VLSI Tightens 'Poison Pill'

Despite pressure from its more litigious shareholders, VLSI Technology directors on Monday amended its by-laws to make it more difficult for Phillips to take over the chip maker.

The Dutch electronics giant is now pursuing a hostile takeover of VLSI (VLSI) after its $777 million bid for the company at $17 a share was left on the table in late February.

At least six separate class action suits have been filed by VLSI shareholders to force the board to cooperate with suitors, according to Reuters.

The VLSI directors amended the bylaws by lowering the threshold at which its 'poison pill' takeover defense kicks in to 10 percent from 20 percent of outstanding shares.

The board members said they continue to have "an open mind" about the Philips bid and that they tightened the poison pill provisions only protect their ability to review the bid ahead of their March 18 recommendation to shareholders.

"The board of directors continues to have an open mind concerning the Royal Philips proposal, despite the fact that Royal Philips commenced an unsolicited tender offer only four business days after it first made its proposal," said CEO Alfred J. Stein, chief executive officer of VLSI.

"The amendments adopted today merely seek to protect the process that enables the board to evaluate Royal Philips' offer," he said.

The amended rights plan also removed a 10-day window that potentially allowed an acquirer to redeem the rights after replacing the board of directors.

Philips was offering close to a 60 percent premium for VLSI shares at the time the bid was announced. On Friday, VLSI ended unchanged at 18 5/16.

VLSI's fiscal 1998 revenue were $547.8 million, a decrease of 23.1 percent from the $712.7 million reported in 1997, the company reported Jan. 20.

Written By Emily Church, CBS MarketWatch