T. Boone Pickens was an Oklahoma and Texas oil-and-gas man, albeit one of some national renown, which would make news of his recent passing of limited interest out here in the Pacific Northwest.
Except, of course, for that time he tried to buy Boeing.
That time was the summer of 1987, and a revisiting of that saga, a big story then but little remembered now, illustrates just how much has changed in the political and business worlds, and how some things haven’t, in the intervening three decades.
That time was the era of the corporate raider. Backed by copious amounts of leverage and publicity, the raiders would target a publicly traded company with a stock they perceived to be underpriced or undervalued and launch a hostile takeover threat.
In some cases the raiders really did want the company they purported to be after, arguing they could generate greater value and returns for shareholders than incumbent management.
In others instances, though, it was a bit like the dog with a habit of chasing cars — what was he going to do with it if he actually caught one? In those cases the raiders were practicing what was known as greenmail. (Older readers will encounter terms like corporate raider and greenmail with a sense of recognition — “Oh yeah, I remember that” — while, among younger readers, they may only elicit blank stares of befuddlement.)
The idea behind greenmail was not to actually acquire the company but to secure a small stake, drive up the stock price with news of the hostile takeover bid, then capitalize on the gain by having corporate management buy those shares at the heightened price to make the raider go away; the objection to this practice was that other shareholders didn’t benefit from the payout. The raider also could cash in if the target company sought refuge by agreeing to an acquisition by someone else.
Whatever the motivation, just the sighting of a raider on the horizon was sufficient to unnerve corporate executives. They asked shareholders to enact poison-pill bylaws to thwart the threat. Should an attack actually materialize, they’d launch counterattacks of their own, and start dialing politicians to help defend them.
But why would a bid from an obscure oil-and-gas executive from outside the region and the industry put a fright into Boeing, then as now a giant American corporation and a dominant player in the global aerospace market?
One reason was that Pickens had a recent history of going after another corporate giant, with huge consequences for the target. He didn’t land Gulf Oil, then one of the country’s biggest refiners and marketers, but he did drive it into an acquisition by Chevron.
When Boeing itself disclosed in July 1987 that Pickens was interested in acquiring a 15 percent stake in the company, expert opinion was that Boeing was too big for Pickens and his company, Mesa Petroleum, to swallow, and that the stake was merely for investment purposes.
Boeing wasn’t taking any chances that those predictions would be proven correct. It enacted several measures internally to thwart a takeover. And it went to the Washington Legislature for further defenses, getting lawmakers to enact a special-session bill.
Eventually the corporate-raider movement faded away, due to defensive measures, the drying up of the debt market used to finance takeover bids and some bad experiences with companies that actually were acquired. Little was ever heard after the summer of 1987 about Pickens’ interest in Boeing, or whether he ever carried through on the investment.
Hostile takeover bids are much rarer.
Today when a company is targeted for a low stock price, poor financial performance or lackluster management, the attack is often from a hedge fund advocating a sale or breaking up of the company. Management reactions range from attempting to refute the charges to accommodating the critics with a few board seats and even selling off some assets.
That’s what’s changed since 1987. But what about a company’s political pull, its ability to rally support in the form of legislation to defend itself? Has that changed?
For all the contentiousness between Washington politicians and Boeing over the intervening years, including the headquarters move, the company still retains considerable clout in Olympia, as evidenced by its successes to win incentives for new projects in the state. When Boeing gets around to figuring out what its next plane is and where it might be built, it will still be able to point to the tens of thousands of jobs (a synonym for “votes”) it supports in the state to nudge the Legislature in the direction it wants.
But Boeing and aerospace are no longer the only big economic show playing in this state. The tech sector, however it’s defined, is now a huge economic presence, accounting for a lot of jobs (votes) that it could wield politically in its defense should it choose to do so. So far, it hasn’t, other than in limited instances (the Seattle employee head-tax confrontation).
Here’s what’s different about their circumstances.
The big threat to big tech companies is coming not from corporate raiders or their modern equivalent but from politicians themselves.
No one is calling for Boeing to be broken up. Everyone from Donald Trump to Elizabeth Warren is calling for Amazon and other Big Tech companies to be broken up. The Legislature can help Boeing to tell T. Boone Pickens to go away. It can’t do much to tell the federal government, or other states, to go away —assuming it’s even inclined to do so.