VLSI asks Philips for more time on buy-out

VLSI asks Philips for more time on buy-out
David Manners A cat and mouse game is under way between Royal Philips and VLSI Technology. VLSI’s response to Philips’ deadline of last Wednesday (March 10) for a reply to its buy-out offer was to request more time for consideration and would respond on March 23. According to documents filed with the US Securities and Exchange Commission (SEC), Philips and VLSI have been talking about the takeover since November. Philips’ response to VLSI’s request has been to make a tender offer for VLSI’s shares which expires on April 1. Under the tender plan, shareholders can accept Philips’ $17 per share offer which is $7 above the stock market price before Philips’ interest was known. However, VLSI has a witty defensive stratagem contained in a clause in its articles of incorporation which says that when another company acquires 20 per cent of its shares it can issue more shares at half market price so diluting the voting power of any shares a bidder acquires and raising the bid cost. Philips has demanded that VLSI either gets rid of the clause or rescinds it specifically in respect of the Philips offer. Meanwhile, Philips has identified a mechanism by which, under SEC rules, it can proceed to replace members of the VLSI board with Philips nominees. Wall Street has generally sided with Philips in this battle – probably because VLSI has been underperforming in the standard cell Asic market for more than a year. Shareholders are also miffed to learn that VLSI’s board turned down a higher offer from LSI Logic last year. Analysts reckon that VLSI’s board has only two options: sell to Philips or get sued by VLSI’s shareholders. VLSI chairman Al Stein seems caught between a rock and a hard place.


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