Archive Corp. Makes Hostile Bid for Rival
Archive Corp. on Tuesday launched a $109-million hostile takeover bid for Cipher Data Products of San Diego, a rival computer tape-drive manufacturer. The two are locked in a costly patent dispute.
In a statement released late Tuesday, Costa Mesa-based Archive said it has begun a $7.50-a-share cash tender offer to acquire all of Cipher’s 14.5 million shares outstanding. Archive said has already purchased 675,000 shares, or 4.6%, of Cipher’s stock.
Cipher’s stock, traded over the counter, closed unchanged Tuesday at $4.875 per share. Archive’s shares closed at $11.375 per share, up 12.5 cents, on the OTC market. The announcement was made after the market closed.
Archive and Cipher are leading manufacturers of tape drives used to copy data stored on computer hard disk drives. Owners of computer systems use the tape drives to have an extra copy of information in their computers in case the data is accidentally lost.
B. J. Rone, Archive’s vice president for finance, declined to comment on the offer except to say it was being made at a time “when there has been a lot of consolidation in the industry.”
Cipher officials could not be reached for comment.
Archive’s bid comes at a time when Cipher is preoccupied with financial problems. Citing a huge dropoff in demand for its products, Cipher announced Oct. 19 that it was laying off 525 workers, nearly a quarter of its work force.
At the same time, Cipher announced a $14.2-million loss for the quarter ended Sept. 30. The company’s sales plummeted to $41.3 million in fiscal 1990’s first quarter, compared to $52 million in the year-earlier period. Cipher earned $12.1 million on revenue of $217.7 million in fiscal 1989, which ended June 30.
Meanwhile, Archive is enjoying strong financial results. The company’s profit jumped 40% to a record $15.3 million in its fiscal year ended Sept. 30, while revenue rose 48% to $181.4 million.
Archive said it has obtained conditional commitments from Barclays Bank PLC to provide financing. The firm has about $30 million in cash, which could also be used for the deal. The tender offer, which expires Jan. 22, is being made through an acquisition unit, CAC Corp.
The firm also said it has filed suit against Cipher in federal court in California seeking to nullify the San Diego firm’s “poison pill” anti-takeover plans. The suit also seeks to bar Cipher from filing suit to prevent Archive from proceeding with its tender offer.
Archive approved an anti-takeover plan of its own in April, 1989.
Archive and Cipher have been locked in a patent dispute since May, 1988, when Archive filed a patent infringement suit against Cipher. Cipher filed a countersuit two days later.
The dispute centers on loading technology that enables tape cassettes to be inserted sideways into the tape drives. Cipher’s claims to the technology are covered in patents awarded to the company in 1986, Cipher has said.
The patent case is scheduled to go to trial in U.S. District Court in Santa Ana in May, 1990.
