Telecommunications, Consumer Protection, and Finance Subcommittee, letter, dated December 5, 1983, from Chairman Wirth to organizations, State officials, associations and individuals re adequacy of current Federal regulation of tender offers-Continued Individuals and corporations-Continued Telecommunications, Consumer Protection, and Finance Subcommittee, letter, dated July 9, 1984, from Chairman Wirth to organizations and indi- viduals re comments on H.R. 5693 as amended, on H.R. 5972 or on other proposals that should be considered during the committee markup of the APPENDIX The materials in this appendix are the responses from two letters that were submitted by Hon. Timothy Wirth on December 5, 1983 and July 9, 1984 dealing with the adequacy of current Federal regulation of tender offers and comments on H.R. 5693 and H.R. 5972 on other proposals that should be considered during the subcommittee markup of the legislation. The Subcommittee on Telecommunications, Consumer Protection and Finance, which I chair, has jurisdiction over the securities laws and the capital markets. As part of our continuing review of central issues related to the future of our capital markets, in early 1984 we will focus on issues relating to tender offers. I am writing this letter to ask you to participate in a comprehensive review of the adequa cy of current federal regulation of tender offers. The American capital markets today are liquid, (1) In Yet another public policy dimension is involved when a "hostile" tender offer is the means employed to effect a business combination. The merger battle itself gives rise to issues which relate not only to economic efficiency, or whether a merger or acquisition will impede competition. a hostile takeover, basic questions of fairness -- to shareholders, labor, pension fund recipients, management, and the affected community come into play. While not easily defined, the issue of fairness is often at the center of the public policy debate. - In 1982, the unrestrained warfare between Bendix and Martin Marietta raised an outcry from members of the public, government officials and even some of the biggest players in Wall Street's merger battles. In response to heightened public concern, the Securities and Exchange Commission formed an Advisory Committee on Tender Offers, which began its work in February of this year. In July, the Committee issued a series of recommendations. After receiving the report, Senator D'Amato and I agreed that the issues were of such significance that a joint review was merited. Accordingly, the Senate Subcommittee on Securities, which is chaired by Senator D'Amato, and the House Subcommittee on Telecommunications, Consumer Protection and Finance will hold joint hearings on the issues early in 1984. In preparation for those hearings, I am soliciting the views of leaders of the business and investment community, government, consumer groups, labor, and others. While the SEC Advisory Committee report focuses primarily on the tactics and mechanics of tender offers, it is a useful jumping off place to begin the debate on these broader issues. The Advisory Committee report represents the thinking of top merger experts. I have enclosed a listing of the recommendations contained in the report and am asking that you indicate your views on each of the recommendations. As you develop your comments, I urge you not to confine yourself to the recommendations of the report if you believe other issues merit consideration. For example, noticeably missing are recommendations relating to the impact of takeovers on employees and local community interests. In addition, some commentators have noted that the report does not address the issue of the "inherent coercion" of target company shareholders, and the emphasis on speed under current tender offer regulation. Please comment on any issues you believe either were not addressed in the Advisory Committee's recommendations, or for which the Advisory Committee did not recommend remedies that, in your view, are adequate to address abuses. So that we may have the benefit of your views prior to the commencement of the hearings, I am requesting that you reply by no later than January 30, 1983. If you have questions concerning your participation in this review, please contact Marti Cochran, securities counsel for the Subcommittee, or Jane D'Arista or Darina Chlumecky, economists for the Subcommittee, at (202) 225-9304. I can think of few other issues before the Congress which affect such a wide spectrum of the public including labor, local communities, financiers and the business community - as well as shareholders, whose participation in the securities markets make it possible for businesses to raise capital and to have fair and liquid markets for their securities. I want to thank you in advance for participating in this important review. With best wishes, Enclosures: Sincerely yours, Timothy E. Wirth Attachment Attached is a listing of the recommendations of the SEC Advisory Committee on Tender Offers. With respect to each recommendation, please indicate whether you agree or disagree and, if you believe an explanation would be useful, stating the reasons for your views. If you do not have views on some recommendations, please feel free not to respond to those. I would particularly appreciate your response on certain major issues. With respect to the broad economic question of the usefulness of takeovers, the Advisory Committee concluded that takeovers and related transactions are a "valid method of capital allocation." (Recommendation 1) In July of this year, House Judiciary Committee Chairman Rodino, along with Representative Seiberling, introduced legislation which would impose an additional waiting period for review and a "public interest" test to evaluate business combinations involving the largest American corporations. Do you believe this or similar tests should be imposed with respect to takeovers? The Advisory Committee also concluded that there is "no material distortion in the credit markets resulting from control acquisition transactions, and no regulatory initiative should be undertaken to limit the availability of credit in such transactions". (Recommendation 2) Do you agree or disagree? Others in the Congress would disagree. For example, House Banking Committee Chairman St Germain included as part of credit control legislation a measure which gives the Federal Reserve Board stand-by authority to approve all bank loans used in mergers that involve more than $100 million in financing. Do you believe this In addition, because the following areas addressed by the Advisory Committee received a great deal of debate, I would appreciate your commenting on as many of these issues as possible: - What should be the objectives of federal and state -- What should be the threshold percentage of ownership |