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Carter Hawley Hale versus Marshall Field & Company

CORPORATE STRATEGY
Dosen :
Dr. Bambang Riyanto LS, MBA

Oleh :
Kelompok 8 AP 13A & B
Andretti Reiza
Dodyk Supriyono
Riandi Ichram
Yulius Bayu S.H

Master of Management
Faculty of Economics & Business
Universitas Gadjah Mada
Carter Hawley Hale versus Marshall Field & Company

Introduction
Angelo R. Arena was hired as president of Marshall Field, lured away from his position
as head of Carter Hawley Hale's Dallas-based Neiman-Marcus. The board selected an
outsider because it wanted a leader who could build the company into more of a national
firm. Plans began to be laid for the expansion of the Marshall Field chain into Texas.
Chairman and CEO Burnham, however, died suddenly of a heart attack that October,
thrusting Arena into the CEO post. Seeing an opening with the change at the top, Carter
Hawley Hale almost immediately contacted Marshall Field, offering to take over the
company--an ambition it had had for more than a decade. In December 1977 Carter
Hawley Hale made a $36 per share, or $325 million, bid. Although this represented a
significant premium over what the company's stock had been trading at, the Marshall
Field board unanimously rejected the offer. They wanted to keep the company
independent and also contended that the deal could not pass antitrust muster given the
two firms' overlapping markets of operation. Arena pushed ahead with expansion plans in
early 1978. He reached an agreement to acquire two Liberty House stores in Tacoma,
Washington, and three in Portland, Oregon, all of which were subsequently converted
into Frederick & Nelson outlets. In addition, he formally announced plans to open five
new Marshall Field's stores in the faster-growing South, attending the groundbreaking for
the first one, to be located in Houston's Galleria shopping center. Although Carter
Hawley Hale bumped its price up to $42 per share, the offer was withdrawn in February
1978 when it was clear that Marshall Field would continue to fight the takeover and after
the Federal Trade Commission began investigating the deal's antitrust implications.
Shareholders subsequently filed class-action lawsuits against Marshall Field claiming that
the board had not acted in the interest of the shareholders, but these suits were quickly
dismissed.

The attempt by Carter Hawley Hale (CHH) to acquire Marshall Field is an


interesting example of a management struggle to retain control. Marshall Field, a
high-quality department and specialty store chain, enjoyed less growth than other retailers

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but consistently rejected merger bids. In early 1978, Carter Hawley Hale, another retailer,
offered $42 per share for Marshall Field stock, which was selling for less than $20.

In response to Carter Hawley Hale's attempted takeover, Marshall Field acquired five
department stores in Seattle and other locations in the Pacific Northwest. Marshall
Field then brought an antitrust suit against Carter Hawley Hale on grounds that a
merger would unlawfully reduce competition in the Seattle and Chicago retail markets.
Shortly thereafter, Marshall Field announced plans to expand in Houston and other
southern markets in which CHH was an established competitor.

Resisting, Marshall Field filed a lawsuit that argued the acquisition would violate
securities and antitrust laws. It informed shareholders that the asking price was
inadequate and made several defensive acquisitions that aggravated potential
antitrust problems and made it less attractive to Carter Hawley. Marshall Field’s board
authorized top officials to take “such action as they deemed necessary” to defeat
the offer. After Carter Hawley withdrew the offer, Marshall Field’s stock fell back to
$20 per share.

Carter Hawley Hale & Marshall Field


Carter Hawley Hale was the nation's eighth largest department store group. Marshall
Field was the largest of the department store independents. CHH had
sales of $1.4 billion compared with Field's sales of $610 million. Carter Hawley Hale,
which had grown through acquisitions, sought to expand further by taking over Field. At
the time of the offer, Field shares which had a book value of $27 were trading at $23. In
the prior 5 years, Field earnings per share had fallen by 20% as it struggled with
declining profit margins and shrinking market share. Field owned valuable real
estate, was established in the Chicago market, possessed large cash reserves, and had a
conservative debt-to-equity ratio of 28% even with lease capitalization. Carter Hawley
Hale had been looking to break into the Chicago market and believed it could bring
operating improvements to Field. The takeover battle drew attention to CHH's highly
leveraged position. Carter Hawley Hale had a debt-to-equity ratio of 42%, or 113% with

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lease capitalization, and was planning to finance the merger on the strength of Field's
balance sheet.

Q1:
What defensive actions did Marshall Field take in response to Carter Hawley Hale’s
interest ?
A1 :
There were several defensive actions that Marshall Field take in response to Carter
Hawley Hale’s interest :
• Marshall Field said that the price proposed by CHH was inadequate.

• Field directors said the the merger would not be in the best interest of Field
stockholders, employees, and customers. The merger would give a bad impact for
the company.

Field filed an antitrust suit. Since CHH was the nation’s eighth-largest department store
group and Field was the largest of the department store independents, the merger of both
companies would lessen competition in the market.

Q2:
Why did Carter Hawley Hale want to acquire Marshall Field?
A 2:
Field owned valuable real estate, was established in the Chicago market, possessed large
cash reserves, and had a conservative debt-to-equity ratio of 28% even
with lease capitalization. Carter Hawley Hale had been looking to break into the Chicago
market and believed it could bring operating improvements to Field

Q3:
Over the years, which defense did Marshall Field employ several times?
A3:
Field used the antitrust defense and/or made a major acquisition. Under the advice of
lawyer Joseph Flom, Field believed expansion would help the firm remain independent

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Q4:
Which characteristics attracted Marshall Field’s suitors to bid for the company ?
A4:
There were several characteristics which attracted Marshall Field’s suitors to bid for the
company :
• Field was the largest of the department store independents.

• Field had the ambitious vision of becoming a national retailer.

• Field owned valueable real estate, possessed large cash reserves, and had a
conservative debt-to-equity ratio of 28% even with lease capitalization.

In 1981, its share price had fallen to less than $ 20 per share from $23 in 1976, where the
book value was $27.

Q5:
Who was Marshall Field’s white knight ?
A5:
The Marshall Field’s white knight was Batus Incorporated, the American subsidiary of
B.A.T. Industries of London. Batus owned the nation’s third largest tobacco company,as
well as Gimbel’s and Saks Fifth Avenue.