ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Wednesday, January 29, 1997 TAG: 9701290088
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: NEW YORK
TYPE: ANALYSIS
SOURCE: FARRELL KRAMER ASSOCIATED PRESS
Hostile takeovers have lost their stigma. Investment bankers pitch deals worth billions of dollars, and nobody blinks. Companies bathed in history such as McDonnell Douglas and MCI have agreed to be bought out.
The rules have changed: It's eat or be eaten.
Back in the 1980s, when terms such as ``corporate raiders'' and ``leveraged buyout'' entered America's lexicon, aggression was mostly a trait of the takeover artists - swashbucklers like Icahn, Goldsmith or Pickens. Corporations rarely pursued takeovers with the zeal they exhibit today, perhaps because they were too busy defending themselves.
The realities of competition 1990s style, though, changed that as companies began believing they had to be more efficient - and bigger - to survive in a smaller world. They began to merge, and their mergers begat more mergers, and so on.
Now, companies in merger-frenzied industries view combining not only as an option, but as a necessity. If they don't become buyers or sellers, they stand to shrivel slowly as others grow.
Hilton Hotels Corp. chief executive Stephen Bollenbach implied as much Monday after announcing his company's $6.5 billion hostile bid for ITT, owner of Sheraton hotels and numerous casinos. ``We want to be a leader in the consolidation of the gaming business,'' he said. Investment bankers see it every day.
``More companies are looking, and feel like they don't have an option,'' said Gregg Polle, a managing director in the mergers and acquisitions department of Salomon Bros.
One good example is the takeover battle for Conrail, the big East Coast railroad. CSX, a freight carrier, signed an agreement to buy Conrail. Norfolk Southern, another competitor, jumped in with a hostile bid of its own.
``If Conrail were bought by CSX, that had profound implications for Norfolk Southern,'' Polle said. The winner stands to be the dominant freight carrier in the East.
Numerous deals driven by fear of being left behind helped push 1996 into the record books as the Year of the Merger, with about $650 billion in announced U.S. deals, according to Securities Data Co. Some of the most deal-frenzied industries were telecommunications, utilities and broadcasting. Banking, which saw heated action in 1995, also inked some notable combos.
The excitement has worked its way into Corporate America at large, like Bollenbach's hotel and casino business. Most experts expect it to continue into the foreseeable future. Size seems to be no object.
``It's getting hard to be shocked,'' said Kathryn Rudie Harrigan, a professor of business leadership at Columbia Business School. ``I'm afraid we're getting jaded.''
If massive corporate mergers have become de rigueur, aggressive deals may represent those with the greatest panache. They pit bankers who go for the throat against financial strategists specializing in defense.
Hostile deals, Polle notes, are successful more often today than back in the go-go '80s, when Carl Icahn, Sir James Goldsmith and T. Boone Pickens were at the top of their games.
Actually, Icahn is back in the fray, staging a complex fight for control of Marvel Entertainment, the comic-book creator controlled by financier Ronald Perelman. More often, though, hostile bids are likely to come from the blue bloods of corporate society. A few buyers from the recent past: IBM, AT&T, Johnson & Johnson.
LENGTH: Medium: 68 linesby CNB