Royal Philips Electronics launched a hostile bid Friday to acquire all of the outstanding common
shares of VLSI Technology Inc. after VLSI declined to respond to Philips’ merger proposal by last week’s Wednesday
deadline.
“Given the compelling nature of the offer and Philip’s desire to quickly complete such a mutually
beneficial transaction, Philips has decided to take its offer directly to VLSI shareholders,” the company said in a
statement last week. “Philips remains hopeful that VLSI will decide to negotiate a transaction
soon.”
Reports surfaced last week that Philips, based in Eindhoven, the Netherlands, was planning to petition
VLSI shareholders directly to unseat the board if the company didn’t enter formal negotiations. VLSI designs and
manufactures custom and semi-custom integrated circuits for the wireless communications and computing
markets.
VLSI said last Thursday it plans to hold a special board of directors’ meeting March 23 to consider a
merger proposal. Philips made a bid to acquire the San Jose, Calif., company late last month for $17 per share, a 58-
percent premium to VLSI’s closing price of $10.75 per share on Feb. 25, said Philips. The tender offer is set to expire
April 1.
Philips will ask the VLSI board to redeem the company’s rights plan or otherwise take action to render the
plan inapplicable to Philips’ offer.
“In the event the VLSI board does not dismantle the rights plan, Philips
intends to take the necessary steps to replace the
VLSI board with nominees who, subject to their fiduciary duties,
would allow the Philips offer to proceed,” Philips said.
Alfred Stein, chief executive officer of VLSI, said in a
statement Thursday the company’s board “recognizes the interests of the stockholders in a complete evaluation of
the proposal. We are confident that Philips realizes that an appropriate evaluation of the proposal cannot be completed
within the four-business-day time frame set forth in its letter.”
VLSI retained Morgan Stanley Dean Witter
and Hambrecht & Quist L.L.C. as its financial advisers; and Latham & Watkins and Richards, Layton & Finger as its
legal counsel to assist the board in evaluating the proposal. The company said it will not comment further on the matter
until after the special meeting.
VLSI announced February plans to ship its single-chip cdmaOne dual-core baseband
solution this month. Other manufacturers like VLSI have been hoping to score more projects with larger handset
manufacturers, but the larger companies are making their own products, said Phillip Redman, senior analyst with the
Yankee Group in Boston.
“These companies are at a juncture,” said Redman. “They are working
hard to break into the high-tier companies, but now there may be an opportunity for them to partner.”
