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VLSI strengthens poison pill
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March 8, 1999: 10:56 a.m. ET
Chip maker amends shareholder rights, but keeps 'open mind' on Philips' offer
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LONDON (CNNfn) - California chip maker VLSI Technology fortified its defenses Monday against a $777 million hostile takeover bid from Philips Electronics, but said it "continues to have an open mind" about the proposal.
Amsterdam-listed Philips filed suit Friday to block VLSI from mounting a so-called "poison pill" defense to thwart the acquisition. Under an offer that expires April 1, Philips had proposed a day earlier to pay $17 a share for VLSI as part of a plan to expand its operations in North America.
VLSI, a San Jose-based maker of integrated circuits for cellular phones and other wireless devices, said Monday it had lowered the "trigger" in its shareholder rights plan and amended several by-laws.
Under the restated plan, new shares can be created for existing shareholders if an outside party acquires 10 percent of VLSI's common stock, compared with 20 percent prior to the revision.
The amended plan also removed a 10-day window that potentially allowed takeover parties to redeem the rights after replacing the company's board.
In a statement Monday, VLSI said it had taken the action in order "to protect the Board of Directors' process of evaluating the unsolicited tender offer."
VLSI's chief executive officer, Alfred Stein, insisted the changes to the rights plan - last amended in 1992 - "are not intended to interfere with a transaction that is in the best interests of VLSI and its stockholders."
Philips spokesman Jeremy Cohen told CNNfn.com it would be premature to react to the amendments while they were still being reviewed by company lawyers.
But he took exception with VLSI's contention that it is not interfering with the takeover process.
"On first impression, it makes it seem as if they are trying to strengthen their poison pill defense," Cohen said. He said Philips' suit sought an outright retraction of the poison pill, reiterating that Philips believed its $17-per-share proposal is a "fair offer."
In its suit, filed in Delaware Chancery Court, Philips accused VLSI of refusing to redeem the poison pill despite the "attractiveness" of its offer.
Under Federal rules, VLSI must make a recommendation on the offer by March 18.
With the poison pill in force, Philips says it would face prohibitive costs to acquire VLSI.
Stein said Monday the changes will "modernize" the rights plan. He also hinted that VLSI would be amenable to an offer under better terms.
"The Board of Directors continues to have an open mind concerning the Philips proposal, despite the fact that Philips commenced an unsolicited tender offer only four business days after it first made its proposal," Stein said.
Shares of Philips slipped 0.23 percent to 64 euros in Amsterdam Monday. VLSI (VLSI) was down 1/16 at 18-1/4 on the Nasdaq.
--from staff and wire reports
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