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Read-Rite Rejects Takeover Bid From Applied Magnetics

March 04, 1997|From Times Staff and Wire Reports

Read-Rite Corp. said Monday it rejected an unsolicited takeover bid from Applied Magnetics Corp., a rival maker of computer disk drive parts, after the stock offer's value plunged from $1.76 billion to $1.22 billion.

The companies both make computer disk drive heads, which read and write information on computer storage devices. The combined companies would have $1.8 billion in annual sales and equity worth $3.4 billion.

Milpitas-based Read-Rite, the world's largest independent supplier of recording heads, said its board of directors voted unanimously to reject the offer and remain independent.

Applied Magnetics of Goleta said it still intends to try to complete the offer and will start talking with Read-Rite shareholders to gain their support. The company said it hadn't talked to members of Read-Rite's board and has no plans to raise the bid.

Read-Rite Chairman and Chief Executive Cyril Yansouni said the board is unlikely to reverse its decision.

"This deal doesn't bring anything to us," Yansouni said. "We're already the biggest. We don't need anything they have."

Applied Magnetics, with about 900 employees and $345 million in sales last year, is far smaller than Read-Rite, which boasts a work force of about 20,000 and $991 million in sales for the same period. But Read-Rite has struggled of late, recording a loss of $43 million in 1996 compared with Applied Magnetics' $32.3-million profit for the same period.

On Feb. 24, Applied offered 0.679 of its shares for each share of Read-Rite, which at the time valued the transaction at $1.70 billion and Read-Rite at $36 a share. Since then, Applied's stock has fallen from $53 to as low as $38 late last week. Applied shares were up $4.625 Monday, closing at $43.125 on Nasdaq.

Read-Rite's stock, which was at $32 when the offer was disclosed, traded as low as $29.75 late last week. Shares of Read-Rite closed at $30.75, up 6.25 cents on Nasdaq.

"Wall Street made up its mind [about the bid] and it made our job easier. But our decision was not based on [the offer] price," Yansouni said. "The decision was based on the continued huge potential for our company as we execute our game plan."

Since the bid was announced, Applied Magnetic's stock has fallen about 22%, including a partial rebound on Monday. Read-Rite stock has shed 3.5% during a period in which the Dow Jones industrial average slid 2.15% and the Nasdaq composite dropped 3%.

Applied Chairman Craig Crisman said he was confident that his company's share price would rebound.

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