FTC Reportedly Asks Justice Dept. to Sue Wickes

The Federal Trade Commission reportedly has concluded that Wickes Cos. of Santa Monica, the parent company of Builders Emporium, violated antitrust restrictions last year in its unsuccessful takeover bid of Owens-Corning Fiberglas.

The Wall Street Journal, quoting unnamed sources familiar with the agency’s investigation, said the FTC earlier this year urged the Justice Department to sue the company for using stock option agreements allegedly to evade requirements of the Hart-Scott-Rodino antitrust law.

Wickes spokesman Michael Sitrick said Friday that the company would have no comment on the report.

In August, 1986, Wickes made a hostile $2.1-billion takeover bid for the Ohio fiberglass company, but dropped it after Owens-Corning announced a restructuring plan.

The Journal said the FTC made a similar recommendation regarding an unsuccessful $1.8-billion takeover of Ashland Oil Co. in March, 1986, by the Belzberg family of Canada. The Justice Department, which has final say over such suits, was said to be reviewing the matter.

The Hart-Scott-Rodino law is designed to allow federal regulators to review proposed mergers and acquisitions for possible antitrust problems. Corporations and individuals are required to report to the government stock holdings of at least $15 million and await an antitrust review by the FTC before buying more shares.

The investigation centers on put-and-call option agreements, the newspaper said. Brokerage firms assemble large blocks of stock under an option agreement for those contemplating a takeover. However, that company or individual doesn’t buy the stock until federal approval is given to boost the stake.

“This is a way to jump the gun, to line up shares while waiting for Hart-Scott clearance,” one securities lawyer explained.