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Regulation and the market for corporate control: Hostile tender offers for electric and gas utilities

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Abstract

We document that regulation significantly constrains takeover activity. Of the twenty-one hostile offers for utilities between 1960 and 1990, only one was successful. In spite of this low rate of completion, announcement period returns to target utilities are positive and significant, although substantially smaller than average returns to nonregulated targets. We examine post-offer events and find that control-market effects are not entirely eliminated. One-third of hostile offers are followed by additional bids, control changes and/or divestitures. The regulatory and political environment changed during the period of this study and the frequency of hostile offers increased. Utility regulation, however, remains a substantial impediment to the completion of hostile takeovers.

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Authors and Affiliations

  1. School of Management, Suffolk University, 02108, Boston, MA

    Robyn M. Mclaughlin

  2. Wallace E. Carroll School of Management, Boston College, 02167, Chestnut Hill, MA

    Hamid Mehran

Authors
  1. Robyn M. Mclaughlin
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  2. Hamid Mehran
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Additional information

We have benefited from the insights and commentary of several individuals involved with the utility industry including: Douglas Hawes (LeBoeuf, Lamb, Leiby & MacRae); Lyle Koerper (Kansas Gas & Electric); John Rosenberg (Kansas Power & Light); Mark Sholander, Turner White, and Bernie Beaudoin (Kansas City Power & Light); Neil Talbot (Tellus Institute); Darin Klemm (The Wisconsin Investment Board); Melissa Whitten (Cascade Natural Gas Corp.); Gregory Enholm (Salomon Brothers); and David Medley (Donaldson, Lufkin, and Jenrette). We are also grateful for the comments of Edith Hotchkiss, Michael Jensen, David Mayers, Timothy Mech, Richard Ruback, Robert Taggart, Hassan Tehranian, and William Wilhelm, The paper has been substantially improved by the comments of the editor, Michael Crew, and two announomous referees.

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Mclaughlin, R.M., Mehran, H. Regulation and the market for corporate control: Hostile tender offers for electric and gas utilities. J Regul Econ 8, 181–204 (1995). https://doi.org/10.1007/BF01072589

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  • DOI: https://doi.org/10.1007/BF01072589

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