Archive Opens $109-Million Bid to Take Over Cipher Data of S.D.
Archive Corp. on Tuesday launched a $109-million hostile takeover bid for Cipher Data Products of San Diego, a rival computer tape-drive manufacturer with whom Archive is locked in a costly patent dispute.
In a news release Tuesday, Archive said that it has begun a $7.50-a-share cash tender offer to acquire all of Cipher’s 14.5 million shares outstanding. Archive said it 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 over-the-counter 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 in order to have an extra copy of data in the event that information in their computers is accidentally lost.
B.J. Rone, Archive’s vice president for finance, declined to comment on the offer, except to say that 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 serious financial woes. Citing a huge drop-off in demand for its products, Cipher announced Oct. 19 that it was laying off 525 workers--or 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 in fiscal 1990’s first quarter, falling to $41.3 million from $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 record financial results. The company’s earnings 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 for the offer. The firm has about $30 million in cash, which could also be used in the deal.
The tender offer, which expires Jan. 22, is being made through an acquisition subsidiary, 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.
Both companies have acquired other tape-drive companies this year. Cipher earlier this year acquired Irwin Magnetic Systems, an Ann Arbor, Mich., tape-drive maker. Archive recently completed its purchase of Maynard Electronics, a small Florida tape-drive maker.
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 contends.
The patent case is scheduled to go to trial in Santa Ana federal court in May, 1990.
ARCHIVE VS. CIPHER
Archive Corp. has announced a $109-million hostile takeover bid against longtime rival Cipher Data Products
ARCHIVE CORP. Location: 1650 Sunflower Ave. Business: Manufacturer tape drives used to backup computer hard disks. Top executive: D. Howard Lewis, chairman and CEO Revenues: $181.4 million for the fiscal year ended Sept. 29. Net income: $15.3 million for the fiscal year ended Sept. 29. Stock exchange: Over-the-counter Closing price: 11 3/8
CIPHER DATA PRODUCTS Location: 9715 Business Park Ave., San Diego Business: Manufactures digital magnetic tape drives Top executive: Gary E. Liebl, chairman and CEO Revenues: $217.7 million for the fiscal year ended June 30. Net income: $12.1 million for the fiscal year ended June 30. Stock exchange: Over-the-counter Closing price: 4 5/8
Source: The companies, Standard and Poor’s Register
