PHOENIX — Arizonans do not always look fondly on The Greyhound Corp. It has battled unions, sold off its bus lines and 18 other businesses and has been criticized for skimping on charitable contributions.
Yet, when John W. Teets, Greyhound's tough-talking chief executive, in July asked the state's lawmakers to enact emergency measures to protect the Phoenix company from takeovers, the Arizona Legislature fairly snapped to attention. Within days, and by lopsided margins, the legislators adopted a Greyhound-inspired bill that state officials say is among the most comprehensive in the nation.
"Greyhound said, 'Jump,' and we said, 'How high?' " said state Rep. Jim Skelly, chairman of the House Judiciary Committee.
26 States Have Laws
Arizona is one of 26 states that have adopted anti-takeover laws, and some say that the trend already is slowing the pace of the decade-old wave of corporate takeovers. Anti-takeover measures have swept through state after state in recent months, propelled by the influence of local companies and the appeal such bills hold for legislators eager to vote for local jobs and businesses.
These actions have not resolved debate over the laws' merits, however. Critics say that they hurt not only shareholders who could profit from takeover offers but also companies that want to acquire, to be acquired or simply to maintain maximum investor interest in their stock.
Such restrictions may protect managers who deserve to be ousted, critics say, and they do not guarantee that local companies will not lay off employees or sell assets, anyway. Some also wonder whether the states are moving with unseemly haste to enact laws that benefit few and may have far-reaching effect on the economy.
Not 'Finest Hour'
These statutes "aren't exactly the legislatures' finest hour," said Michael Hatch, secretary of commerce and labor in Minnesota, which adopted a tough law in June to protect retailer Dayton Hudson Corp. "This isn't lawmaking that would impress (former Supreme Court Justice Benjamin N.) Cardozo," he said, referring to one of the nation's foremost legal scholars.
Congress, after years of debating the issue, has only tinkered with federal takeover rules because of concern that a full overhauling might upset the balance of power between corporate managers and those who wish to overthrow them. The states are rushing in where Congress has feared to tread.
They have moved most quickly since last April, when the Supreme Court upheld state regulation of takeovers after a review of Indiana's statute. Since then, nine states have enacted or amended such laws--six at the urging of threatened managements. Several others have enacted aggressive new rules that may not survive court tests, takeover specialists say.
As Arizona shielded Greyhound and Minnesota protected Dayton-Hudson, so Washington state assisted aircraft builder The Boeing Co. Massachusetts came to the aid of consumer-products maker Gillette Co. Florida helped publisher Harcourt Brace Jovanovich Inc., and North Carolina sought to shield textile manufacturer Burlington Industries. Experts predict that many other states will follow suit within months. California plans hearings on the subject in the fall.
In Arizona, the call for protection came in the blunt language of Teets, the Greyhound chief.
Teets, the iron-pumping son of a Chicago crane operator, began his lobbying by making the rounds of some spots he does not often visit. His limousine swung past Arizona's copper-domed Capitol for meetings with legislative leaders, by the state executive tower, where Gov. Evan Mecham works, and by the offices of newspaper editors.
The consumer-products and service company had noticed heavy trading in its stock, he told them, and suspected that Minneapolis investor Irwin Jacobs or another corporate raider might make a takeover bid or try to "greenmail" the company--force it to pay an above-market price for the investor's stock.
Got Special Session
Teets wanted the Legislature to meet in special session to write Greyhound a law. If it did not, he warned, this very Republican state could no longer claim to be pro-business.
"The question is: Are (state legislators) for business, or are they against it?" Teets demanded to know.
The Greyhound bill was introduced on July 21, passed the next day (43 to 12 in the House of Representatives; 25 to 2 in the Senate) and immediately signed by the governor. Among other features, the law seeks to prevent unfriendly takeovers financed by heavy borrowing. It prohibits such a suitor from liquidating a target company's assets within three years of the purchase.
Michael Preston Green, the Phoenix lawyer and lobbyist who masterminded Greyhound's campaign, called the statute "the most well-balanced in the country . . . a model to which other states will be looking."
