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VLSI Technology Rejects Philips' Offer
VLSI Technology Rejects Philips
By Jeff Dorsch -- Electronic News, 3/22/1999
San Jose, Calif.-- VLSI Technology Inc. is officially in play.
The name of the game now is "Win Al Stein's Company," and in formally rejecting Royal Philips Electronics NV's unsolicited offer to acquire the company for $17 a share in cash, VLSI's board of directors invited anyone with more than $777 million to sit in at the poker table.
VLSI previously had scheduled a special board meeting for March 23, to hear a formal evaluation from its new advisers, including Morgan Stanley & Co. and Hambrecht & Quist LLC. But the VLSI board accelerated the process last week, with the company stating that the directors had "unanimously determined" that Philips' offer is "inadequate and not in the best interests of (VLSI's) stockholders." The board recommended that shareholders reject the offer and not tender their shares to Philips.
"The VLSI board also unanimously determined that VLSI should explore its strategic alternatives, including a merger, sale or recapitalization of VLSI. The VLSI board said those alternatives could include negotiations with interested parties, including Philips," VLSI, based here, said in a statement. It added that the board "believes interested parties will recognize the strong business potential of VLSI."
Philips planned to respond to the rejection on Friday by making a filing with the Securities and Exchange Commission, stating that it is willing to negotiate with VLSI. Meanwhile, investors took heart at the news of VLSI's formal rejection, pushing the market price of VLSI's stock over $19 a share on Friday.
What forced the board's hand? Observers suggested it was Philips' move on March 12 to file a consent statement with the SEC, seeking the consents of VLSI shareholders to remove the incumbent directors from the VLSI board and replace them with nominees who would "allow the Philips offer to proceed," Philips stated. The next step, if VLSI's board continues to resist the Philips bid, would be a consent solicitation, seeking proxies from VLSI shareholders to call a special meeting of the shareholders, with the purpose of removing the VLSI board.
Philips' current tender offer expires next week, on April 1. If Philips is willing to raise its offer to more than $17 a share, it may let its existing tender offer run out and make a new tender at a higher price.
Philips disclosed on March 12 that it had acquired 1,235,000 shares of VLSI's common stock, or about 2.7 percent of VLSI's shares outstanding.
Philips also reported retaining Credit Suisse First Boston Corp. as its financial adviser for the VLSI tender offer. There has been investor speculation that Lazard Freres & Co. may also be playing a role in Philips' bid; on Feb. 16, nine days before Philips went public with its offer to buy VLSI, Lazard Freres disclosed to the SEC that it had acquired 3,117,022 shares of VLSI stock, a 6.46 percent stake in the ASIC company. The New York investment bank declared it had bought the stock "in the ordinary course of business," usually a bit of legal boilerplate in 13G filings with the SEC, and not with the purpose of acquiring control of VLSI.
In filing the consent statement with the SEC on March 12, Philips said it "remains hopeful that VLSI will enter into negotiations soon.
