Anti-takeover measure draws broad support

Glendening bill would help Md. businesses resist hostile offers

February 17, 1999|By Timothy B. Wheeler | Timothy B. Wheeler,SUN STAFF

The Glendening administration's proposal to strengthen Maryland laws discouraging hostile corporate takeovers won broad support yesterday in Annapolis.

Spokesmen for the administration and for business and lawyers' groups told the House Economic Matters Committee that, without new legal defenses, Maryland-based corporations and real estate investment trusts could be gobbled up by takeover "sharks" or "raiders."

"We have seen many well-known Maryland companies disappear," said Richard C. Mike Lewin, state business and economic development secretary. The acquisitions of those companies have cost Maryland tax revenues, jobs, charitable contributions and prestige when corporate headquarters move out of state, he said.

Lewin, who joined the administration last fall after a career in the securities industry, said he had witnessed "the kind of rapacious conduct -- driven solely by short-term greed -- that has been exhibited by certain ruthless corporate raiders."

Though there have been no hostile takeovers of Maryland companies in recent years, he said, the state "must not wait until after we lose a major headquarters company before we act."

The governor has introduced a bill that would let corporate boards of directors weigh the impact of potential takeovers on employees, customers and the community before deciding to submit them to shareholders' votes.

The measure also would raise procedural hurdles to the latest form of takeover bid, in which a would-be purchaser tries to gain control by replacing all or most of the directors. Participating Maryland corporations would stagger directors' terms, require a two-thirds vote to remove board members and allow special meetings only when requested in writing by a majority of a company's stockholders.

The bill draws on anti-takeover laws in Pennsylvania and Virginia, supporters said. The governor sponsored it at the behest of his Economic Development Commission, which wants Maryland businesses to have similar protection.

"We are completely intertwined with the economy of this state," said Alan D. Yarbro, general counsel of Mercantile Bankshares Corp., explaining why his Baltimore-based company wants additional takeover protections.

Scholars have criticized anti-takeover laws, saying they protect inept management and interfere with shareholders' right to earn top dollar on their investments.

Studies have suggested that the stock value of many Pennsylvania-based corporations declined slightly after that state adopted its most recent anti-takeover law.

No opponents of the bill appeared at yesterday's hearing. Administration officials said their bill does not go as far as the Pennsylvania law and that the protections would be voluntary.

"Nothing in this bill or in current law will prevent a takeover that is welcome, or even an unwelcome takeover that makes economic sense," said Abby Brandel of the governor's legislative office. "This bill will simply enhance the ability of decision-makers of publicly traded corporations and real estate investment trusts based in Maryland to play a role in the futures of those businesses."

The administration's position drew support from lawyers, bankers and the Maryland State Chamber of Commerce.

"It is a good, responsible, reasonable bill that provides limited protection against hostile takeovers," said James J. Hanks Jr., speaking for the Maryland State Bar Association. "There's nothing revolutionary here."

Pub Date: 2/17/99

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