Something is wrong in the world of mergers and acquisitions.
Investment bankers, lawyers, stockholders, corporate-takeover specialists, employes, community leaders and legislators are worried.
The reason is simple: The pace of activity and the size of mergers have exceeded our ability to determine whether we are witnessing the natural restructuring of basic industries or, instead, the costly dismembering of many of America's largest corporations, including some that are managed efficiently.
The debate has moved outside the world of corporate boardrooms and Washington lobbyists and into the homes of millions of Americans, with network talk shows and general news magazines shining their spotlights on the major players.
Many financial experts believe that the takeover game is out of control, but there is little agreement about what -- if anything -- needs to be done by Congress or anyone else to slow things down.
A House subcommittee headed by Rep. Timothy Wirth (D-Colo.) will resume hearings today to try to determine whether federal legislation would be the best solution to problems caused by the dramatic increase in mergers.
Whatever its conclusion, it is unlikely that any comprehensive legislation will be introduced until late this year or sometime in 1986, congressional sources said.
The witnesses appearing at the hearings today are involved in the latest highly publicized takeover battle, the fight for control of Phillips Petroleum Co.
Those scheduled to testify include T. Boone Pickens Jr., chairman of Mesa Petroleum Co., who put Phillips into play by purchasing a large stake in the company, which he eventually agreed to sell back to Phillips for an $89 million profit, and Carl Icahn, the corporate-takeover specialist who has said he will launch a tender offer for Phillips if certain conditions are met, and other principals in the fight.
The debate over takeovers has included verbal attacks on corporate executives who use antitakeover strategies that often seem designed more to preserve their jobs than to serve the shareholders by increasing the stock prices of the companies.
The fear of hostile takeovers has fueled an increase in the adoption of antitakeover techniques by corporations recently.
Some, such as the fair price ammendment adopted by Mobil Corp. last week, guaranteeing all of the company's stockholders the same price for their shares in a merger, appear to be in the best interest of both stockholders and management.
But other strategies appear to demonstrate that the interests of stockholders and corporate executives are not served equally.
In cases where management and directors own a small percentage of stock, management may have a strong personal interest in taking steps to prevent a takeover to preserve its power, even if doing so hurts the stock price.
Despite the company's valiant efforts to argue that it had proposed the acquisition primarily for offensive reasons, Wall Street analysts have attacked the latest billion-dollar deal, the $1.25 billion acquisition of Stauffer Chemical Co. proposed last week by Chesebrough-Pond's Inc., as an example of a costly maneuver designed to prevent a takeover bid.
They argue that one of the main reasons Chesebrough wants to buy Stauffer is to weaken its own balance sheet, because its debt-to-total-capital ratio will jump from 45 percent to 70 percent if the deal is completed.
Chesebrough officials said they hope to return the ratio to 45 percent eventually.
By using up its borrowing capacity, Chesebrough executives will reduce the chances that a raider or competitor will attempt an acquisition because the company will be arguably less attractive.
The top 29 officers and directors of Chesebrough own less than 0.5 percent of the company's stock, according to its 1984 proxy statement.
When the deal was announced last week, Chesebrough stock dropped 3 7/8 to 33 1/2, and it closed yesterday at 33 5/8.
The company's board of directors voted last year to purchase 1.8 million of its shares from Carl Icahn and also agreed to buy Polymer Corp., another company that Icahn controls, if Icahn would agree not to threaten the company with a takeover bid.
Would the directors and executives have made the same decisions if they were major stockholders?