Hostile deals are popular in techland

Bailouts and shotgun weddings might be the order of the day for financial institutions, but among tech companies, hostile deals continue to win the popularity stakes. The fact that this year’s biggest hostile tech deals have failed to produce mergers — think Microsoft-Yahoo, Electronic Arts-Take Two, Cadence-Mentor – has done little to curb appetites for unsolicitied deals, which have hit record levels in the U.S.

Shareholder activism too has been on the rise, beginning with hedge fund Jana Partners’ agitation to pull CNET Networks out of its stupor — which eventually led to CBS snapping up the company best known for its tech news site. Smaller companies like Micrel and Asyst Technologies, too, have had to fend off dissident shareholders, although those stories got short shrift given the gargantuan activist-shareholder angle in Microsoft-Yahoo, courtesy Carl Icahn.

Then, there are two ongoing hostiles: Korean consumer electronics giant Samsung’s $5.8 billion unsolicited offer for flash memory maker SanDisk and Vishay Intertechnology’s $1.7 billion offer for International Rectifier. SanDisk has rejected Samsung’s offer as being too low.

Vishay, meanwhile, launched a tender offer for IRF yesterday, after the power semiconductor maker rejected Vishay’s sweetened $23-a-share bid. Friedman, Billings, Ramsay & Co analyst Craig Berger thinks the deal’s unlikely to get done.

“Both management teams have very disparate opinions about IR’s fair value,” Berger wrote in a note. Vishay seems reluctant to raise its offer again, and shareholders won’t tender their shares at $23, Berger concluded.

But if you think the spate of failed hostile deals might deter tech companies from taking that approach to M&A, think again. Tech stocks, which were smarting from the financial crisis, are even cheaper now and that, combined with the cash bounties that many tech firms have on their balance sheets, are creating new opportunities, one tech banker said.

“The stage is set,” the banker said.

What’s more, bankers said tech companies are shedding the traditional wisdom that hostile takeover attempts are no good because the assets — meaning the engineering talent — would walk out the door. And Oracle’s successful takeover of BEA Systems had a lot to do with that mindset change, they said.

Photo: Reuters file