AMP facing attempted hostile takeover, other woes

It has been a tough four months for AMP Inc. The Harrisburg, PA-based manufacturer of electrical, electronic, fiber-optic, and wireless interconnection devices and systems, has been fac- ing a threat of hostile takeover by AlliedSignal Inc. (Morris Township, NJ), a maker of automobile and aerospace components.

Nov 1st, 1998

Mark A. DeSorbo

It has been a tough four months for AMP Inc. The Harrisburg, PA-based manufacturer of electrical, electronic, fiber-optic, and wireless interconnection devices and systems, has been fac- ing a threat of hostile takeover by AlliedSignal Inc. (Morris Township, NJ), a maker of automobile and aerospace components.

And although both companies have filed separate lawsuits in the U.S. District Court for the Eastern District of Pennsylvania, the litigation with AlliedSignal is just one of the battles AMP is fighting in court. Connectware Inc., one of its wholly owned subsidiaries, is being sued by Magnetic Technologies (Brussels) for fraud; AMP officials have declined to comment on that matter.

Making the situation even more frenzied for AMP is the latest in a series of reorganizations, announced in July, which has 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. These latter actions, however, are all part of a "profit-improvement plan that we believe will deliver significant value to shareholders and help us serve our customers better," says AMP spokeswoman Joele Frank, adding that it is "a very exciting time" for AMP under the new leadership of Robert Ripp, chairman and chief executive. "Bob Ripp has found that the unwanted AlliedSignal hostile-takeover attempt has helped galvanize the employee body to deliver results--results that help employees, customers, and shareholders to make AMP a much stronger company."

These reorganization efforts have come under heavy fire from officials at AlliedSignal, who say the takeover is in the best interests of shareholders in both companies. "We know how to fix companies that are hurting," says Mark Greenburg, vice president of communications at AlliedSignal. "[AMP] has the largest market share of any company in the connector market. Yet, they have anemic profit margins, a declining market share, plummeting profits, and plant closings."

Larry Bossidy, AlliedSignal chairman and chief executive, says AMP, which made $5.75 billion in 1997, has had "ample opportunity" to restructure the company. He adds that AMP`s ability to change on its own is improbable, and he has verbally attacked Ripp, for his lack of experience as a chief executive.

The hostile-takeover attempt began on August 4 when AlliedSignal announced that it would offer AMP $9.8 billion or $44.50 per share, a 55% premium, according to AlliedSignal, over what AMP shares were selling for before the offer. Bossidy indicated that AlliedSignal will move forward with its plan to acquire AMP with a lawsuit filed in U.S. District Court to "assure AMP shareowners will not be denied the opportunity to receive, consider, and act upon our offer."

In September, AlliedSignal extended and changed its offer to make it a partial, pro-rated bid for 18% of AMP`s shares. In a prepared statement, AMP officials said that AlliedSignal`s new offer constituted as "efforts to end-run the various protective features of Pennsylvania law and the Rights Plan. AMP also issued a letter to shareholders, reassuring that its profit-improvement plan would yield $320 million in savings; increase operating-income margins to 11% for the fourth quarter of 1998, 13.5% for 1999, and 16.5% for 2000; and improve earnings per share to at least $2.30 for 1999 and at least $3 for 2000.

Since then, the issue has been tied up in court. AMP`s counter has been to seek injunctive relief from the advanced-technology manufacturer as well as a partial summary judgment. AlliedSignal has asked the court to reverse AMP`s "poison pill" efforts to raise the cost of its stock, block election of AlliedSignal`s 17 nominees to AMP`s board of directors, and prevent the attempted hostile takeover.

Ripp responded to AlliedSignal`s offer on August 21 and said he was not surprised by AlliedSignal`s actions following AMP`s rejection of what he called an opportunistic and inadequate offer. Ripp called Bossidy`s comments strident and inappropriate and said AMP management will be undeterred in its determination to deliver the benefits of its improvement plan to shareholders and other constituencies.

"From our perspective, it`s either ignorance or arrogance on AlliedSignal`s part," AMP`s Frank adds. "We believe they are trying to buy AMP on the cheap, and we believe we can deliver over or in excess of their low-ball bid. All they are trying to do is talk down the value of the asset they are trying to buy."

The court ruled that any attempts to pack AMP`s board with AlliedSignal officials violate Pennsylvania`s fiduciary laws. Despite this decision, AlliedSignal got its foot in AMP`s door when it purchased 20 million shares in the company.

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