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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.

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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 adequacy of current federal regulation of tender offers.

The American capital markets today are liquid,
efficient and fair. The ability of companies to raise
capital to build and grow depends upon investor confidence
in these markets and the expectation that the market will
reward investors for their risks. Corporate takeovers have
been one of the means by which shareholders have realized
substantial gains on their investments. Corporate takeovers
also often serve to bring innovation and new capital to
existing businesses, to achieve economies of size, and in
some instances, may serve to remove entrenched management.
However, corporate takeovers may also have negative
effects. Public debate on tender offer activity has
intensified following the record merger boom in 1981 and
several well-publicized takeover attempts during recent
years. To a certain extent, debate has focused upon the
economic impact and public policy implications of large
business combinations. It has been argued that large
business combinations result in the loss of jobs, and that
the use of credit to finance takeovers reduces the amount of
credit available for other "productive" purposes.

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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

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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.

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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. 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
Chairman

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