1988: The Year in Business

JANUARY A presidential commission headed by Nicholas F. Brady issues a call for stock market reform. Its report on the stock market crash of October, 1987, recommends “circuit breakers” to limit price movements, new rules for buying securities on credit and other measures. Swiss pharmaceutical giant Hoffmann-La Roche bids $4.2 billion for Sterling Drug, the maker of Bayer aspirin, but weeks later Eastman Kodak wins Sterling for more than $5 billion. The American subsidiary of Britain’s BAT Industries offers $4.2 billion to buy Farmers Group. After months of resistance, the Los Angeles-based insurer agrees in August to be acquired for $5.2 billion by the tobacco, retailing and paper conglomerate. Campeau Corp. of Canada offers $4.2 billion for Federated Department Stores, owner of Bullock’s, Bloomingdale’s, Ralphs Grocery and others. R. H. Macy & Co. joins the bidding, but Campeau eventually wins in April with a $6.6-billion bid and an agreement to sell Bullock’s and other units to Macy. FEBRUARY Japan makes another controversial move in the United States. Japanese-owned Bridgestone Tire offers $1.25 billion for 75% of Firestone’s tire operations. Italy’s Pirelli later enters the bidding, but Bridgestone in March wins all of Firestone for $2.6 billion. California First Bank, controlled by Bank of Tokyo, will acquire Los Angeles-based Union Bank for $750 million. Deal closed in October. Ford Motor Co. reports 1987 profits of $4.6 billion, the largest ever in the auto industry. MARCH Hollywood entrepreneur Burt Sugarman vies for Media General with a $1.7-billion offer, but the publishing company successfully resists the drawn-out takeover battle. Merv Griffin enters the bidding for Resorts International, delaying Donald J. Trump’s effort to take over the casino firm. In April, they agree to split up Resorts’ assets. Donald J. Trump buys New York’s famous Plaza Hotel for $390 million. APRIL Texaco pays $3 billion to settle a years-old dispute with Pennzoil over the purchase of Getty Oil and emerges from Chapter 11 bankruptcy protection. Lucky Stores becomes the subject of a $2.4-billion buyout deal with Gibbons, Green, van Amerongen. In May, however, it agrees to be taken over by American Stores, owner of Alpha Beta, for $2.5 billion. Federal regulators launch an unprecedented plane-by-plane safety inspection of Eastern and Continental airlines and the management fitness of their owner, Texas Air. In June, the government issues an essentially clean bill of health. MAY Major banks raise their prime lending rate to 9% from 8.5% Lorimar Telepictures will be acquired by Warner Communications for $1.2 billion. Publishing house Macmillan receives a $1.6-billion bid from billionaire Robert M. Bass. But British entrepreneur Robert Maxwell, after a mighty struggle, gets it for himself in July at a price of $2.5 billion. JUNE Federal officials disclose what appears to be the biggest investigation ever of suspected fraud and secret data trafficking by defense contractors and consultants in their dealings with the Pentagon. No indictments are returned by year’s end, however. Texaco agrees to sell a half-interest in some of its refining and marketing operations to Saudi Arabia for $1.28 billion in cash and oil. It would be the largest acquisition of American oil operations by an OPEC member. JULY Major banks raise their prime rate to 9.5% from 9%. Roy E. Disney announces that his Shamrock Holdings owns 8% of Polaroid’s stock. A takeover bid of $2.3 billion is made in August but Polaroid resists. The battle continues. SCEcorp, owner of Southern California Edison, makes a bid for San Diego Gas & Electric. After initial management resistance and a public outcry in San Diego, SDG&E; agrees in December to be acquired for $2.4 billion. Henley Group gives up on a 2 1/2-year effort to gain control of the Santa Fe Southern Pacific transportation company. An MGM/UA plan to spin off the MGM studio collapses. AUGUST Congress passes a sweeping trade bill that broadens power to retaliate against unfair trade practices and gives workers 60 days’ notice of plant closings. Insider trading scandal breaks over individuals getting an advance look at an influential Business Week column. Money costs go up as the Federal Reserve Board raises the discount rate by a half-point to 6.5%. Prime rate also goes up a half-point to 10%. Rupert Murdoch pulls off the biggest publishing deal ever by buying TV Guide, Seventeen magazine and the Daily Racing Form for $3 billion from Walter H. Annenberg. Nippon Mining, in the fourth-largest Japanese acquisition of an American company, acquires Gould for $1.1 billion. After a nine-month wait, Vons gets government approval to buy Safeway’s Southern California grocery stores and begins immediately to merge the operations. SEPTEMBER Rescuing the biggest thrift ever, regulators pledge $2 billion in assistance as American Savings & Loan is acquired by billionaire Robert M. Bass, who is to put up $550 million. Terms are later modified; deal is completed in December as estimates of rescuing troubled S&Ls; escalate to $100 billion. Drexel Burnham Lambert is hit with fraud charges by the Securities and Exchange Commission. The 184-page complaint charges insider trading, stock manipulation and other illegalities. The Hunt brothers of Texas, once among the richest people in the world, file for personal bankruptcy protection. Inter-Continental Hotels chain is bought by a Japanese company, Seibu Saison Group, for $2.27 billion. OCTOBER The Pillsbury doughboy has a fight on his hands as Grand Metropolitan seeks to take over the food company. Pillsbury finally submits in December for $5.68 billion. Steven P. Jobs brings out his new computer to generally rave reviews for its music, sound and graphics capabilities. More takeover turmoil in the food business. Philip Morris succeeds in its $13-billion takeover bid for Kraft. Disclosure of a possible management buyout of RJR Nabisco sets off a bidding war for the company; investment firm Kohlberg Kravis Roberts ultimately wins at a price of nearly $25 billion. It is the biggest corporate transaction ever. Sears plans an overhaul, buying back $1.6 billion of its own stock while selling the landmark Sears Tower in Chicago and part of the Coldwell Banker real estate unit. NOVEMBER Californians vote to slash their auto rates by passing Proposition 103. Insurers challenge the the rate-cutting provisions in court. A U.S.-Canada free trade agreement is assured after Canadian Prime Minister Brian Mulroney is returned to office with a Progressive Conservative majority in Parliament. OPEC works out an oil-production accord, the first in a long time. DECEMBER Banks raise their prime lending rate to 10.5% from 10%. The mammoth contract to modernize the federal government’s phone system goes to AT&T; and U.S. Sprint. Project ultimately could be worth $25 billion. A Japanese stock-trading scandal widens, leading to the resignations of the nation’s finance minister and the chairman of Nippon Telegraph & Telephone. ZZZZ Best founder Barry Minkow is convicted on securities fraud and conspiracy charges arising from the collapse of his San Fernando Valley carpet-cleaning firm. Federal Express will buy Tiger International, the big Los Angeles-based air freight company, for $880 million. Drexel Burnham Lambert, the controversial investment firm that built a reputation for “junk bonds” and takeovers, agrees to plead guilty to six felonies and pay a $650-million fine to settle a federal investigation of the firm’s trading activities. Settlement leaves key Drexel trader Michael Milken essentially alone to fight an expected indictment. Takeover tactician Paul A. Bilzerian is indicted on charges of conspiring to hide purchases of stock in four companies.