NCR Corp rejected AT&T’s $90 a share paper offer in trenchant tones, as can be seen from the letter from Charles Exley to Robert Allen reprinted below – but the company left the door open by saying that it would negotiate a share exchange at $125 a share or about $8,500m to reflect the value […]
NCR Corp rejected AT&T’s $90 a share paper offer in trenchant tones, as can be seen from the letter from Charles Exley to Robert Allen reprinted below – but the company left the door open by saying that it would negotiate a share exchange at $125 a share or about $8,500m to reflect the value it reckons has built up. AT&T responded by launching a hostile cash tender offer – but disappointed by not going above $90 a share.
Exley’s letter to the AT&T chairman…
Dear Bob – Given the abundance of rhetoric over the past few days since you launched your public campaign to take over NCR, it might be useful for me to clarify a few basic facts so that, at least, the record is clear. NCR’s Board of Directors has been and remains unswervingly committed to protecting the vital interests of NCR’s shareholders, customers, employees and other important stakeholders. We believe that all of our shareholders and other stakeholders are best served by continuing to build NCR’s enormous inherent value as an independent company. We will not jeopardise the important values we are creating at NCR and sacrifice a successful American computer company in order to bail out AT&T’s failed strategy. Thus, NCR neither sought nor invited nor welcomes AT&T’s hostile overtures. With these facts in mind, after considering AT&T’s most recent proposal for a $90 stock for stock merger, the NCR Board unanimously rejected it concluding that it is not in the best interests of NCR and its shareholders and other stakeholders and concluded that it is grossly inadequate and unfair. The senior management and Board of Directors of NCR recognizes its responsibilities to its shareholders as well as its responsibilities to protect NCR from the disruption and distractions which your proposal causes. Consequently, I informed you that our Board determined that it would consider an AT&T offer which reflects the full and fair value of NCR including the enormous value that we believe will result from the implementation of NCR’s current strategy. You did not respond with such an offer. Instead, you asked us what it would take for NCR to enter into negotiations for a combination with AT&T. As I earlier accepted your request to meet directly with our Board in my effort to deal as constructively as possible with this matter, let me now respond to your question about a fair price.
NCR is prepared to commence negotiations if AT&T offers to pay not less than $125 per NCR share. We will provide AT&T with non-public information concerning NCR to support that price if, and only if, AT&T enters into a customary confidentiality and standstill agreement providing appropriate assurance that if AT&T refuses to go forward at the price level, it would immediately terminate its effort to acquire NCR. By now I hope that it is clear to you and your colleagues and advisors that we will continue to deal with this situation you’ve created in a professional and responsible manner. Neither threats nor intimidation will impel us to breach our obligations to all of NCR’s stakeholders. Although we have never sought or participated in negotiations aimed at such a combination, our Board and senior management carefully listened to and considered AT&T’s desire to combine with NCR. You have still given us no reason whatsoever to change our view that the transaction you propose makes no business sense, and so it must be a desperate attempt to salvage AT&T’s disastrous foray into the computer business. If your assertions about the vital importance of NCR and its senior management to AT&T are correct, you may now proceed at this fair price level. Otherwise, rather than continue down a destructive path, you should withdraw your proposal so that we can all redirect our energies and resources to the vital business agendas of our respective companies. The shareholders, customers and employees of both companies deserve nothing less. Please understand that if you cannot offer NCR shareholders this fair value, we will use every means at our disposal to protect our shareholders and other stakehold
ers against your attempt to deny them the inherent values of NCR.
Although at this time we have not been able to reach agreement, we are still hopeful that a friendly merger will be arranged between our two very compatible computer businesses, AT&T chairman Robert Allen responded. This combination is of clear strategic benefit to both companies and offers a premium price to NCR shareholders. We continue to have great respect for NCR’s management team and want them to manage a combined computer enterprise which we are confident will become a world leader in networked computing. However, now that NCR’s board has rejected our $90 per share offer, we believe AT&T should make it possible for NCR shareholders to decide for themselves whether to accept our offer. We are entering an era in which the survival of stand-alone computer companies will be sorely challenged, particularly from abroad. This merger will produce a strong American company with excellent prospects for succeeding in the global marketplace. AT&T launched the $90-a-share cash tender offer yesterday, saying that it would expire on January 4 unless extended, and was conditional on it obtaining at least two third of NCR’s shares on a fully diluted basis, on NCR’s defensive rights being redeemed or invalidated, and on AT&T being satisfied that Maryland anti-takeover law would not hinder the transaction. It also requires that NCR shareholders approving voting rights for the shares acquied by AT&T, and is dependent on AT&T raising the necessary financing.
causes NCR to bolster its defences
NCR’s board responded to the tender offer by amending its Shareholder Rights Plan poison pill, and adopted a resolution opting out of Maryland’s Control Share Acquisition Statute. The amendment to NCR’s Rights Plan provides, among other things, that the rights will become exercisable after a person or group acquires 15% or more of NCR common, down from 20%, which effectively inhibits AT&T from buying NCR’s shares too freely in the market. The amendment also adds an automatic flip-in feature. If a person or group acquires 15% or more of NCR’s common stock each right would entitle the holder, other than the 15% stockholder, to purchase preferred shares having a market value equal to twice the rights’ exercise price, which is presently $175 per share. It decided that the Maryland Control Share Acquisition Statute should not apply to an acquisition of its shares – the Statute removes voting rights from shares of voting stock acquired by a shareholder if the acquisition results in the shareholder having voting power in excess of certain specified levels but makes it easier for a bidder to get shareholder backing to bounce the board. NCR’s board will meet again within 10 days to advise shareholders of its position and recommendation on the tender offer. An impatient NCR shareholder in Cincinnati has filed suit against NCR seeking to force it to take the AT&T offer seriously. The Union of Communications Workers is urging NCR to resist the bid: it represents 100,000 AT&T employees and fears widespread new job losses.