Cipher Data Rejects Hostile Bid From Rival
Cipher Data Products on Friday spurned a $109-million hostile takeover offer from rival Archive Corp. and said it has retained an investment bank to explore other alternatives, including a merger with a third party.
Cipher, a San Diego-based computer tape-drive manufacturer, said Archive’s offer to pay $7.50 per share for the 95.4% of Cipher’s stock that it doesn’t already own is “inadequate, excessively conditional and not in the best interests of Cipher or its stockholders.”
Gary E. Liebl, Cipher’s chairman and chief executive, said Archive’s offer does not reflect the long-term value of the company’s stock and the expected benefits from its recent acquisition of Irwin Magnetic Systems, a realignment of its product groups and expected improvements in the computer business.
Securities analysts have estimated Cipher’s book value--its worth after all of its assets are sold--at between $9.50 and $10 per share.
Costa Mesa-based Archive launched a bid on Dec. 21 for Cipher, one of its main rivals in the computer tape-drive market. The two companies are locked in a costly patent lawsuit, and some analysts view the Archive bid as an attempt to force a favorable settlement of the dispute.
Archive, which already holds a 4.6% stake in Cipher, said in a statement that it might be willing to raise its bid to $8 per share as part of a “friendly” acquisition.
Cipher said it has asked its financial adviser, First Boston Corp., to “explore possible alternative transactions,” including a merger with another company, that would boost its stock price.
The firm said it has amended its share purchase rights plan--an anti-takeover measure--to prevent Archive from acquiring Cipher until their legal dispute is resolved. The patent case is scheduled to go to trial in federal court in Santa Ana in May.
Also on Friday, Cipher disclosed in a filing with the Securities and Exchange Commission that it has approved lucrative severance packages known as “golden parachutes” for seven key employees. They would receive payouts totaling $1.4 million if Cipher is acquired by a hostile bidder.
