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From the world's financial capital, New York City, this is Moneyline with Lou Dobbs.
Good evening. Nothing like an international incident to boost the dollar.
The dollar today surging in global trading after U.S. fighters shot down two Libyan warplanes over the Mediterranean Sea.
The Pentagon says the U.S. planes acted in self-defense while flying in international airspace.
The dollar usually attracts buyers in times of international tension.
Analysts say investors see the dollar now as a safe investment because of America's military and financial might.
But $1 watcher says there's also an emotional reaction during times of crisis, especially in the age of terrorism.
Sometimes we're a little bit more elated when we see that the U.S. is potentially flexing that muscle and indicating that we are strong.
And we are on the lookout to prevent these things from happening.
But it does concern a lot of people that it can make the world that much more dangerous.
And therefore they like to come under our military umbrella as well as our markets and our financial umbrella.
Orders to buy dollars pouring into currency markets around the world.
In New York trading, the dollar gained two Finnegs against the Deutschmark more than a yen against the Japanese currency.
The dollar also closing sharply higher against most major currencies.
The strong dollar ignited a rally on Wall Street today.
The Dow Jones Industrial is posting the biggest one-day gain in two months.
The Dow rose early, beginning a slow climb for most of the session.
Late in the day, a wave of computer buy programs sweeping through the market.
The Dow doubling again in only an hour, closing 33 points higher.
The stock market may have caught fire, but it was a washout in the other markets.
The Treasury's 30-year bond closed slightly lower in commodity trading.
A rough day for crude oil and precious metals.
West Texas intermediate crude falling sharply, while silver closed below $6 an ounce for the first time in a year.
Gold prices also falling.
The financial markets today dominated by news out of the Mediterranean.
The Pentagon denying that the downing of those two Libyan planes is related to construction of a chemical weapons plant near Tripoli.
Libya says the plant is only for making pharmaceutical drugs.
Meanwhile, the controversy is heating up over reports that a West German chemical company is helping Libya develop chemical weapons.
Grant Perry is here tonight, has been looking into the story, and has the report for us. Grant?
Louis, first the West German government totally discounted reports that a West German chemical company, Imhaus & Chemie, may be helping the Libyans develop the capacity to produce chemical weapons at this plant in Roptah, Libya.
The company denies the charges, but now the West German government says it takes the accusations about the Libyan plant very seriously, even though it still has no evidence that any German companies are assisting the Libyans.
Meanwhile, Moneyline has learned that the West German government has a lot more to say about German assistance that may have been provided to Iraq in making chemical weapons during the Iran-Iraq war.
In an interim report issued just yesterday, the government said 38 persons are under investigation, that more than 90 witnesses have testified in the probe, and more than 50 firms and persons have been searched.
The report also says there are suspicions that chemicals were funneled through France and Austria to circumvent West German export control.
The Iran-Iraq war is, of course, over, and the U.S. State Department is more concerned about what the Libyans might do with chemical weapons in the future.
The State Department says it is engaged in a full-scale diplomatic effort to convince a number of companies to closely monitor their chemical companies.
The State Department says it's not too late to stop full-scale production at the Libyan plant, but others aren't skeptical about that.
They say the technology isn't terribly complex, and the Libyans may already have all the expertise and materials they need to produce nerve and mustard gas.
Lou.
Thank you, and Grant Perry will be following up on that story to report on the companies involved in that Libyan chemical weapons plant.
Well, Braniff today revving up to fly with the airline Big Boys announcing plans to buy up to 100 commercial jets from Airbus Industries.
The cost of the deal, a lofty three and a half billion dollars.
The chairman of Braniff, William McGee, says the move signals the airline's commitment to become a major coast-to-coast carrier within the next year and a half.
These A320 aircraft are modern, highly efficient, quiet, and long-range aircraft. High payload and lower operating costs will help keep Braniff competitive for years to come.
Braniff also making a deal to assure delivery of at least some of those planes by mid-summer, swapping a highly sought-after Airbus delivery position with Pan Am.
Usually, airlines must wait three to four years for delivery of their aircraft. The backlog of orders at Airbus now topping 450.
The European consortium delivering just 60 planes a year. Boeing's backlog, by way of contrast, now tops 1,100.
1988 delivers just under 300 aircraft. And McDonnell Douglas, a backlog there of 278 aircraft, delivering just less than half that number in 1988.
Strong demand for commercial aircraft, setting the tone for factory orders in general.
New orders in November overcoming a sharp decline in the military sector, overall registering a healthy three-tenths of a percent gain, excluding the military orders rising a strong 1.1 percent.
The Borden Corporation has developed what it hopes will be a surefire, poison-pilled defense. We'll tell you all about it when Moneyline continues. Stay with us.
Moneyline is brought to you by Shearson-Lehman Hutton, the financial firm for the serious investor.
Shearson-Lehman Hutton. Stocks returned over 16 percent in 1988. The one-year CD returned 8 percent.
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Borden, the consumer food and chemical company today, announcing an unusual takeover defense, a defense that relies on a kind of buddy system.
If a corporate raider were to acquire Borden at what the company were to consider less than fair value, and if that raider were to fire even one top Borden executive, two dozen more Borden executives would quit on the spot.
Steve Young is here tonight with the intriguing story about this intriguing, innovative idea.
Lou Borden's one-for-all and all-for-one pact could be the start of a new corporate trend, the era of the poison pink slip.
Borden, which says it wants to stay independent and doesn't see any sharks in the water, is just going on record in case one swims by.
It set up a system under which all managers in the top two tiers of the company would resign if any one of them got fired after the company had been taken over at less than fair value.
You could call it a kind of poison pink slip.
An acquirer who gains control without paying our shareholders a fair price risks losing the entire senior operating management, the people who developed and actually run the company's six different businesses.
Borden directors have redefined the meaning of fair value and invented a unique standby takeover agreement.
It would last three years and be triggered if the takeover price is wrong.
The right price is fair company value as determined by outside experts plus at least 50 percent of whatever an acquirer could gain from sell-offs or restructuring.
The company claims the threatened poison pink slips protects shareholders, not Borden bigwigs.
It says the 25 Borden executives already are protected by individual employment contracts with a combined value of $35 million.
Having given birth to the poison pink slip, Borden hopes the concept sweeps corporate America.
So far no reaction from most leveraged buyout companies which are still chewing over the idea.
Borden says it consulted with four law firms which believe the strategy will survive any conceivable challenge.
While we reach takeover specialist Boone Pickens for a comment, he remains undaunted by the new strategy saying they're way overestimating their value in the scheme of things.
Luke, imagine that. Top management overestimating its value.
Steve, thank you.
Well, something of a change of heart and certainly a change of direction on Wall Street today.
Stock prices rallying making up for yesterday's losses and then more.
The Dow Jones Industrial Average doubling its gains in the final hour of trading closing up 33.
The Dow finishing at 2,177.68 up 33.04 on the day.
Volume 149,700,000 shares as the second day of trading in this new year picking up the pace and advancing issues four to one.
An advantage over decliners and the New York Stock Exchange Composite Index up 2.08.
The S&P 500 up 4.12.
The Dow Transportation's posting a post-crash high.
Strong airline group gaining 18.81.
The utilities up also sharply up 2.61.
And the 10 most active issues on the big board today.
Marion Laboratories up 1.58 expecting to begin marketing a new heart drug in the next quarter.
Oklahoma Gas and Electric trading X dividend as was Montana Power both gaining on the day a fraction.
RJR Nabisco up a half. Exxon up three quarters.
IBM up 5.8. Canadian Pacific up a quarter.
Bell South trading X dividend up a half.
And Verity was unchanged while Telephone gained an eight.
And Counter Trading, the Nasdaq Composite Index gained 4.20 closed at 382.76 on volume of 121,273,000 shares.
And on the American Exchange a gain of 2.53.
The close 307.77 volume 12,321,000 shares.
And taking a look at tonight's Moneyline Market Movers, Federal Express jumping three and a quarter.
The rival United Parcel Service raising its rates giving Federal Express a competitive edge.
Freeport McMorrin gaining two and three-eighths boosting its quarterly dividend.
First Corp dropping one and seven-eighths a loss for the fiscal year and no quarterly dividend.
And Over-the-Counter Trading, Medstone up three and three quarters.
A product distribution agreement with GE.
North Atlantic Industries up one and a quarter.
The company is looking for a buyer and investors sending the stock up better than 40 percent.
Vacuum maker Regina coming clean today.
Reporting a 15-month net loss of almost 17 million dollars on 90 percent decline in stockholders' equity.
Last September the company withdrew incorrect financial figures.
Those figures reflecting healthy profits instead of the more accurate losses.
Regina's stock moving up a quarter. It closed at five and a quarter.
That's down from a 52-week high of 27.5.
Well takeover stories which flooded the market last year show no signs of letting up in early 1989.
Moneyline columnist Dan Dorfman is here tonight to zero in on some of the latest, most interesting, fascinating stories making the rounds.
Dan.
It's wonderful. I love the way you put that.
Well thank you very much.
Well Lou you know the game does go on.
And let's start off Lou with some of the intriguing names you talk about.
And to start us Lou, a brand new name.
Marriott Corporation.
Talk is a potential buyer, perhaps Japanese, maybe Donald Trump, maybe I and the company.
The thing though is that Marriott insiders hold about 17 percent.
So an unfriendly deal may be very tough to do.
However, significantly there's been a lot of options activity in this one.
We go on to Cooper Tire and Rubber.
The seventh largest tire manufacturer in the country.
Stock up five-eighths.
The story is it's under accumulation.
Not by me but supposedly by someone.
Here's a name Lou that's been around for quite a while.
Texco. 52 up one. Big volume.
What?
I'm sorry?
Texco.
Texco.
52 up one.
It's not up there on the graphic.
Well it should have been Lou.
We'll find out who's responsible.
Okay 52 up one and there are several rumors.
There it is.
Okay. Three rumors Lou.
Another career save.
One is a big restruct...
Well here we go again.
One is a big restructuring next week.
We'll have to wait and see.
Another story icon may bid in the low 60s shortly.
And the third story making the rounds is that Texco...
The third story making the rounds is that Texco Canada may be sold at a much higher price than expected.
We go on to SmithKline Beckman.
I hope we have that one on the screen.
Lou up five-eighths.
This one's been around for quite a while.
The story there, beat you.
Takeover fever continues.
We go on to Ohio mattress which is certainly not sleeping lately.
Stock up three-quarters.
The company announces considering selling out and rumors of a deal coming soon.
It's priced around 21 bucks a share.
Lou control data 25...
Twenty and five-eighths.
Look at this one Lou.
Twenty and five-eighths up three-quarters.
And Lou the rumor of a takeover of this one has been around I think for 20 and five-eighths years.
And the story is a foreign buyer is on the way.
I'll believe it when I see it.
And finally another new name Lou.
Interlake 43 and a quarter diversified manufacturing company.
The story is someone is accumulating the stock.
Again Lou, strictly stories.
We've got some new names in there and the game goes on.
The game goes on.
You've made it more interesting by talking about them in sort of reverse order from what our production people have assembled them.
We like to surprise them.
I think it's probably more interesting for the viewer to try to keep up with us.
We apologize for taking all of that out of order.
We'll try to get it sorted out the next time.
And it was nice to see a new name in there.
No, there were several new names there Lou.
Well there's Ohio Mattress.
No, Ohio Mattress and Niles is considering selling out.
But there's Marriott.
There's Interlake.
That's another name.
And we also had the Cooper Tyrone Rubber.
Cooper Tyrone Rubber is hardly new.
I mean that's been around for months.
I know, but now Lou...
It's sort of new to you or?
No, it's never new to me.
It's not new to me.
Never new to you.
No, I shouldn't say that.
Not new to me Lou, but the action is stepping up.
Okay.
All of them are guaranteed?
I make no guarantees.
That's what we wanted to get that point out very quickly.
Okay.
It's fun to start the new year.
Great.
You bet.
Thank you.
We will continue with Moneyline.
Stay with us.
Shearson, Lehman, Hutton, January 1989.
Where we stand on stocks.
Contrary to popular opinion, 1988 was not a bad year.
Stocks returned over 16 percent.
Outperforming all cash investments.
We believe the stock market will rise in 1989.
Again, outperforming money funds and CDs.
Our recommendation, buy stocks for the long term.
Shearson, Lehman, Hutton.
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What do the Libyan experts think about the shooting down of two Libyan jets?
We'll be speaking live with Dr. Frank Fukuyama, a senior staff member with the Rand Corporation on Newsnight.
At the top of the hour.
The top management of Drexel Burnham Lambert in talks with the Securities and Exchange Commission
on a possible settlement of securities fraud charges.
The Drexel negotiating team includes Chairman Robert Linton, Chief Executive Officer Fred Joseph.
They began meeting with government officials yesterday.
Drexel has until next Tuesday to settle civil charges filed by the SEC in September.
That deadline is part of an agreement on criminal charges reached with U.S. Attorney Rudolph Giuliani.
Well, the defense today moved for a mistrial in the stock manipulation case against GAF and its Vice Chairman, James Sherwin.
GAF attorneys would not comment on the details of the motion, but it is believed to involve inadmissibility of evidence,
that evidence obtained by the government in the case.
The judge is expected to rule on that motion for a mistrial tomorrow.
All of that behind the scenes maneuvering, cutting into the testimony of the government's star witness today,
Boyd Jeffries, the former chairman of Jeffries & Company, taking the stand.
He was on the stand for less than an hour.
Barring further delays or a mistrial, Jeffries' cross-examination should begin tomorrow.
Well, still more advice about managing the savings and loan crisis in this country,
this time from the chairman of the Federal Deposit Insurance Corporation, William Seidman,
today saying the fund used to insure the savings and loans should be an independent agency.
The Federal Savings and Loan Insurance Corporation is now run by the Federal Home Loan Bank Board,
but Seidman says that's a bad marriage.
The bank board's mission is to provide lower-cost financing to help American people have housing.
It's a very desirable objective, but that objective may be in direct conflict with having SNLs make sound loans.
Seidman says unsound loans have left a $60 billion hole in the savings and loan industry.
Seidman's proposal, by the way, drew criticism and quickly from the Federal Home Loan Bank Board,
no stranger to criticism itself.
The Congressional Budget Office today saying the cost of the savings and loan crisis
and its cleanup will inflate the federal budget deficit even more than had been thought.
The nonpartisan group upping its deficit estimate by $7 billion to $155 billion for the fiscal year 1989.
That won't be the end of it.
The savings and loan crisis will add another $6 to $11 billion to the deficit each year for the next five years.
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Our 900-poll question tonight asks whether you think the U.S. was justified in shooting down two Libyan jets.
Was it self-defense? Register your opinion on NewsNight.
We'll be right back.
Our columnist Myron Kandel now takes a look at that Borden anti-takeover plant, and he says he likes what he sees.
Myron, tell us why.
Lou, I do like this new Borden plan because it's an innovative effort to protect the interests of both shareholders and management.
One of the reasons for the takeover wave that has swept corporate America in recent years is that the stock market,
supposedly a most efficient pricing mechanism, has undervalued the shares of many companies.
That's why we keep hearing from my pal Dan Dorfman and others that the break-up value of such and such a company is far more than the current price of its stock.
Since the parts are worth a lot more than the whole, corporate raiders are attracted to buy up the company and sell off the pieces at a big profit.
In some cases, the pieces can do better, either on their own or in concert with similar operations.
In other cases, however, the dismemberment can be economically inefficient and personally brutal.
In any event, the real value of a company, whole or in pieces, should accrue to its shareholders rather than raiders or speculators.
The Borden plan tries to do that. It leaves it up to its board of directors to determine if a takeover bid represents fair value.
And that fair value isn't just the current stock price plus a premium. It's also other benefits that an acquirer would gain later.
If that condition and some others aren't met, the management of the company walks.
True, it walks with some golden parachutes, but ones that don't seem excessive to me.
Two other points about Borden. It has a good record of growth in both dividends and stock price.
And I also like its board. Of its ten directors, only two, the present and former CEOs, are offices of the company.
The eight others are independent directors.
Now this plan may not be perfect, but it's a good move toward protecting shareholders and repelling avaricious takeover artists who are just in it for a quick buck.
Lou?
A quick buck in avaricious takeover art.
There are a few of those around.
Well there are. But who benefits immediately from that avarice?
Well, but what this plan says is that...
It was a rhetorical question.
Well, the shareholder does get a premium over the present price.
Right.
But this plan says that the future benefit, which now will accrue only to the takeover artist, the LBO firm or whatever, will also be shared by the shareholders.
Be shared by the shareholders. You said that you did casually mention golden parachutes.
In the case of Borden, we're talking about three years out. Full payment.
Most executives of companies these days do have employment contracts, and that's a perfectly legitimate business tool.
Well, I have no problem with employment contracts, nor would I suspect that you would. You and I both operate under employment contracts.
But the idea that top management should have these are golden parachutes put into play when the company is taken over.
But don't forget, it's not the management...
Do you really believe that top management is entitled to a three-year payout because the company is taken over?
But, Lou, it's not the top management that determines whether the offer is of fair value. It's the board, and as I indicated, this board is dominated by independent directors.
Well, that's terrific. Ultimately, shouldn't the shareholder have the right to tender his or her shares at a stated price?
Well, there's nothing to stop it. The manager of the company says that we're willing to walk.
Now, it's not easy. Even with that three-year contract, it's not easy for somebody to get up, especially a middle junior manager, a middle manager who hasn't been there all that long, to get up and walk and go find a new job.
They're prepared to do that if they feel the offer isn't fair, and I respect them for it.
You're saying that these valuable top managers would require three years to find new employment, and they're so critical to the operation of the country?
It's a generous plan, but otherwise you wouldn't get the 25 people to agree to it.
But doesn't this plan, just in its nature, suggest all of the wrong things?
The reason that we've seen corporate raids and leveraged buyouts, that the managers are putting premiums on their services rather than bringing about value for the shareholders.
I think the management of Borden has done a very good job over the years to maximize shareholder value, and this is a way of protecting both them and the shareholders. I like it.
And especially them. Byron, thank you. We're out of time. That's Moneyline for tonight. We thank you for joining us. I'm Lou Dobbs. Good night from New York.
For a transcript of Moneyline, send a check for $3 and a self-addressed stamped envelope to CNN Business News, 5 Penn Plaza, New York, New York, 1001.