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AMP rejects hostile bid
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August 21, 1998: 12:27 p.m. ET
AMP says thanks but no thanks to AlliedSignal's $10 billion tender offer
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NEW YORK (CNNfn) - It may be hard up for cash, but AMP Inc. told shareholders Friday to shoot down a $10 billion hostile takeover bid by AlliedSignal, saying the company can get its own house in order.
The Harrisburg, Pa.-based maker of electrical connecting devices told investors that its previously announced restructuring plan will provide more opportunities for the company than a takeover, Wall Street sources said.
In a statement, the board said AlliedSignal lacks synergies with AMP and said the company's offer "is inadequate and does not reflect the inherent value of AMP as the world's largest supplier of electrical and electronic connectors."
The company also said its stock price "should increase significantly as the strategic initiatives announced in June … start to take effect."
"AlliedSignal has launched its offer at a time when AMP's business, like those of other companies similarly situated, is under pressure from a significant, but ultimately temporary, economic downturn in the Far East and, accordingly, when AMP's stock price was near the lower point of the last 12 years," said AMP's newly elected Chairman and Chief Executive Robert Ripp.
"The offer is nothing more than an attempt to buy AMP on the cheap," he said. "It is clearly an opportunistic attempt to grab a world industry leader at a bargain price."
AlliedSignal, a Morris Township, N.J.-based high tech manufacturing firm, extended the offer Aug. 10 after AMP allegedly ignored friendly overtures.
Under terms of the proposed cash deal, AlliedSignal offered to buy all of AMP's outstanding shares at $44.50 apiece. At the time, the offer represented a 55 percent premium over AMP's trading price.
AMP (AMP) shares were off 1-1/16 at midday Friday at 37-15/16 on the New York Stock Exchange.
AlliedSignal shares (ALD) were off 2-1/8, or 5.4 percent, at 37 on the Big Board in afternoon trade.
Although protected by Pennsylvania's tough anti-takeover laws, AMP is considered vulnerable because its stock price has been battered in recent months by earnings disappointments tied to exposure in volatile Asian markets.
The stock, which traded in the mid-50s last fall, recently has slumped to the low-30s. In July, AMP announced plans to close facilities and lay off 7.5 percent of its workforce as part of a recovery plan.
A rejection of the AlliedSignal bid likely will set the stage for a protracted takeover battle and could force AMP to search for a "white knight," especially if its shareholders are attracted to the hostile offer.
But because AlliedSignal's bid already represents a significant premium to AMP's recent trading price, it's uncertain whether an effort to find another buyer will succeed.
"Obviously, AMP would love to find a partner where they could be more in control of their own destiny," said James Meyer, an analyst at Janney Montgomery Scott Inc.
AMP declined to comment on the expectations for its rejection. 
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