The Sperry, Burroughs Courtship / History of Marriage a Classic Example of Strategic Maneuvering in Hostile Takeover

Article excerpt

NEW YORK - Ten minutes before the board of the Sperry Corp. was to begin an 11 a.m. meeting at the company's Manhattan h eadquarters last week, an envelope arrived, carrying a $76.50-a-share acquisition offer from the Burroughs Corp.

Two hours later, Sperry agreed to the offer, a decision that will create the nation's second-largest computer manufacturer after the International Business Machines Corp.

But the courtship that led to Sperry's agreement to merge with its rival from Detroit was far more emotional and carried with it a history of firsts and starts. The denouement involved hundreds of hours of legal and investment banking work, some of it done from vacation retreats on Long Island, and is a classic example of two companies trying for weeks to outmaneuver one another in what quickly became this year's most closely watched hostile takeover.

For the past year the dream of W. Michael Blumenthal was to create a new force in the computer industry by combining Burroughs, where he is the chairman, with rival Sperry. Last year the two computer middleweights first discussed, but abandoned, the idea of ganging up on the heavyweight, IBM. Burroughs offered $65 a share, but Sperry refused.

The current round began in May when Burroughs approached Sperry with a $70-a-share offer. But before Sperry had a chance to respond, Burroughs began a hostile tender offer of $70 a share. Later it indicated it was willing to pay more and talks began.

This time, Blumenthal was determined. He had even gone so far as to obtain prior antitrust approval from the Justice Department.

But the dream appeared to be slipping away again on May 19, when a letter from Burroughs informed Sperry that it was only willing to go as high as $75 a share, Sperry, hoping for as much as $80 a share, walked away from the bargaining table in a huff, accusing Burroughs of bargaining in bad faith and, as one insider said at the time, using a ""bait and switch'' tactic of offering a higher price than it was actually willing to pay.

But behind the scenes, sources close to the talks said, things were not quite as bleak. The First Boston Corp., acting on behalf of Sperry, and Lazard Freres & Co., representing Burroughs, were still chatting.

""It was not principal to principal,'' said one source familiar with the deal, meaning that Blumenthal had not been in direct contact since May 19 with Gerald G. Probst, the influential chairman ofSperry who would have to be won over if the merger was to succeed.

Burroughs, in fact, was said to be harboring a secret hope early last week that the Sperry board would decide to go against the wishes of Probst and approve the $75-a-share offer. …