Archive Will Negotiate Cipher Buyout

COSTA MESA — Archive Corp.’s effort to take over Cipher Data Products of San Diego took a step forward Wednesday as the two companies announced an agreement to negotiate an acquisition of Cipher by Archive at $8.25 per share.

In December, Archive issued a hostile tender offer of $109 million, at $7.50 per Cipher share. Since then, the companies have had on-again-off-again merger talks.

The companies, fierce competitors in the market for computer tape drives, which are used to make backup copies of computer data, at one point agreed to consider $8 a share. But those talks broke down.

Montague Merrick, an attorney for Archive, said the agreement to negotiate the deal at a higher price is a positive step toward a merger. He would not comment further. Cipher officials declined comment.

More than 85% of Cipher’s outstanding shares have been tendered to Archive, but a takeover has been blocked by Cipher’s “poison pill” defense, which would dilute the value of the acquired shares in a takeover and make a buyout prohibitively expensive.

The poison pill also blocks a takeover until patent litigation between companies is resolved.

Archive sought a temporary restraining order to nullify the poison pill, but a San Diego judge refused the request.

Archive has extended the tender offer several times and has continued its efforts to get Cipher to agree to a takeover. Cipher had said it was also negotiating with other possible buyers.