Three years ago David R. Waters was sitting on top of the world.
As chief executive of Garfinckel, Brooks Brothers, Miller and Rhoads Inc. he had set a goal of boosting sales and profits by 20 percent a year and was meeting his objectives with the precision of the pin stripes on a Brooks Brothers suit.
Acquisition of the trendy Ann Taylor chain of women's shops had neatly balanced Brooks' classic menswear. Ann Taylor, Brooks and Garfinckel's were poised for dramatic growth.
Shaping up the weaker links in the chains -- the Harzfield, Miller & Rhoads and Joseph R. Harris stores -- and making a couple of additional acquisitions were next on the five-year plan.
But that isn't what's happened.
The Garfinckel corporation's neatly drafted agenda has been shredded by a small recession, big interest charges, family feuds and merger mania.
First the recession slowed sales, then interest rates made acquisitions too costly. Simultaneously, a dispute with the family that owned the biggest block of Garfinckel stock threw control of the company up for grabs.
Now only lawyers, luck and the loyalty of stockholders can keep Waters from having his glass-topped desk pulled out from under him.
Luck hasn't been with him lately. The lawyers are working overtime. Stockholders' loyalty is measured in dollars per share these days, and it's doubtful Garfinckel's shareholders can resist an offer as rich as the one made Friday by Allied Stores Corp. of New York.
Allied is offering $48 for a share of stock selling for only $34 the day before. Even $34 was a record high price. The $48 bid is more than three times what the stock was selling for little more than a year ago and almost twice the current book value of $25.90 a share.
Bigger companies than Garfinckel's have been gobbled up for less money this year, as a wave of takeovers has swept the country unchecked by record interest rates and unchallenged by government regulators.
Grafting Garfinckel's $470 million a year volume onto Allied's $2.3 billion business will do nothing to increase productivity or reindustrialize America. Allied probably will borrow the $210 million needed to buy Garfinckel's, draining more money out of already tight credit markets.
Unless Garfinckel's can find a secret weapon or a "white knight" to better Allied's offer, the biggest Washington-based retailer will become just another branch of a New York merchandising machine.
Prospects for the Garfinckel corporation remaining independent don't look good. The lawyers have fended off two previous takeover forays, but their job is more difficult this time.
Garfinckel's is the victim of what is known in takeover talk as a "bear hug" -- a pre-emptive surprise attack. Waters reacted with rhetoric rude even by the standards of corporate propaganda.
"Lying, deceitful and threacherous" is what he called Allied Chairman Thomas Macioce, charging Allied, "violated the standards by which decent men do business."
What Allied did was to listen carefully to Garfinckel's offer to sell its Miller & Rhoads chain in Richmond, then decide instead to buy the entire company. Precisely how much Allied learned about Garfinckel corportion while looking at Miller & Rhoads is unclear at this point.
Garfinckel people protest publicly about "inside information." Some question privately how Macioce, who sits on the board of several companies, could betray corporate confidences. Waters says Macioce on at least three occasions -- once before outside witnesses -- assured him Allied was not going to try to take over Garfinckel's.
If insider information was used, if legally binding vows were broken, Garfinckel's will certainly go to court. But breaking promises isn't exactly a capital offense under the rules of corporate takeovers.
Garfinckel's killer weapons the first time it faced an unfriendly acquisition were standards in the takover fighters' arsenal -- antitrust charges, accompanied by corporate mudslinging.
It was Gamble-Skogmo of Minneapolis that was trying to buy Garfinckel's then. Gambles is a highly diversified retailer, and Garfinckel attorneys were able to raise serious legal questions about the territorial and product line overlaps of the two firms. Gambles' Women's World stores, they noted, cater to the same large-size customers as Garfinckel's Catherine Stout Shoppes, and a merger would reduce competition in that market.
Garfinckel's also exploited the differences between the two firms. Gambles' chain of Mode O'Day low-price women's apparel shops had no customers in common with the Garfinckel or Ann Taylor stores. The suggestion was that no one at Gambles was sophisticated enough to wear a Brooks Brothers suit, let alone run the company.
There will be more talk like that in the next few weeks, although Allied is a considerably classier operation than Gambles.
Macioce for years has run a solid group of department stores, some of them gray ladies to be sure, but all of good breeding. Acquisition of Bonwit Teller in New York two years ago gave Allied a Fifth Avenue outlet, but Allied does more business in Manhattan from its Plymouth Shops catering to the "career girl" market.
Jordon Marsh in Massachusetts and Florida, Joske's in Texas, Bon Marche in the Northwest, Donaldsons in Minneapolis, Sterns in New Jersey and Gertz on Long Island are among the other Allied stores.
There are also the Herps, Field's and Hardy-Herpolsheimer stores in Michigan, Wren's in Ohio and half a dozen other stores no more conspicuous than the Miller & Rhoads chain that Allied was negotiating to buy.
Allied and Garfinckel's "were within a few days of signing a definitive agreement" for the sale of Miller & Rhoads, Garfinckel attorney Joseph Carter disclosed during a federal court hearing in Richmond Friday morning.
At the same time the offer for Garfinckel's was being announced in New York and delivered in Washington, Allied lawyers went to court in Richmond. At 9 a.m., they asked for a temporary restraining order blocking enforcement of a Virginia law meant to protect companies from unfriendly takeovers.
Regardless of what happens to Garfinckel's, the future of the Virginia takeover law is likely to be determined by the dispute.
Allied attorneys contend the state law conflicts directly with federal law and Securities and Exchange Commission rules; federal jurisdiction must prevail, they claim.
Federal law says a tender offer for the stock of a company must be made within five days after it is publicly announced and must be kept open for 20 business days. The state law, however, says the offer can't be made until at least 20 days after a request is filed with the State Corporation Commission. The SCC, after reviewing the offer, can order public hearings and delay the deal still further.
Allied officials acknowledge they have not complied with the Virginia law. Instead, they sued the SCC and Garfinckel corporation, asking the federal court to protect them from any disciplinary action by Virginia officials.
U.S. District Court Judge Robert Merhige Jr. declined to block state action immediately. Instead he scheduled a hearing for 5 p.m. Wednesday to decide whether to issue a preliminary injunction against the SCC.
One other complex legal issue stands in the way of the Allied takeover of Garfinckel's, a dispute over the 21 percent of Garfinckel's stock controlled by Wickes Corp. of San Diego, which bought Gambles last year.
When Garfinckel's and Gambles settled their previous fight, Gambles signed an agreement giving Garfinckel's the right to buy back the shares by matching any other offer made.
Now that Wickes owns Gambles, Wickes also must give Garfinckel's the right of first refusal on the shares, Garfinckel attorneys claim. Wickes disagrees and has signed an agreement to sell its stock to Allied, provided Allied acquires at least 30 percent of Garfinckel's from other shareholders.