Direct Approach in $4-Billion Buyout Bid : Burroughs Solicits Sperry Shareholders
Burroughs Corp., reacting to Sperry Corp.'s stubborn silence on a 3-day-old, $4.06-billion offer to buy out the rival computer manufacturer, announced Wednesday that it will go immediately to Sperry stockholders with its bid to acquire control of the company.
Detroit-based Burroughs said it will offer $70 each for 33 million shares of Sperry common stock, a move that would give the company control of 58% of Sperry’s outstanding stock when combined with 260,000 shares already held by Burroughs. It would convert the remaining Sperry stock into Burroughs securities as a part of the merger process.
“Because we haven’t heard from them, we’ve decided to go forward,” said a spokeswoman for Burroughs. “But we’re still very open and eager to talk with them.” She said there have been no negotiations with Sperry officials.
The tender offer, regarded as a hostile takeover maneuver, follows increasing rumors on Wall Street that Sperry’s failure to respond is a prelude to rejection of the Burroughs offer or an attempt by Sperry to resist the bid. At one point, rumors that a defensive Sperry move might be an effort to buy the much larger General Dynamics sent stock prices in the aerospace firm up as much as $5.25 a share; the stock closed at $82.62 1/2, up $2.87 1/2.
“Burroughs should be getting pretty edgy,” said Jan Lewis, president of Palo Alto Research Group in San Jose. “Sperry doesn’t seem to want the merger.”
A spokesman for Sperry in New York again declined comment on the Burroughs offer or on suggestions that Sperry is interested in acquiring another company. Sperry Chairman Gerald G. Probst, who had been traveling out of the country, has returned to New York, the spokesman said.
Burroughs announced the tender offer after New York stock markets had closed Wednesday. Sperry, which had jumped $16.25 a share to $71.25 in the two previous days, closed at $70.37 1/2 a share, down 87 1/2 cents. Sperry again was the volume leader with 5.8 million shares traded. Burroughs also slipped back, falling 62 1/2 cents a share to $62.87 1/2.
The proposed $4.06-billion offer is intended to create the second-largest computer maker in the country behind International Business Machines. It was the second time in less than a year that Burroughs Chairman W. Michael Blumenthal had made a bid for Sperry. The previous offer, for $3.5 billion in a stock trade, collapsed when Sperry management, cool to the offer, failed to accept terms before a Burroughs-imposed deadline expired.
“This time it looks like Burroughs is prepared to fight,” said Thomas Crotty, an analyst with the Gartner Group in Stamford, Conn.
Burroughs said that following completion of its cash tender offer, it intends to complete the merger by converting remaining Sperry stock into Burroughs preferred stock and debt securities valued at $70 a share. The tender offer expires June 5 and is contingent upon Burroughs acquiring at least 33 million shares and completing its bank financing arrangements.
The company said it has received commitments from Morgan Guaranty Trust, Bankers Trust and National Westminister Bank to provide financing of $1.5 billion for the cash portion of Burroughs’ bid.
On Wednesday, Standard & Poor’s followed the lead of Moody’s Investors Service a day earlier and placed Burroughs on a creditwatch “with negative implications.” Standard & Poor’s said that “the combined (companies) would bear significantly higher debt leverage than the existing organizations.”
The move also reflected skepticism about the compatibility of the Burroughs and Sperry that had been expressed earlier this week by a number of market analysts.