Case Study 3: A city divided, Edison’s hostile takeover attempt
California was in a serious recession in the late 1980s. Entities everywhere were struggling financially, including Southern California Edison, a power utility located in a suburb of Los Angeles. Southern California Edison (Edison) was also struggling because Los Angeles’ population growth had begun to slow. As Edison looked around for solutions, it noticed that its relatively close neighbor, San Diego, was not suffering from a population growth slowdown, but was, in fact, the fourth-largest-crowing city in the United States. Edison decided the answer to its woes was to envelop San Diego Gas & Electric (SDG&E) through a hostile takeover.
The first hostile takeover bid was presented on July 26, 1988. SDG&E rejected it and two successive bids. In fact, SDG&E even asked the state to stop Edison’s takeover attempt. Yet, abruptly on Nov. 30, SDG&E accepted an Edison bid of $2.5 billion.
City officials, civic leaders and San Diego residents were unnerved and a discussion of a municipal takeover of SDG&E began. SDG&E responded by dropping out of the Chamber of Commerce; and rumors began circulating that Edison had offered some SDG&E officials positions if they agreed to the takeover.
Suddenly, San Diego was divided among two camps, those in favor of the merger and those opposed to it. In favor was San Diegans for the Merger, Edison and members of management and the board of directors at SDG&E. Opposed was, the Coalition For Local Control (CFLC), San Diego Mayor Maureen O’Connor, City Attorney John Witt and the majority of employees at SDG&E.
Immediately, the groups opposed to the merger were at a disadvantage. Edison began to fund San Diegans for the Merger. In total, Edison and its supporters spent more than $2.2 million on advertising and publicity campaigns, an amount that the grassroots networks opposed to the merger could never fathom. However, those opposed to the merger had greater...
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