Records of hostile tender offers

The 1969 bid by Northwest Industries, Inc. for the B.F. Goodrich Company began the hostile takeover era for large American companies. In 1969, this bid was the largest non-governmental debt offering ever. In response to the Goodrich contest and others, Representative Wilbur Mills, Chairman of the House Ways and Means Committee introduced tax reforms. As a result of these reforms, cash became the only feasible medium of exchange for large hostile takeovers until the early 1980s. Then, Michael Milken, a bond trader with Drexel Burnham Lambert, purported to use “junk bonds” to finance hostile takeovers, in addition to leverage buyouts.

This collection focuses on the “hostile cash tender offer,” the most ferocious and controversial method used to gain control over a company. These offers usually took the target management by surprise, because the management had not put their company “in play” and were not negotiating to be acquired by another company or group. The hostile tender offer is distinct from other takeover methods because the “tender offer” was made over management’s head directly to the shareholders of the target company. This was done through ads in the newspaper, formally making a takeover offer to buy the stock for cash without mention of management’s recommendations. In more than 95% of the cases, the uninvited cash tender offer led to the target company losing its independence to either the first offeror or to another merger partner. The careful focus on the actual uninvited tender offer defines this collection and makes the creation of a comparable collection solely from the usual indexes difficult.

Edmund J. Kelly (b.1937) assembled this collection. He is a graduate of Columbia Law School where he was a James Kent Scholar and a member of the Law Review. As a partner in a Wall Street law firm, and later as vice chairman of an investment banking firm, he participated in several major takeover battles in the 1960s and 1970s. These included the successful defense of the B.F. Goodrich Company against Northwest Industries, Inc. in 1969, and the “white knight” victory of J. Ray McDermott over United Technologies for control of Babcock & Wilcox in 1977. Mr. Kelly is also the author of the “fair price clause,” the most widely used corporate charter provision to curb abuses of shareholders in takeovers. He has written The Takeover Dialogues, A Discussion of Hostile Takeovers (1987) and has contributed articles to legal journals.