ST Shields Itself from Future Hostile Takeovers

By Colleen Taylor -- Electronic News, 11/28/2006

STMicroelectronics N.V. is sheltering itself against future hostile takeover bids.

The company’s supervisory board has amended and approved an option agreement with origins in 1999 that would pass along its shares to an independent foundation, Stichting Continuiteit ST, in the event of a hostile takeover attempt.

Although rare, hostile takeovers are a real threat in the tech industry. Earlier this year, Loeb Partners Corp., a New York-based activist hedge fund, submitted a letter to intellectual property licensing company Mosaid Technologies Inc.'s board of directors, proposing that the company be sold. Loeb, which owned more than 6 percent of the company's shares, also threatened to engage in a proxy fight to replace the board's directors with its own shareholder representatives.

ST’s new option agreement is being entered into along with one of its shareholders, STH II B.V., to reflect changes in Netherlands' legal requirements, the company said, emphasizing that it is not being adopted in response to any current hostile takeover attempt.

Specifically, the agreement provides for the issuance of 540 million preference shares, the same number as the agreement it is replacing. Any such shares would be issued by STMicroelectronics to the foundation, upon its request and in its sole discretion, upon payment of at least 25 percent of the par value of the preference shares to be issued.

They would be issuable in the event of an unsolicited offer or acquisition, ST said, which is unsupported by the company’s managing and supervisory boards and which the foundation determines would be contrary to the interests of STMicroelectronics and its stakeholders. The preference shares may remain outstanding for no longer than two years.