Attempted hostile takeover averted, thanks to white knight

A hostile four-month courtship launched by AlliedSignal Inc. to gain control of amp Inc. ended last November when the object of its affection tied the knot with Tyco International Ltd.

--Mark A. DeSorbo

A hostile four-month courtship launched by AlliedSignal Inc. to gain control of amp Inc. ended last November when the object of its affection tied the knot with Tyco International Ltd.

The marriage was unanimously approved by the boards of directors of both companies, forming a tax-free, stock-for-stock swap, valued between $51 and $55.95 per share, or $11.3 billion. That`s about $1.5 billion more than what AlliedSignal (Morris Township, NJ) offered in August when it initiated a hostile takeover attempt.

According to a report by Fleck Research (Santa Ana, CA), amp Inc. (Harrisburg, PA) gave up efforts to remain independent and found a friendly "white knight" in Tyco. The Hamilton, Bermuda-based manufacturing and service company produces and installs fire protection systems; provides electronic security services; and is a manufacturer of electrical and electronic components and under- water telecommunications systems. "We are bringing to Tyco the world`s largest electronics connector company with an exceptionally strong market position," says L. Dennis Kozlowski, Tyco`s chairman and chief executive. "The combination with Tyco provides amp a clear path to becoming the lowest-cost manufacturer, while providing attractive margin improvement resulting in double-digit earnings growth and strong cash flow for the foreseeable future."

Under terms of the agreement, if Tyco`s weighted average stock prices range from $60 to $67 per share, amp shareholders will receive Tyco stock valued at $51 per share. If Tyco`s stock price ranges from $67 to $73.50, amp shares will be valued $51 to $55.95. If Tyco`s share prices become greater than $73.50, amp shares will be fixed at $55.95. amp shareholders will also earn Tyco shares as well. For example, because Tyco`s share price closed at $65 on November 20, amp shareholders received 0.7838 shares of Tyco stock for each amp share.

Bob Ripp, amp`s chairman and chief executive, says the company`s growth strategy is also supported with Tyco`s track record of growth in both its core businesses and through acquisitions. amp`s growth strategy was spelled out in a "profit-improvement plan." The plan yielded 3500 layoffs worldwide, mandatory furloughs for 22,000 U.S. employees, the consolidation and relocation of several of its facilities, and the movement of some of the company`s production to India and Mexico. "We expect positive results of amp`s profit-improvement plan to be accelerated further by this strategic combination. Tyco is well-recognized for management and strength and willingness to invest in businesses for growth and manufacturing productivity," says Ripp, who will serve on Tyco`s board of directors.

On November 19, apparently unaware of the deal transpiring between Tyco and amp, AlliedSignal announced that it would continue its efforts to acquire amp after a U.S. District Court judge dissolved an injunction that prohibited it from doing so. The automobile and aerospace components maker had already purchased 20 million amp shares and set its sights on asking amp shareowners to expand the board of directors from 11 to 28 members in order to elect 17 AlliedSignal nominees. amp appealed that measure, and the U.S. District Court issued a new ruling that prohibited AlliedSignal`s nominees, if elected, from being seated on amp`s board.

On November 23--the same day the merger between amp and Tyco was announced--AlliedSignal issued a press release stating, "Tyco`s price for amp exceeds the value AlliedSignal places on amp."

"If this transaction is consummated, we are glad that amp shareowners will realize a substantial gain over the $29 price of amp shares before out offer," says Lawrence A. Bossidy, chairman and chief executive of AlliedSignal, who also wished Tyco and amp well. "We believe our gain on the amp shares we own will substantially exceed our costs incurred in pursuing amp."

Fleck`s report indicated that AlliedSignal stated that it would not counter with an increased offer. The report also indicated that chief executives of other connector companies, who were contacted by Fleck, were nearly unanimous in favoring AlliedSignal. The report also stated that AlliedSignal would not be a contender for other connector companies.

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