Pennsylvania Gets Nation’s Strictest Anti-Takeover Law

Gov. Robert P. Casey on Friday signed the nation’s toughest anti-takeover law, saying it would discourage corporate raiders from stripping jobs and economic vitality from Pennsylvania.

Within hours, the law was challenged by two suits filed in federal court that claimed unconstitutional infringement on shareholder and investor rights.

Analysts expect that the law, which took effect immediately, will create ripples in boardrooms and legislatures throughout the nation.

For the first time in any state, raiders will be forced to surrender short-term profits from thwarted takeover attempts. The law also restricts the voting rights of raiders and preserves labor contracts when corporations change hands.

Hostile takeovers have cost Pennsylvania thousands of jobs and such corporate mainstays as Gulf Oil Co., which closed its headquarters in Pittsburgh after it was merged with Chevron Corp. The AFL-CIO estimates that 90,000 jobs were lost nationwide over the last decade because of mergers, takeovers and leveraged buyouts.

Casey signed the bill at the City Council chambers blocks from the corporate headquarters of Armstrong World Industries, the floor-covering manufacturer that the legislation was first drafted to protect.

Its enactment comes three days before Armstrong’s annual stockholder meeting, where the Belzberg family of Canada plans to wage a proxy fight to place four of its representatives on the company’s board.

A suit filed on behalf of the Belzbergs in U.S. District Court in Philadelphia alleges that the law conflicts with federal legislation and violates the First and Fifth amendments of the Constitution.