Hostile takeovers not new to area businesses

7/9/2003

Toledo-area investors know the drill for takeovers. They've been there before - especially in the 1980s and early 1990s, when the region lost five Fortune 500 firms and another had to reorganize radically in order to avoid a hostile takeover.

Area investors know that the first offer is rarely the only one. Many takeover bids spur counteroffers from the takeover target, higher bids by the would-be acquirer, and perhaps the intervention of a “white knight” - another company viewed as a better merger partner.

Takeover offers can set in motion a number of actions, including shareholder lawsuits; company negotiations to borrow many millions or even billions of dollars to use as an anti-takeover defense fund; possible recapitalization to free up funds to sweeten the pot for shareholders to get them to remain loyal, and many times, investigations or caveats from government regulatory agencies (particularly in industries with anti-trust concerns).

The Toledo area got a rude introduction to hostile takeovers in October, 1981, when Mobil Corp. made an unsolicited bid of $3.4 billion for controlling interest in Marathon Oil Co., then based in Findlay. Marathon quickly activated a $5 billion credit line to defend itself against a hostile takeover. But U.S. Steel Corp. stepped in with an offer of $6.2 billion.

Marathon's board and shareholders ultimately accepted U.S. Steel's bid, although it was challenged by a dissident group of 2,000 shareholders seeking additional compensation.

Mobil went all the way to the U.S. Supreme Court to try unsuccessfully to block U.S. Steel's takeover. The legal battle ended in March, 1982, producing what was then the second largest takeover in corporate history.

Two years ago, reacting to shareholder pressure, U.S. Steel's successor, USX Corp., agreed to split its steel and oil businesses and to spin off Marathon as a separate publicly traded company, now in Houston. Findlay lost about 1,000 Marathon jobs over the next 12 years.

In 1986, Owens Corning was able to avoid a hostile takeover but only after taking painful and costly steps, and that same year Owens-Illinois, Inc., found itself in the middle of a takeover battle that ended with O-I no longer having publicly traded stock for more than four years.

Also during the 1980s, Toledo lost three other Fortune 500 companies - Sheller-Globe Corp., Questor Corp., and Champion Spark Plug Co. - through takeovers. Almost all traces of those firms vanished, including headquarters and research-and-development facilities.

Ten financial institutions were taken over in the 1980s and 1990s, including such local stalwarts as Ohio Citizens Trust Co., Trustcorp, Inc., and First National Bank of Toledo.

In recent years, the takeover wave continued in the region, with the takeovers of Chase Industries, Inc., in Montpelier; OHM Corp. in Findlay; Aeroquip-Vickers, Inc., in Monclova Township; Seaway Food Town, Inc., in Maumee, and Capital Bank in Sylvania.

Toledo would almost certainly have lost Owens Corning if Sanford Sigoloff, then chairman of Wickes Companies, had had his way.

He launched a $2 billion bid to take over the fiberglass firm, and OC retaliated by announcing a plan to restructure itself, putting itself $2.6 billion in debt to reward its shareholders with cash and debentures - and that led to selling off some of its segments and downsizing many of its facilities, including its Toledo headquarters.

The reward for Wickes was a $9.4 million profit on the OC shares it had accumulated.

By the end of 1986, Owens-Illinois received a $3.3 billion takeover bid from the New York takeover kings, Kohlberg Kravis Roberts & Co. At first, it seemed almost friendly: O-I's board met to consider the offer and hired two big investment banking firms as advisers.

But some shareholders quickly filed suits to block the takeover and within a month O-I directors rejected the buy-out offer and announced a plan to sell $1 billion in assets, cut costs, and increase management ownership of stock.

KKR responded by upping the ante to more than $3.6 billion, and O-I's board began to accept the inevitable.

The takeover, although painful to many O-I employees, had a happy ending. Kohlberg Kravis Roberts took the Toledo firm public again in 1991, and two O-I spinoffs whose shares are traded on the New York Stock Exchange are in Toledo - Libbey, Inc., and what is now Manor Care, Inc.

Ironically, Dana Corp., now the object of a hostile takeover bid, was itself a bidder for Champion Spark Plug Co. in 1989, an offer that probably led to Champion's takeover by another company.

Dana bid $590 million and said Champion's headquarters would remain in Toledo. Dana's bid was trumped by Cooper Industries, Inc., of Houston, which offered $707.5 million for 90-year-old Champion.

Cooper won Champion, but later peddled it to Federal-Mogul Corp. in Southfield, Mich.