Telxon Corp., an Ohio technology firm that has made a $95-million acquisition bid for MSI Data Corp. of Costa Mesa, said Monday that it will ask a Delaware judge to nullify an anti-takeover plan adopted by MSI last week.
Telxon also reaffirmed its willingness to increase its $17-a-share cash offer for all of MSI's common stock. And the Akron-based company, which is MSI's main competitor, said it would be willing to retain MSI's "key managers" if its takeover effort is successful.
On Friday, MSI management rejected Telxon's offer as "inadequate" and asked company shareholders not to tender their stock to Telxon, which launched its buyout effort Sept. 12.
Telxon said it intends to file a counterclaim in U.S. District Court in Delaware seeking to have MSI's "poison pill" takeover defense declared invalid. Poison pills are measures designed to make it prohibitively expensive for an unwanted suitor to acquire its target.
Refusing to Negotiate
Telxon's suit also claims that MSI's directors have breached their fiduciary duties by refusing to negotiate with Telxon.
MSI, meanwhile, filed papers on Monday asking the Delaware court to uphold the poison-pill plan. MSI is incorporated in Delaware.
In an earlier filing, MSI asked the Delaware court to block Telxon from proceeding with its offer until a patent litigation suit between the two companies is resolved. MSI has accused Telxon of infringing MSI patents for portable data entry systems, which are small, hand-held devices used by retailers and wholesalers to record information.
MSI and Telxon are the two leading makers of portable data entry systems.
MSI's suit, which is scheduled for trial Nov. 22, alleges that Telxon initiated its takeover offer because it feared that it would lose the patent suit and would have to pay millions of dollars in damages to MSI. Telxon, the suit charges, "chose to time its tender offer in advance of trial of the patent suit before the market price of MSI stock reflected the value of any damage recovery from Telxon."
Eliminating 'Damage Exposure'
The suit further charges that the purpose of Telxon's offer "is to eliminate Telxon's damage exposure from the pending patent litigation and to gain free access to patented technology which Telxon has wrongfully exploited and incorporated into its major products lines and continues to use in those lines."
Telxon officials were not immediately available to comment on MSI's charges.
In a letter sent Monday to MSI Chairman William J. Bowers, Telxon Chairman Raymond D. Meyo requested that Telxon receive the same non-public corporate information that it said MSI is providing other parties interested in acquiring MSI. On Friday, MSI said it has received "expressions of interest from other companies" that may want to purchase MSI "at a more attractive price."
Telxon reiterated its willingness to raise its $17-a-share offer for MSI "if appropriate."
The Meyo letter also stated that if Telxon's bid is successful, "one of our top priorities will be to negotiate mutually satisfactory arrangements enabling the combined MSI-Telxon entity to have the benefit of MSI's key managers."
Financial analysts have speculated that MSI management is resisting the Telxon offer, in part, because it is worried that Telxon will fire MSI managers after it takes control of the company.