AlliedSignal buys 20 million AMP shares

Despite a U.S. District Court judge`s ruling that packing amp`s board with AlliedSignal officials violates Pennsylvania`s fiduciary laws, AlliedSignal Inc. got its foot in amp Inc.`s door when it purchased 20 million shares of the Harrisburg, PA-based manufacturer of electrical, electronic, fiber-optic, and wireless interconnection devices and systems.

Dec 1st, 1998

Mark A. DeSorbo

Despite a U.S. District Court judge`s ruling that packing amp`s board with AlliedSignal officials violates Pennsylvania`s fiduciary laws, AlliedSignal Inc. got its foot in amp Inc.`s door when it purchased 20 million shares of the Harrisburg, PA-based manufacturer of electrical, electronic, fiber-optic, and wireless interconnection devices and systems.

Judge James T. Giles also upheld amp`s amendments to its shareholder rights` plan. "If AlliedSignal`s directors and officers are elected to amp`s board of directors, they will have an inherent conflict that will necessarily put them at risk of violating Pennsylvania`s fiduciary duty standard," Judge Giles ruled. "amp`s shareholder rights` plan was amended by the board to better protect the interests of amp and its relevant constituencies and to help ensure amp shareholders the opportunity to assess the success of amp`s profit-improvement plan and judge it against AlliedSignal`s inadequate offer."

Shortly after the October ruling, AlliedSignal announced that it had purchased 20 million shares of amp stock at $44.50 each. An amp spokesman, who asked to remain anonymous, says that although AlliedSignal is now a shareholder, the company continues to follow through with a profit-improvement plan that was launched in July. amp has asked the court to give it until the shareholder`s meeting in May, when officials say the reorganization will reach its stride. The effort has yielded 3500 layoffs worldwide, man-datory furloughs for 22,000 U.S. employees, the consolidation and relocation of several of its facilities, and the movement of certain production to India and Mexico.

"We have an initiative that is in place and it hasn`t had the time to come to fruition and become more valuable than AlliedSignal`s offer," the spokesman said. "AlliedSignal doesn`t want to give us the time. They want to reap the benefits of our improvement and our hard work."

Up to 30 million more shares also were self-tendered by amp at $55 each. "Our self-tender offer will provide amp shareholders the opportunity to sell a portion of their shares at a price far in excess of AlliedSignal`s price," says Robert Ripp, amp`s chairman and chief executive. "We chose the $55 price because it gives amp the ability to deliver value to shareholders today while the company continues to take the necessary steps to increase the value tomorrow. The self-tender is our down payment on the inherent value of amp`s profit-improvement plan."

AlliedSignal officials, however, say they can comply with Judge Giles`s ruling and still move forward with the plan to acquire amp. "We are still considering appealing part of the judgment--the `poison pill` tactic of blocking Allied- Signal officials from election to amp`s board of directors," AlliedSignal spokes-man Adam Wiener says. "The judge`s ruling appears to provide a way to still proceed with our consent solicitation."

The first step AlliedSignal took in that consent solicitation was the recent purchase of amp shares. The $890-million investment, Wiener says, shows AlliedSignal`s commitment. "amp has good products and a good reputation in its markets," he adds. "We think we can add our focus on quality and customer satisfaction to that to make amp even better and even more responsive."

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