pure and simple.”

The buybacks were also viewed in part as a defensive measure by corporations that might be attractive takeover targets at depressed share prices.

Few companies disclosed how many shares they bought back from shareholders Tuesday, although one company, Denver-based US West, said it had repurchased more than 200,000 of its shares.

At AFG Industries in Irvine, Gary Miller, vice president and treasurer, said the glassmaker is launching a buyback because it believes “the value of our shares isn’t being reflected in our stock price. Our business is fundamentally strong, and we think our shares are an excellent investment.”

“I’m surprised everyone isn’t doing it,” said Maurice J. Scanlon, financial vice president at Hilton Hotels in Beverly Hills, which also announced a repurchase program Tuesday.

Joining the corporations on a buying spree were investors who viewed the crash in share prices as a chance to accumulate shares cheaply. Jacobs said the decline in share prices, if it continues, would not only encourage more repurchase programs, but also attract corporate raiders looking for bargains. “If things stay the way they are, we are going to see a wave of takeovers, no doubt about it. Companies are selling for a fraction of the value that existed. It is a grand opportunity for those who can take advantage of it.”

For Tampa, Fla., investor Paul Bilzerian, the stock market crash this week provided “the buying opportunity of a lifetime.” While many investors were dumping stocks Monday and Tuesday, Bilzerian was accumulating large blocks of shares at what he considers bargain prices.

“I’ve been waiting for this for a year,” Bilzerian said in a telephone interview Tuesday. Bilzerian, a takeover specialist who once tried to buy Hammermill Paper Co., said he had already acquired a stake in one company that he wouldn’t identify but that he considers a prime takeover candidate.

“This is the healthiest development for deal opportunities that you can come across,” a jubilant Bilzerian said.

Others who have been active players in mergers and acquisitions in the past said rising interest rates and the losses suffered by some investors might dampen instead of fuel takeover fever. Richard J. Riordan, a Los Angeles lawyer who has been active in the merger field and participated in the refinancing of Mattel, said he anticipated a decline in merger activity.

“I can argue either way, but my intuition tells me that when the market goes down, it has a detrimental effect on merger activity,” Riordan said. With lower share prices, “you can’t look forward to taking a company public later, and without that financing, it makes it harder to buy.”

But as the bargain hunting progressed for some on Tuesday, a number of pre-crash mergers unraveled. This is because many investors had offered to buy shares at prices that now greatly exceed the market. Additionally, an increase in interest rates makes financing more difficult to obtain.

The Dart Group, based in Maryland, on Tuesday sold 1.6 million Dayton Hudson shares at a huge loss and called off its four-month quest for retail giant Dayton Hudson. The Dart Group expects to take a $70-million after-tax loss on its Dayton Hudson stake.

“No one likes a loss,” said investor Robert M. Haft, who noted the Dart Group was still in good shape and would have $400 million in cash after disposing of all its Dayton Hudson stock. Haft said he was looking forward to when “current chaotic market conditions will change and there will be considerable business opportunities.”

In New York, Icahn called off the proposal he made just four days ago to take Trans World Airlines private, citing market conditions. Icahn, chairman of Trans World, had offered to pay shareholders not affiliated with him $20 in cash and $25 in subordinated debentures.

Later in the day, United Artists Communications and United Cable Television said they suspended negotiations over a proposed $2-billion stock swap merger that was announced Oct. 16 and would have created one of the biggest cable companies in the nation.

In an unusual turn of events, GAF Corp. said it would buy back 21% of its shares, apparently at prices in the $35 range. Last week, the Wayne, N.J., chemical and building products concern had rejected as inadequate a $66.50 takeover bid from a group led by its chairman, Samuel J. Heyman.

The decline in share prices also dampened plans by some firms to sell shares. Nortek Corp., a Rhode Island firm, said it canceled plans to spin off its Dixieline Products do-it-yourself home decorating retail chain due to market conditions.

“This is the kiss of death for new issues,” said Norman G. Fosback, a Fort Lauderdale, Fla., stock market newsletter publisher. He said companies selling shares to the public for the first time won’t in most cases be able to get a good price for their shares. “Investors are skittish, especially about more speculative investments.”