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Hawley Hale, and McGraw-Hill defeated a tender offer
by American Express.
It is the drubbings, rather than the huge winners, that
have contributed to Wyser-Pratte's new-found celebrity.
It turns out that he is a very hard loser, and he has been
waging holy war on chief executives and boards of directors
who manage to defeat hostile acquirers. The first
object of his wrath was John C. Suerth, the chairman of
Gerber. Anderson Clayton offered Suerth $32 a share in
December 1976, and then made a tender offer at $40 the
following April. In July, while the takeover battle was
still on, Wyser-Pratte showed up at Gerber's annual
meeting in Fremont, Michigan, to inquire, noisily, why
Suerth was trying to prevent his shareholders from making
money.
Wyser-Pratte bought only a small amount of Gerber
stock for Bache and thus his loss was insignificant when
the takeover attempt failed, yet he still persisted in his
attack. He found a shareholder in Ohio to sue Suerth
and the Gerber board for violating their fiduciary duty,
and Bache picked up the legal fees for the lawsuit.
Wyser-Pratte says he kept after Suerth simply because he
wanted to make a point.
"The heavy-handedness involved here makes a
mockery of free enterprise," he says. "It's incredible the
lengths managements go to protect their sinecures. If
companies aren't for sale at any price, they should have
a surgeon general's warning to that effect. I'd like to see
what would happen to their cost of capital then."
Wyser-Pratte did buy a significant amount of
McGraw-Hill stock after American Express made its
tender offer in 1979, and he lost about $220,000. In that
case, he's been trying even harder to make a point. Just
after the tender offer collapsed, he joined a shareholder
committee in a highly publicized attempt to poll
McGraw-Hill owners on whether they wanted the board
to reconsider the American Express bid. The object was
to sway the board or, failing that, build ammunition for
a court fight. The plan fell apart when McGraw-Hill
made it clear that it would ensnare the shareholders in
costly lawsuits if they persisted.
But Wyser-Pratte still isn't through with McGraw­
Hill. He bought 100 shares of the company's stock in his
own name so that he could put a proposal in its 1980
proxy statement. He wants to amend the bylaws so that
the board will be required to present to the shareholders
any offer, by a financially responsible entity, to buy
more than forty-five percent of the stock at a fortypercent
premium over the market price. The bylaw
would also prohibit the directors from spending any company
money to contest such an offer.
"The shareholders own the company and they can
read," Wyser-Pratte says in explaining his proposal.
"They are capable of making their own decisions about
whether to hold or sell shares." The Securities and
Exchange Commission ruled that McGraw-Hill didn't
have to include the proposal in its 1980 proxy statement
because Wyser-Pratte bought his shares too late to be a
shareholder of record on the last day for filing material.
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Subsequent changes in the price of the stock would indicate
to anyone else that the matter was closed. But not
Wyser-Pratte. He is still thinking it over.
Wyser-Pratte openly revels in his self-assumed role as
the shareholder's protector, but his actions haven't been
all that popular among other arbitrageurs. They dislike
losing as much as he does, but they lick their wounds in
private. In their view, the glamour of takeovers and the
enormous profits they've made have already focused too
much attention on the arbitrageurs, and they don't need
one of their own stirring up even more trouble.
Ironically, the one attracting all the publicity is the only
major arbitrageur who was born into the profession.
Wyser-Pratte's father, Eugene, started out in classic arbitrage
in Paris and moved to New York in 1948. Guy
went through grammar and high school in Westchester
County and enrolled at the University of Rochester in
the fall of 1958. He now looks back on the four years in
Rochester as "the greening of Wyser-Pratte." The intellectual
climate, he says, was a radical change from the
know-nothing attitude that prevailed at his earlier
schools. In addition to majoring in history, he was an
original member of the University of Rochester hockey
club, rising at five o'clock on winter mornings to slap
pucks on the frozen Genesee. He attended Rochester on
an ROTC scholarship and was the only one in his class
to opt for a Marine commission instead of one in the
Navy.
The other variety of greening didn't begin until
Wyser-Pratt left the Marine Corps in 1966. He joined
his father's company, which by then had shifted from
classic to risk arbitrage, and started night courses
towards an M.B.A. in finance at NYU. (His thesis for
the degree, which he got in 1970, was on risk arbitrage.)
In 1967 he and his father sold the business to Bache and
both went to work there. Guy has been in charge of the
arbitrage operation since his father retired in 1971.
Running the arbitrage department entails keeping a
constant eye on the ticker and fielding nonstop questions
from his subordinates as he makes the final decisions on
the twenty to forty situations that Bache has investments
in at any given time. For lagniappe, Wyser-Pratte
manages investment portfolios for eight European banks.
With all that, he is able to take two months off each year
and spend time with his daughters, Joelle, eleven, and
Danielle, seven. He also gets back to his native France
four or five times a year. The allure isn't Paris, but the
countryside. Wyser-Pratte would rather be walking
through the vineyards and farmlands of France than
anywhere else. Unless, of course, a big tender offer is in
the works.
A.F. Ehrbar, who received his M.B.A. from Rochester in 1974, is a
senior editor at Fortune, specializing in feature articles on public policy
matters.