Legality of BAT Bid Questioned by Lawmakers
A group of 200 members of Congress asked Secretary of State James A. Baker III to raise the issue of possible U.S. securities laws violations in Sir James Goldsmith’s hostile bid for BAT Industries.
Sen. Mitch McConnell (R-Ky.) Thursday released a letter signed by many prominent Democrats and Republicans expressing concern that the $21.3-billion takeover bid was designed to circumvent U.S. takeover laws.
“We find it particularly disturbing that this highly leveraged deal has been designed to avoid the U.S. securities laws and to ignore the rights of Americans that hold shares in BAT through American depository receipts,” the letter said.
In a statement issued late Thursday, Goldsmith said he was “shocked that 200 people would sign a letter attacking us.” And he took issue with critics’ claims that that the proposed purchase would result in the loss of U.S. jobs.
“Our history of acquisitions in the United States demonstrates that this has resulted in job creation and not job loss,” Goldsmith said.
This is not Goldsmith’s first run-in with Congress. During his 1986 attempt to acquire Goodyear Corp., the flamboyant Anglo-French raider was grilled by members of Congress during hearings on takeovers.
Avoiding U.S. Mail
In the letter to Baker, the legislators did not specify which securities laws the bid might violate.
However, a congressional source said they wanted to make sure the Securities and Exchange Commission did not allow Goldsmith to circumvent any U.S. securities rules by his attempt to exclude U.S. shareholders from the deal.
He said the takeover group had tried to avoid U.S. regulations as far as possible including the avoidance of using U.S. mail. About 5% of BAT shares are held by 2,200 American shareholders who would not be needed by Goldsmith to accomplish the takeover and therefore might exclude the deal from U.S. jurisdiction.
The members of Congress said their concern arose from the possible losses to U.S. shareholders and the possible loss of jobs at BAT’s U.S. companies resulting from a takeover. About 55,000 Americans are employed in 40 states by the company’s U.S. subsidiary, Batus Inc.
“Sir James, who has a reputation for breaking up successful companies, is thumbing his nose at American interests and has created a political outcry,” McConnell said in a statement.
Prominent Lawmakers
Goldsmith’s acquisition vehicle, Hoylake Investments Ltd., plans to sell most of BAT’s businesses except for its core tobacco operations. BAT’s American assets, including the Saks Fifth Avenue and Marshall Field stores, the Farmers Group insurance firm and its paper producers, have been valued by analysts at about $7 billion.
“This proposed deal looks like takeover-mania at its worst. Too many large investors have used one simple formula to become even richer: saddle healthy companies with long-term debt in order to make short-term profits,” said Sen. Wendell Ford (D-Ky.).
Earlier this week, Goldsmith offered to put the U.S. insurance operations under an independent trust to avoid a change of ownership that would require the approval of insurance regulators in several states.
The letter to Baker was signed by several prominent lawmakers, including Senate Republican Leader Robert Dole of Kansas, Senate Foreign Relations Committee Chairman Claiborne Pell (D-R.I.), House Foreign Affairs Committee Chairman Dante Fascell (D-Fla.) and House Banking Committee Chairman Henry Gonzalez (D-Tex.).
