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Book Review: Corporations in Conflict, 60 KY L.J. 471 (1972)


There is nothing new about the takeover bid. It is an effort by
persons outside a corporation, or insurgents within it, to oust its management
and seize control. In the history of these wars the Homeric
epic is Commodore Cornelius Vanderbilt's siege in 1868 of the Erie
Railway, whose capture he deemed necessary to eliminate the threat
of competition to his New York Central. Vanderbilt's technique, the
use of his own millions to purchase on the open market all the Erie
stock available, was crude, but it would have worked had there been any limit on the quantity of stock available. But, there was not.
An obscure statutel authorized railroad companies to issue unlimited
amounts of bonds convertible into common stock-or at least, as construed
by the directors of the Erie Railway, Messrs. Daniel Drew, Jim
Fisk and Jay Gould, it did. The directors possessed a printing press;
it held up nobly and the more Erie Common Vanderbilt purchased,
the more there was for sale. The combat, splendidly chronicled by
Charles Francis Adams, Jr., was ultimately settled by treaty, naturally
at the expense of the public. Hardly less dramatic was the sudden
onslaught by Edward H. Harriman, Lord of the Union Pacific Railroad
(and father of the Polonius of the Democratic Party), on James H.
Hill's Northern Pacific, likewise carried out by huge purchases of
Northern Pacific on the open market. Harriman had the backing of
Jacob Schiff and Kuhn Loeb; Hill's protecting deity was the elder J. P.
Morgan. The head-on collision of these giants shook Wall Street; on
May 9,1901, the price of Northern Pacific rose from 170 to 700.

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