Gateway Communications Inc. said Friday that it has adopted a shareholder rights plan intended to make a hostile takeover of the company more difficult to complete.
Paul J. Schneider, Gateway's chief financial officer, said the action was taken because the company believes its stock is priced below its market value, not as a response to any specific takeover attempt.
"We believe that on a long-term basis our stock is undervalued," Schneider said.
Gateway stock, which traded as high as $17 per share in 1986, has floundered around the $2 mark during the past year. On Friday, the stock closed at $2.0625 per share, down 6.25 cents, in over-the-counter trading.
Because an undervalued stock makes a company more attractive as an acquisition target, it is not uncommon for firms to adopt anti-takeover plans when they believe their stock is bargain-priced.
Although Schneider maintained that Gateway is not responding to an imminent takeover threat, he did note that a New York-based investment group, Centennial Associates, recently acquired a 5% stake in the company. But he said the group has told the company that the purchase was made for investment purposes only.
The rights plan "will give the board the ability to negotiate" with a party attempting an unfriendly takeover, Schneider said. The plan gives current shareholders the right to buy additional stock at a set price. It would go into effect in the event that a party acquired 30% or more of Gateway common stock or announced a tender offer for at least 30% of the company.
"The board intends for the rights to enable all shareholders to realize the full long-term value of their shares in the event of an acquisition of the company," Schneider said.
"The rights do not deter takeover attempts but should encourage any interested acquirer to negotiate with the board prior to attempting a takeover."
A number of Orange County companies have adopted anti-takeover plans during the past year, among them Western Digital Corp. and AST Research Inc.
Gateway, whose sales were $16.8 million for 1988, manufactures communication products known as local area networks that enable personal computers to talk to each other and to share printers and other peripheral equipment.
For the nine months ended Sept. 30, Gateway earned $755,793 on revenue of $19.7 million, up from earnings of $514,725 on revenue of $11.7 million for the same period last year.