Western Digital Adopts Plan to Deter Suitors : Shareholders Could Buy Common Stock at Discount if Any Investor Has 25%

Amid a recent flurry of corporate takeover activity, Western Digital Corp.’s board has adopted a shareholder rights plan designed to deter hostile suitors.

Under the plan, shareholders will have the right to buy common shares at a discount if any investor acquires 25% or more of the company’s stock.

Roger W. Johnson, chairman of the Irvine-based computer products company, said the action “was not taken in response to a specific takeover threat.”

But securities analysts speculated that Western Digital may have been responding to recent takeover activity in the computer industry and a general slump in technology stocks.

“I think (Western Digital) is undervalued in the stock market today, and I’m sure that’s what management is thinking,” said Karen Payne, a technology analyst with Butcher & Singer in Philadelphia. “They could be a sitting duck for somebody.”

Payne said Western Digital could make an attractive takeover target to a number of electronics concerns, ranging from semiconductor manufacturers to personal computer makers.

“Western Digital’s key strength is its manufacturing expertise,” she said. “They make up to 10 million computer boards a year, and that kind of capacity is incredibly attractive to a lot of people.”

The fact that Western Digital management controls only a small percentage of the firm’s stock would also make it easier for a potential buyer to gain control of the firm, Payne said.

In American Stock Exchange trading Monday, Western Digital stock closed unchanged at $12.50 per share. The stock has traded as high as $18 during the past year.

In recent months, several Orange County computer companies have been involved on both ends of takeovers. MSI Data of Costa Mesa fought off a hostile bid earlier this year by agreeing to be acquired by Symbol Technologies. And currently, Tustin-based MAI Basic Four is making a hostile bid for Prime Computer.

Johnson said the shareholder plan “will not and is not intended to prevent a takeover of the company on terms that are fair to and in the best interest of all stockholders.”

The plan will, however, give the company “additional time and flexibility to protect stockholder interest in the event of an unsolicited takeover bid,” Johnson said.

Western Digital shareholders will receive rights under the plan enabling them to buy Western Digital common shares at a discount if any investor acquires 25% or more of the company’s stock.

If the Irvine firm is merged into another company or if 50% or more of the company’s assets or earning power are sold, the rights would entitle their holders to buy common shares of the acquiring firm at half their market value.

Western Digital said the rights will be distributed to shareholders of record on Dec. 13 and will expire in 10 years.

Western Digital, Orange County’s largest computer company, makes semiconductors and a broad range of components for use in personal computers and communications equipment.