NEW YORK - Hostile takeovers have lost their stigma. Investment bankers pitch deals worth billions of dollars, and nobody blinks. Companies bathed in history like McDonnell Douglas and MCI have agreed to be bought out.
In that light, Hilton's $6.5 billion play for ITT Corp. shouldn't be much of a surprise. The rules have changed: It's eat or be eaten.
Back in the 1980s, when terms like "corporate raiders" and "leveraged buyout" entered the common lexicon, aggression was mostly a trait of the takeover artists, swashbucklers like Icahn, Goldsmith, Pickens. Corporations rarely pursued takeovers with the zeal they exhibit today, perhaps because they were too busy defending themselves.
The realities of competition 1990s style, though, began to change that as companies came to believe they had to be more efficient - and bigger - to survive in a smaller world. They began to merge, and their mergers begat more mergers, and so on, and so on. ...
Now, companies in merger-frenzied industries not only view combining as an option, but as a necessity. If they don't become buyers or sellers, they stand to slowly shrivel as others grow.
Hilton chief executive Stephen Bollenbach implied as much Monday after announcing his company's hostile bid for ITT, owner of Sheraton hotels and numerous casinos: "We want to be a leader in the consolidation of the gaming business." Investment bankers see it every day.
"More companies are looking and feel like they don't have an option," said Gregg Polle, a managing director in the mergers and acquisitions department of Salomon Bros.
One good example is the takeover battle for Conrail, the big East Coast railroad. CSX, a big freight carrier, signed an agreement to buy Conrail. Then, Norfolk Southern, another competitor, jumped in with a hostile bid of its own.
"If Conrail were bought by CSX, that had profound implications for Norfolk Southern," Mr. Polle explained. The winner stands to be the dominant freight carrier in the East.
Numerous deals driven by fear of being left behind helped push 1996 into the record books as the Year of the Merger, with about $650 billion in announced U.S. deals, according to Securities Data Co. Some of the most deal-frenzied industries were telecommunications, utilities and broadcasting. Banking, which saw heated action in 1995, also inked some notable combos.
The excitement has worked its way into Corporate America at large, like Bollenbach's hotel and casino business. Most experts expect it to continue into the foreseeable future. Size seems to be no object.
"It's getting hard to be shocked," said Kathryn Rudie Harrigan, a professor of business leadership at Columbia Business School. "I'm afraid we're getting jaded."
In days gone by, one shocker would have been Western Resources, a big Midwest utility. Late last year, it announced a hostile bid for ADT, the nation's biggest burglar alarm company. Earlier in 1996, a hostile Western bid broke up a friendly utility merger and Western is now in negotiations to buy its prey, Kansas City Power & Light.
The thing is, utilities NEVER make hostile bids. They've always been known as stable investments, with many stock owners simply counting on dividend payments. Deregulation changed all that, as it did in telecommunications.
Surprising friendly deals like Boeing buying McDonnell Douglas and British Telecom acquiring MCI, both pending, also highlight the new era. Who could've imagined McDonnell agreeing to be purchased by its archrival or feisty MCI bought by a British competitor with a staid reputation?
If massive corporate mergers have become de rigueur, aggressive deals may represent those with the greatest panache. They pit bankers who go for the throat with financial strategists specializing in defense.
Press releases laced with venom but cloaked with legal language find their way to newsrooms daily.
Expect ITT to put up a fight against Hilton. Bollenbach says he tried to open talks and was rebuffed. Meanwhile, ITT is a tough acquirer itself, amassing a huge collection of businesses before recently splitting in three. Its managers won't easily agree to giving up control.
One last point. Hostile deals, Polle notes, are successful more often today than back in the go-go '80s, when Carl Icahn, Sir James Goldsmith and T. Boone Pickens were at the top of their games.
Actually, Icahn is back in the fray, staging a complex fight for control of Marvel Entertainment, the comic-book creator controlled by financier Ronald Perelman. More often, though, hostile bids are likely to come from the blue bloods of corporate society. A few buyers from the recent past: IBM, AT&T, Johnson & Johnson.
Farrell Kramer reports on mergers and acquisitions for The Associated Press.