Statement of Administration Policy: S. 1323 - Tender Offer Disclosure and Fairness Act of 1987

(Senate)
Proxmire (D) Wisconsin and 11 others)

The Administration opposes enactment of S. 1323 and, if it were presented to the President, the Chairman of the Council of Economic Advisers, the Attorney General, and the Director of the Office of Management and Budget would recommend that the bill be vetoed.

S. 1323 is objectionable, because it would significantly increase the cost of takeovers, reduce the benefits resulting from takeovers, and intrude into areas of corporate governance that should be left primarily to shareholders and to the States. Unsolicited corporate mergers and acquisitions improve efficiency, promote the productive use of scarce resources, and stimulate effective corporate management, benefits which would be diminished if S. 1323 were enacted. Particularly troublesome provisions of S. 1323 include:

• Provisions in sections 3 and 5 that would amend section 13(d) of the Securities Exchange Act of 1934. These amendments, which concern requirements to provide information on certain securities transactions, would make it significantly more difficult to undertake a successful tender offer (e.g., by increasing the cost of obtaining additional shares and by giving rise to new causes of action for defensive litigation). These additional reporting requirements, which are not confined to a simple reduction in the section 13(d) reporting "window," would, in effect, protect incumbent management, regardless of its performance, against unsolicited changes in corporate control.
  
  
• The provision in section 7 that would nearly double (i.e., increase from 20 business days to 35 /business days) the minimum period for which a tender offer must be held open. The current minimum offering period provides ample time for incumbent management to evaluate offers and, if necessary, solicit other bids. Lengthening the minimum offering period would deter all types of takeovers, encourage defensive restructuring, and diminish the benefits of the market for corporate control.
  
  
• The provision in section 7 that would prohibit, except through a tender offer, the purchase of any securities that results in the acquiror owning more than 25 percent of the total shares of such securities. This restriction would significantly increase the costs to shareholders of certain activities (e.g., obtaining additional shares and forming joint ventures) unrelated to takeover efforts.