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Archive for Friday, November 6, 1998

BATTLE FOR AMP WILL DRAG ON KNIGHT RIDDER NEWSPAPERS

November 6, 1998

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AlliedSignal, one of Lawrence's largest employers, is confident it will eventually win the troubled company.

If AlliedSignal Inc. is ever allowed to seek the support of AMP Inc. stockholders to expand AMP's board of directors, the company believes it will have no trouble securing a majority of votes through the mail.

AlliedSignal remains confident, even though some or all of its 17 board nominees may not be able to directly participate in discussions and votes on its hostile bid for AMP.

"We expect to swiftly garner a healthy majority" of votes, said AlliedSignal spokesman Mark Greenberg.

AlliedSignal, the Morristown, N.J., company that announced its $44.50-a-share offer for AMP on Aug. 4, hopes to gain majority control of the 11-member AMP board to facilitate its acquisition. With 625 employees at a plant in Lawrence, AlliedSignal is one of the city's largest employers. It employs more than 1,100 in Olathe.

AMP has rejected AlliedSignal's offer as inadequate and has refused to negotiate.

So far, AlliedSignal has been prevented from seeking a shareholder vote -- called a consent solicitation -- because of an Oct. 8 federal court injunction. The injunction required AlliedSignal's 17 nominees to assure AMP shareholders that they would solely represent AMP's interests if elected to the board.

Last Wednesday, U.S. District Judge James T. Giles in Philadelphia said he would be inclined to find AlliedSignal in compliance with his order if the nominees added another sentence to their statements explaining that while they had responsibilities to AMP, their duty of loyalty to AlliedSignal would not be waived.

The 17 nominees are all directors or officers of AlliedSignal. AMP believes that would present irreconcilable conflicts if they are elected to AMP's board. AMP contends the conflicts would prevent the nominees from considering a combination of AMP and AlliedSignal, discussing bids with third parties, or deciding whether AMP should remain independent.

AlliedSignal argued in a hearing before Giles that there are ways to handle these conflicts, including the appointment of special committees of directors or the non-participation of the nominees on issues in which AlliedSignal would have an interest.

An arbitrageur said last week he felt the possible conflicts of the nominees would have no impact on the shareholder vote. If the nominees are elected, all they have to do is decide that they want AMP to be sold to the highest bidder and they're not going to participate in the talks, he said. Or the elected nominees could let shareholders vote on whether they want the company to be sold, he suggested.

"If they want to sell their stock, we're their only hope," said Greenberg. "Everyone will consider the alternatives. Their alternative is to have current AMP management running this company until November 1999," when AMP's shareholder-rights plan expires.

Greenberg said from 80 percent to 85 percent of AMP's stock is owned by institutional investors who are knowledgeable. "They'll have no problem understanding this," he said.

The arbitrageur said he expected that AMP would continue trying to block the consent process. If Giles eventually allows the consent to proceed, then AMP will likely appeal that decision to the 3rd U.S. Circuit Court of Appeals and seek a stay of the vote-by-mail solicitation, he said.

"We expect AMP to use every possible means to block the shareholders, as they have until now," Greenberg said.

The unanswered question is what AMP will do if the consent process ever begins, opening the possibility that the 17 AlliedSignal nominees will be elected and gain control of the AMP board. If that scenario develops, the arbitrageur expects AMP's existing board will decide to sell the company.

Arbitrageurs generally have a vested interest in seeing that AMP is sold, since many bought the company's stock anticipating a quick return on the $44.50 offer from AlliedSignal. Arbitrageurs are said to own about 20 percent of AMP's stock.

The consent process, meanwhile, remains blocked until AlliedSignal revises the letters from its 17 nominees and Giles is authorized to dissolve his injunction, which AlliedSignal appealed to the 3rd Circuit.

Giles' indication that he would be inclined to allow the consent process to proceed was clearly a setback for AMP, the world's largest maker of electronic connectors.

AMP said it was "disappointed" with the court's ruling and will continue to evaluate its options.

A company spokesman would not discuss what those options might be, although they are not necessarily confined to legal ones.

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