Merger Spree Accelerates Price Of Weeklong Binge Reaches Nearly $30 Billion

Disney buys ABC. Westinghouse buys CBS. NBC buys three television stations. Union Pacific buys Southern Pacific.

In the second-biggest weeklong merger blitz ever, these and other buyers agreed to pay nearly $30 billion for leading U.S. companies and upped the price of admission for future acquisitions.

Experts say there are good reasons for this past week’s red-hot pace, second only to $48.4 billion in takeovers during one week in the late 1980s. Instead of a replay of earlier brawls like the battle for RJR Nabisco, the recent wave is merging like-minded partners in long-term marriages.

Even as the spate of new deals drives up prices of remaining potential targets, the cost of transactions has been lowered by a dramatic drop in interest rates this year and soaring stock prices.

“Corporate executives are doing some long-term strategic planning,” said Sung Won Sohn, chief economist at Norwest Corp., a banking company based in Minneapolis. “They are looking down the road and trying to see how they can survive and prosper.”

Corporate acquisitions have totaled $228 billion so far in 1995, a record for the year to date, according to Securities Data Corp. That puts 1995 on track as the biggest year ever for mergers and acquisitions.

But unlike the debt-laden mergers of the 1980s, recent acquisitions are viewed by corporate chieftains as crucial for expansion into intensively competitive markets.

With Congress pushing to ease restrictions in telecommunications, financial services and other industries, companies are snapping up the choicest targets ahead of possible legislative passage - before reform measures drive up prices even more.

“In one sense we are seeing as many mergers now as we saw in the heyday of the mergers in the 1986-89 period,” said Michael Bradley, a professor of finance and law at the University of Michigan.

But we’re not seeing the “bust-up-driven takeovers of the ‘80s,” he said. Those deals often lined the pockets of deal-makers and loaded up target companies with debt but delivered few apparent strategic benefits.