Carl C. Icahn, one of the corporate world's most aggressive raiders, today accused a Securities and Exchange Commission's advisory committee of effectively planning to eliminate takeovers altogether.
Calling the panel's draft of proposed changes in regulations a "manifesto for the entrenchment of mediocre management," he said "you would do away with 98 percent of all insurgency."
Last month, members of the advisory committee on tender offers voted tentatively to recommend that no investor could acquire more than 15 percent of a corporation without making a formal public tender offer for more stock.
The goal would be to protect small shareholders' interests by letting them know who is trying to take control of their company and giving them a chance to sell their shares. However, the Wall Street veterans who make up the committee also left in place some current practices that favor target companies.
Icahn, who has been involved in 12 corporate takeovers--and earned millions in the process--pictured himself as the "little guy" going up against management with the deck stacked in its favor. He philosophized that his activities make management more accountable and that without takeover threats, mediocre management persists, reducing productivity. Icahn's strategy has been to buy up 5 or 10 percent of a company's stock and then threaten a proxy fight unless management agrees to sell the company or to buy back his stock at a higher price. Some of the companies he has targetted are: Saxon Industries, Marshall Field and, most recent, Dan River Inc., the Danville, Va., textile giant. He made almost $8 million on the Dan River move.
Declaring "I'm no Robin Hood" and admitting he is happy to sell back, Icahn said nevertheless that management should not be allowed to buy back stock during a takeover fight, calling that an unfair advantage.
Icahn said that an acquirer should be able to purchase 15 percent of a company's stock on the open market. He should not then be obliged, as had been suggested at the committee's meeting, to make a tender offer for all the outstanding stock if he doesn't have the capital to do so. At the same time, Icahn said management should not be allowed to frustrate takeover bids by issuing stock or selling a company's assets once a tender offer has been made.
Icahn's prediction that the committee proposals would eliminate tender offers contrasted with that of the committee's chairman, Dean LeBaron, president of Batterymarch Financial Management in Boston, who said offers would probably increase.
Today's session, the penultimate before the committee makes its report to the SEC and Congress in July, was the first in which the general public was asked to air its views. Consequently, it was the most heated to date.
Icahn accused the committee of being one-sided by not having any shareholders like himself who had challenged management. His comments brought rebukes from both SEC Chairman John S. R. Shad and former U.S. Supreme Court justice Arthur Goldberg.
Goldberg, who was asked to join the panel after its formation to add an independent view, sharply criticized common takeover tactics. "I am against golden parachutes, selling crown jewels and Pac-Man defenses," he said. These colorful phrases refer to lucrative contracts designed to benefit executives forced out by a successful takeover, the sale of a company's assets to make it more attractive to potential purchasers, and defensive counter offers for an opponent's stock.
On the other hand, Assistant Attorney General William Baxter, head of the Justice Department's antitrust division, approved of golden parachutes in general and recommended that the panel not interfere with the status quo. Attorneys representing state security divisions decried any effort by the SEC to preempt state regulations, which are often more stringent in impeding takeovers.
Orestes Mihaly, chairman of the North American Securities Administrators Association, questioned the panel's basic premise that hostile takeovers are good for the economy. However, he was unable to produce any statistical evidence and asked for more time to study the issue. But LeBaron said the members had wrestled with these fundamental issues in the beginning and, being unable to find any data either, decided to press ahead to meet their July 8 deadline.