Telxon Corp. increased its cash takeover offer for rival MSI Data Corp. to $20 per share Wednesday but said the new offer, representing a 17.5% increase from the initial $17-per-share bid, would apply only in a negotiated merger.
But MSI's stock price pushed well above $20, as Wall Street traders anticipated a bidding war for the Costa Mesa company.
The offer intensifies the pressure on MSI to find a "white knight" willing to acquire it on friendlier terms to prevent it from being taken over by Telxon, MSI's main competitor.
Telxon also said it would consider raising the ante even higher if information provided during negotiations with MSI shows that the company is worth more than the $112 million represented by the $20-per-share bid.
At the same time, Telxon said its $17-per-share tender offer, which values the company at $95 million, remains in effect. That offer expires Oct. 7 but could be extended.
MSI officials did not return phone calls seeking comment on the new Telxon proposal. MSI, a manufacturer of portable data-entry terminals, had said Tuesday that it is discussing the possible sale of the company to an unnamed third party but would not divulge details. Earlier, MSI had rejected Telxon's offer of $17 per share as inadequate.
MSI's stock closed Wednesday at $21.50 a share, up $2.625, in heavy trading on the American Stock Exchange. The stock was trading at $11 a share before the Telxon offer was announced Sept. 9.
"The market thinks the price will go higher," said one New York analyst who asked that his name not be used. "We're talking about a bidding war, or at least the makings of one."
Telxon made its new proposal in a letter sent Wednesday to MSI's directors by Raymond D. Meyo, Telxon's president and chief executive. Meyo proposed a negotiated merger between the firms and said the new offer would require that MSI cancel a "poison pill" anti-takeover plan it adopted last week to fend off its rival, based in Akron, Ohio. Such plans are intended to make a takeover more expensive for an unfriendly suitor.
The Telxon offer "steps up the timetable," said Philip Muldoon, an analyst with the Ohio Co., a Columbus brokerage. "Now MSI will see how serious that third party is" about making an offer.
Analysts have speculated that several companies may be interested in acquiring MSI, which holds a strong position in the market for hand-held portable terminals that are used to scan bar codes and record inventory in such places as supermarkets and distribution outlets.
Analysts said companies that could benefit from MSI's technology and market position include the Allen-Bradley division of Rockwell International; Northern Telecom, a Canadian telecommunications firm, and NCR Corp., an electronics company based in Dayton, Ohio. Other possible suitors include Hewlett-Packard and Panasonic, the Japanese electronics giant.
Telxon and MSI control about half the estimated $500 million market for portable data-entry terminals. MSI pioneered the market in 1967, but Telxon passed it as the market leader several years ago.