MASS EXODUS HITS CORPORATE NAMES

Ameritech? Gone. First Chicago? Gone. Stone Container? Gone. U.S. Robotics? Gone.

Call a dozen business economists, and you’ll get a dozen reasons for the wave of mergers that’s sweeping away many of the grand old names in Chicago’s corporate pantheon.

The global economy. Economies of scale. The search for market power. Overvalued stock. Greedy chief executive officers. (They almost always get a huge payoff in a deal).

Because every industry is distinct, each deal gets done for a different set of reasons, the analysts say.

Last week’s Chrysler Corp.’s takeover by Germany’s Daimler-Benz, for instance, was clearly driven by the forces at play in the global automobile industry.

The two regional auto giants saw combining their product and sales networks as the best way to be winners in the global car wars to come.

But Monday’s announced SBC and Ameritech merger, which will combine three of the original seven Baby Bells created by the 1984 breakup of AT&T, had little to do with global opportunities.

Rather, it was primarily driven by the two firms’ perception that by eliminating potential competition and gaining the operating efficiencies of combining management systems, the joined firm will be more profitable down the road.

But whatever the rationale, the bottom line is that the biggest merger explosion in U.S. business history rolls on with no end in sight. This year promises to witness the most mergers in U.S. corporate history.

Federal Trade Commission officials are beginning to worry they won’t be able to properly scrutinize whether the mergers are anti-competitive.

“There are so many mergers our resources are really beginning to fall short,” said Robert Pitofsky, chairman of the FTC.

In the first six months of the current fiscal year, ending March 31, the Federal Trade Commission reported 2,303 filings under the Hart-Scott-Rodino Act, the law that gives the agency the right to review anti-competitive aspects of mergers. In all of fiscal 1997, the agency received 3,702 such petitions–the highest on record.

So far in 1998, $614 billion worth of corporate transactions have been announced, compared with a record $908 billion for all of 1997, according to Securities Data Corp.

Since the beginning of the year, 221 transactions have occurred involving Chicago area companies, compared to only 148 for the same period last year.

While public attention has been focused on the Justice Department’s possible antitrust suit against Microsoft Corp., the fact is that the nation’s regulators have been relatively quiet in the face of the merger wave. That has consumer advocates hopping mad.

Mergers among the Baby Bells like Bell Atlantic-Nynex and Monday’s SBC-Ameritech are especially anti-competitive, charged Robert Weissman, an attorney with Ralph Nader’s Center for the Study of Responsive Law.

“The bottom line is that these are likely competitors in a deregulated environment.

“They’ll argue there is potential competition down the line from foreigners, long-distance carriers or new technology,” he said. “But it’s always down the line and never manifests itself to consumers.”

The most frequently cited reason for the merger wave is the globalization of the economy.

“We’re going to spend the next 25 years going from a national economy to a global economy,” said Lester Thurow, a Massachusetts Institute of Technology economist.

“If you don’t play this as a global company, you’re going to wind up a niche player.”

Many venerable corporate names that once were regionally significant will go by the wayside. No area of the country has been harder hit by this phenomena than the Midwest.

Since the beginning of the year, Illinois Central Railroad Co., First Chicago NBD Corp., Universal Outdoor Holdings Inc., Inland Steel Industries Inc., 360 Communications Co., Elgin-based Safety Kleen Corp., and Northbrook-based Culligan Water Technologies Inc. have been swept into Lake Michigan.

While the 1980s were considered the merger decade because it included the hostile takeover of RJR Nabisco Inc., virtually every year this decade has seen at least one of Chicago’s largest companies acquired by outsiders, often based abroad.

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In 1990, Chicago-based Beatrice Co. was sold by Kohlberg, Kravis & Roberts to Omaha-based ConAgra in a deal valued at $1.34 billion. That same year, Marshall Field & Co. was sold by London-based B.A.T. Industries to Dayton Hudson Corp. for $1.04 billion.

A year later, Square D. Co., was acquired by the French company Schneider S.A. in a purchase valued at $2.2 billion.

In 1994, Continental Bank was acquired by San Francisco-based Bank of America for $1.9 billion. Continental’s transaction capped a year of bank mergers in the Chicago area in which Suburban Bancorp was acquired by the Bank of Montreal, and First Colonial Bankshares Corp. was acquired by Firstar Corp. Even those who grew bigger then found they needed to grow larger this year. Last month, Bank of America announced its merger with Charlotte-based NationsBank.

In 1995, Kemper Corp., which put itself up for sale in 1994, was acquired by Zurich Group Inc. for $2 billion. In 1996, Bally Entertainment was acquired by Hilton Hotels Corp. for $3 billion, while Helene Curtis Industries Inc., was bought by Unilever N.V. for $915 million. Last year, the deals included Skokie-based U.S. Robotics Corp. being acquired by 3Com Corp.

The combinations roiling the U.S. financial sector are a case of a regulation-bound industry seeking to get around state and national boundaries restricting its largest players. The Citicorp and Travelers merger is a clear violation of the Depression era Glass-Steagall Act because it combines an insurance company, a brokerage and a bank. Yet the companies pressed ahead anyway.

“Those laws have disintegrated,” Thurow, the MIT economist, noted. “In one jump, financial services is moving from a local economy to a global economy. In most countries you already had national banks.”

That dynamic has triggered speculation about whether the recent link-up between Banc One and First Chicago, which created a Midwest powerhouse, will be its last.

While the new bank will be able to compete regionally, some analysts question the new bank’s ability to compete nationally and internationally.