AMP Inc.'s stock price swung sharply yesterday on speculation that a U.S. District Court judge in Pennsylvania may strike down a challenge by AlliedSignal Inc., which claims that AMP's revisions of its so-called "poison pill" violate state law.
The Harrisburg, Pa.-based connector maker has been fending off a $9.9 billion hostile takeover bid by AlliedSignal since August. Among other tactics, AMP has been fortifying its poison-pill takeover provisions, which are designed to allow a company that is the target of a hostile takeover to buy back its stock at a premium, thus making it less attractive to another buyer.
AMP said earlier this week that it would repurchase up to 30 million shares of AMP common stock at $55 a share, $10.50 more than AlliedSignal's latest bid for the company. Meanwhile, AlliedSignal has been attempting to seat new members on AMP's board through shareholder consent who would vote to overturn the company's poison pill.
In late trading yesterday, AMP stock tumbled as much as 10% to 33 9/16. It closed at 35 3/16, down 4.9%, and has remained unchanged for most of this morning.
Yesterday's downturn came after Reuters news reports were published in which stock traders who had been observing the court proceedings in Philadelphia were quoted as saying they did not think AlliedSignal's case was very strong.
Separately, legislation in the Pennsylvania House of Representatives crafted by AMP's lawyers and introduced Monday by Rep. Bruce Smith, R-Dillsburg, made its way closer to a vote. The legislation, which would change the state's already tough takeover law, appeared to be stalled by House leadership earlier this week.
But a Republicans caucus in the House yesterday reached a compromise with Majority Leader John Perzel, who Robert P. Casey, the state's auditor general, accused of trying to quash the bill on Monday.
Smith's bill had sought to prevent shareholders from consenting to accept a hostile takeover bid except during scheduled meetings or waiting until 18 months after the bid is made. The compromise bill changes that waiting period to 12 months.
The amended bill moved through the House Judiciary Committee yesterday, and it is expected to reach the full House for a vote on Tuesday.
"We are pleased that the legislation is moving forward," said Mark McGaffin, an AMP spokesman.
AMP's next shareholder meeting has not yet been set, but the company intends to schedule it "promptly after the first quarter results are made available," which is typically in late April or early May, McGaffin said.
An AlliedSignal spokesperson this morning said that the company does not intend to publicly comment on the legislation until lawmakers vote on it.