VLSI must make up its mind over Philips offer

VLSI must make up its mind over Philips offer
David Manners Today (Wednesday) is the deadline for VLSI Technology to respond to the letter from Philips chairman Cor Boonstra offering to buy the company. Boonstra took the unusual step of publishing a letter he wrote to Al Stein, chairman and CEO of VLSI Technology referring to earlier meetings between himself, Stein and Philips Semiconductors’ chairman Arthur van de Poel, and offering $17 per share valuing VLSI at $777m – some 60 per cent more than its stock exchange value on February 25, the date of the letter. Boonstra asked for a reply by close of business today. Describing the offer as ‘unsolicited’, Stein said: “The company will respond when the appropriate review has been completed.” Asked why Boonstra had published the letter, a Philips spokesman replied “because of stock exchange rules”. However, many industry figures assumed it was to concentrate Stein’s mind putting him under pressure from shareholders. VLSI has significantly underperformed in the main business area in which it operates – the standard cell business. Whereas, according to analysts IC Insights, market leader IBM Microelectronics increased its standard cell revenues by ten per cent last year to $1.7bn and while No.2 company, Lucent, grew its revenues by 20 per cent to $1.6bn, by contrast VLSI’s standard cell revenues declined 25 per cent last year to $440m. A Philips spokesperson attributed VLSI’s underperformance to the company’s phased withdrawal from supplying chips to the PC market. “It’s a good deal for Philips – it catapults them up the top ten,” commented Malcolm Penn chairman of analysts Future Horizons. “It’s the next stage of the European recovery situation. They’ve got the technology – now they’re on the acquisition trail. I expect ST to be heading the same way.” With VLSI’s $550m total revenues Philips’ semiconductor sales would top $5bn, placing it sixth in the world semiconductor league table.


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