Read-Rite Approves Holder Rights Plan
Read-Rite Corp. on Tuesday said its board approved a shareholder rights plan aimed at thwarting hostile takeover attempts such as the $1.28-billion offer it rejected from Applied Magnetics Corp.
Read-Rite on Monday rebuffed rival computer disk-drive-components maker Applied Magnetics, saying it was more beneficial for Read-Rite to remain independent.
The “poison pill” plan dilutes the stake owned by the potential buyer by giving existing shareholders the right to acquire more shares at a reduced cost, making it prohibitively expensive for a hostile buyer to continue a tender offer.
Read-Rite shares rose $2 to close at $32.25 in Nasdaq trading. Applied Magnetics shares lost $2.875 to close at $40.25 in New York Stock Exchange trading.
The value of the offer has fallen from $1.7 billion when it was disclosed Feb. 24 as Applied’s stock has declined on concern about the transaction diluting future earnings and the share price.
Goleta-based Applied Magnetics said it had expected the anti-takeover measure and will proceed with its offer. The company also filed more information with the Securities and Exchange Commission about its bid. It said it may solicit shareholders to replace Read-Rite’s board.
“We are confident that the stockholders of Read-Rite will recognize the value of our offer and will support it,” Chief Executive Craig Crisman said.
Applied Magnetics also said it currently owns about 200 shares of Read-Rite.
Read-Rite, based in Milpitas, said its board gave shareholders one right for each share of common stock held.
The measure is triggered if any group deemed hostile by the board acquires at least 20% of the company. The rights can be exercised 10 days after a person or group discloses a 20% stake or its intention to buy one.
In its filing with the SEC, Applied Magnetics also said it expects that a combined company would earn $7.44 a share in fiscal 1998, compared with $6.22 expected for Applied and $3.20 expected for Read-Rite as stand-alone companies.
It denied that it is interested in acquiring Read-Rite for its advanced technology in a product called magneto-resistive heads, which increase the amount of data on a disk and the speed at which the data can be read. The firm is already shipping its own MR products and increasing production on them, the company said.
