Say no to AlliedSignal, AMP urges stockholders $9.8 billion offer scorned, compatibility doubted


August 22, 1998|By BLOOMBERG NEWS

HARRISBURG, Pa. -- AMP Inc. urged shareholders to spurn a $9.8 billion buyout offer from AlliedSignal Inc., saying that it's too low and that the world's biggest maker of electrical connectors doesn't fit with AlliedSignal's businesses.

As part of its plan to fight the takeover, AMP named Robert M. Ripp, its 57-year-old head of global businesses, as chairman and chief executive officer. Ripp heads a plan to buoy AMP's shares by closing five plants and cutting 7.5 percent of payroll by 2000.

AlliedSignal, which makes chemicals and automobile and aerospace parts, said it will press on with its $44.50-a-share cash offer and expects AMP shareholders to accept. AMP shares fell 50 cents to $38.50, signaling that some shareholders and analysts expect AlliedSignal to fail.

AMP shares have dropped by about half in 10 months as an Asian economic slump weakened demand for connectors used in everything from mobile phones to washing machines. AMP, with 1997 revenue of $5.75 billion, has 17 percent of the connector market.

"The offer is nothing more than an attempt to buy AMP on the cheap," Ripp said. "AlliedSignal's offer is more than 20 percent -- below AMP's peak price and 10 percent below our share price just a few months ago."

AMP also said its businesses aren't compatible with Morristown, N.J.-based AlliedSignal, which had 1997 sales of $14.5 billion.

AlliedSignal, known for its productivity improvement efforts, said can do a better job of fixing up AMP's business than can AMP.

"AMP has had ample opportunity to restructure and fix the company," said AlliedSignal Chairman and Chief Executive Officer Lawrence A. Bossidy, "but its ability to change on its own is at best improbable."

rTC On Aug. 4, AlliedSignal announced its offer to buy AMP at a 55 percent premium to AMP's closing price of $28.625 the day before. The offer is scheduled to expire Sept. 11.

Should AlliedSignal's plan succeed, it would expand AMP's board to 28 members from 11 and AlliedSignal would take control of AMP's board by 17 members.

AlliedSignal shares fell $1.6875 to $37.4375 yesterday on concern that the company will have to increase its offer, said Brian Eisenbarth, an analyst at Collins & Co.

Ripp's cost-cutting measures have yet to make a difference in AMP's earnings. AMP's second-quarter earnings fell 49 percent to $54.8 million, or 25 cents a share, hurt by weak demand from Asia. Sales fell 7.9 percent to $1.35 billion.

AMP said savings from the plant closings and job cuts should generate 11 percent operating margins in the fourth quarter, 13.5 percent next year and 16.5 percent in 2000.

Pub Date: 8/22/98

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