I thought I had posted this, but I'm told it didn't get through. I had asked
Mr. Kehoe to list the benefits that balanced the obvious negatives and caused
the AALL to take a neutral position. I also asked why a non-publisher would
spend $2 billion to buy a publishing company if it didn't intend to publish,
and who these non-publishing offerers are. Mr. Kehoe's answer follows:
Polly A.
In a message dated 96-04-18 16:12:29 EDT, pkehoe@american.edu (Patrick E.
Kehoe) writes:
>Polly, we are preparing yet another article for the AALL Newsletter which
>was originally scheduled to appear one month after the second of the two
>columns that I wrote for it but posted yesterday to Law-Lib. The purpose of
>that article, which is not another President's Column but rather a thing
>unto itself, is to help educate AALL members about some of the questions and
>concerns that the Board had to resolve in its own mind when determining what
>position, if any, to take on the merger. Margie Axtman has agreed to do the
>article which is to be in the form of a question and answer session with
>Brian Hall. The questions are now being developed with the help of CRIV
>people and others including board members. They will be real and the real
>answers will come from Mr. Hall. We will see just what comes out. The
>deadline for the article is only about a week away. (about two months before
>it hits print and your desk in the AALL Newsletter).
>
>You might note that there have been many acquistions of old line legal
>publishers and traditionally relatively little real competition in legal
>publishing. Until about 1947 there even was an agreement between the various
>players in the field to carve up the market. After that date when DOJ forced
>a change, the reality remained much as it had been.
>
>The modern era for law publishing began about a generation ago when Shepards
>was sold by Frank Shepards to McGraw Hill -- then an outsider to legal
>publishing. Other companies have been bought and sold since then. The most
>recent before the West Thomson was the purchase of CCH by Kluer last fall.
>Some of the prices paid have been very high. It appeared that neither AALL
>nor many of its members seemed too concerned about this kind of thing until
>Thomson announced that it was acquiring West. Now we are. Yet the whole
>thing is being driven by market forces beyond anything the AALL can hope to
>control. All we can try to do is influence the antitrust review so as to try
>to get some protection from that for consumers from the kinds of things any
>new owner of West might want to do with it and/or its products.
>
>You ask if there were any financial buyers out there. We understand that
>there were at least three other bidders. The list I have seen does not
>include any other law book publishers. The chilling possible result of the
>purchase of West by a financial buyer is only something about which we can
>speculate. In situations where financial buyers have acquired companies,
>especially during the 1980's, they frequently did things to imporve the
>profit line in the relatively short term of say three to five years before
>unloading them to buyers who then had to deal with the bad effects of the
>short term thinking. In the case of West, I thought that a financial buyer
>would probably cut back on production costs. This would destroy the
>integerty of the final printed product but in ways we might not learn about
>for years. By then the damage would be done. The buyer would also probably
>push prices up as far as it could. This has happened in other settings. Then
>before everything came crashing down, they would unload the company at a
>hefty profit -- their real original goal.
>
>Look at what happened to Safeway in about the mid 80's. Safeway was a major
>and strong food retainer. Then the Haft's of Washington, DC announced that
>they were going to acquire it. The Hafts had already purchased some of
>Safeway stock at low prices before making this announcement. The everyone
>reacted. The financial markets went wild and the Safeway directors began
>borrowing money to use in fending off the Hafts. The result was that they
>were successful in fending them off. The other result is that Safeway was
>almost bankrupted and untimately forced to divest itself of many of its
>regional opperations such as the one in Texas. The company has never
>returned to what it once was. Why did the Board do this at Safeway? Because
>of the track record of the Hafts once they acquired a company. I guess that
>the Hafts are financial buyers whose agendas differ from those of many other
>managers.
>
>Could this have happened at West? We don't of course know for sure. In
>West's situation the owners wanted to sell. Thus noone would have done what
>Safeway's management did. Still the cost is very high and borrowed money is
>probably being used by any buyer at this kind of level. That much debt is
>problematic in its own right. Thomson at least has some kind of track record
>as a legal publisher. Will they too raise prices? We know that they have in
>the past. I guess we really will have to wait and see. This certainly is a
>high risk world in which we are living.
>Patrick E. Kehoe, Director, American University Law Library
>4801 Massachusetts Avenue, N. W. Washington, DC 20016-8182
>Phone: voice 202 274 4374 fax 202 274 4365
>
>
Polly A. >>
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