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Monday, October 5, 1998
"October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February." -- Mark Twain
Shareholder-Unfriendly AMP
Shareholders, shmareholders. That appears to be the view of electronic connectors maker AMP Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMP)") else Response.Write("(NYSE: AMP)") end if %> and the state of Pennsylvania. In an anti-democratic and anti-capitalistic effort to ward off an unsolicited $9.8 billion takeover bid from aerospace and auto parts maker AlliedSignal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %>, Harrisburg, Penn.-based AMP is urging state lawmakers to pass an amendment that would keep shareholders from taking action by written consent -- in this case, to add 17 AlliedSignal directors and executives to AMP's board to facilitate a takeover.
After Friday's close, AlliedSignal announced it would extend until Wednesday its $44.50 a share cash tender offer to buy about 20 million, or 9%, of AMP's outstanding shares -- buying any more shares would trigger AMP's newly adopted poison pill designed to block the takeover. AlliedSignal had already said it would call off the tender offer if Pennsylvania enacts legislation that would prevent the company from proceeding with its bid to shareholders. The proposed amendment goes to the full state House for a vote on Tuesday. If passed, it would still require approval by the Senate as well as the governor's John Hancock.
The very fact that the amendment is even being considered by Pennsylvania lawmakers at all shows the state and AMP's disregard for shareholder rights. Institutional investor College Retirement Equities Fund has called AMP's defensive tactics "entirely inimical to principles of shareholder democracy and good corporate governance." Another investor, Peter Schoenfeld, CEO of P. Schoenfeld Asset Management LLC, has vowed to sponsor a binding resolution at AMP's next annual meeting to force the company to reincorporate in another state if the anti-shareholder legislation goes through.
Even one of the firm's founding families (and its second largest shareholder), the Hixons, owners of about 4% of AMP's stock, has sent a letter to the board expressing its "dismay" at management's anti-takeover tactics and urging it to "take immediate action to truly maximize shareholder value, including abandoning your Pennsylvania legislative initiatives and your ill-conceived share repurchase plan and opening a good-faith negotiating dialogue with AlliedSignal and any other interested parties," The Wall Street Journal reported today.
Shareholders have tendered 72% of AMP's common stock to AlliedSignal -- an overall vote for AlliedSignal and against AMP's board and management, which have done everything possible to block the offer. Foolish investors beware! As investor Schoenfeld said, "The state should understand that investors will penalize Pennsylvania companies in some fashion." If Pennsylvania passes the pending legislation, investors should think twice about buying shares in AMP and other companies based in the shareholder-unfriendly state.
News to Go
Asian-Pacific markets headed lower today with Hong Kong's Hang Seng Index dropping 4% to 7564.54. Meanwhile, the Nikkei shed 2.1% to 12948.12 as the meeting of the Group of Seven (G-7) industrialized nations this weekend did little to ease concerns of a global slowdown in economic growth.
J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> said its exposure to hedge funds as of September 28 totaled around $1 billion, "substantially all" of which is secured by cash and U.S. Treasury and agency securities. The amount owed to the investment bank under financing agreements and unsecured loans was about $70 million. On Friday, Moody's Investors Service placed the company's long-term debt ratings on review for possible downgrade, citing "uncertainty about the longer-term outlook for several of JPM's core businesses and the impact which a contraction of those businesses could have on future earnings."
Lehman Brothers Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LEH)") else Response.Write("(NYSE: LEH)") end if %> CEO Richard Fuld told Barron's late Friday that the investment bank is "solvent" and dismissed rumors on Wall Street that the Federal Reserve was trying to get BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> to take control of it. "Lehman Brothers has had no conversations about being acquired, with the Fed or anyone else," the CEO said.
Oil and gas exploration and production company Unocal Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCL)") else Response.Write("(NYSE: UCL)") end if %> announced it will sell nearly all of its oil and gas assets in Michigan to Newstar Energy USA Inc. and Omimex Energy Inc. for roughly $37.25 million in cash and 670,000 shares of stock in Newstar Energy parent Newstar Resources Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NERIF)") else Response.Write("(Nasdaq: NERIF)") end if %>. The company expects the sale will result in an after-tax gain of about $10 million in the fourth quarter.
Pharmaceutical company American Home Products' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AHP)") else Response.Write("(NYSE: AHP)") end if %> proposed $35 billion acquisition of life sciences company Monsanto Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MTC)") else Response.Write("(NYSE: MTC)") end if %> is still on track, Bloomberg reported, citing as its source "a person familiar with Monsanto's negotiators." Monsanto shares finished down $2 1/8, or 4%, to $52 Friday in heavy trading after falling as low as $46 3/6 amid speculation that the merger would be postponed or canceled. Monsanto had originally intended to hold a shareholder vote on the merger by October 1.
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Brian Graney (TMF Panic), Writer
Jennifer Silber (TMF Amused), Editor
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