January 31, 1997 4:15 PM PST

AST weighs Samsung offer

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For troubled computer maker AST Research (ASTA), Samsung Electronics appears to be the last man standing.

AST's stock inched up 5/16, just over 6.5 percent, to close today at 5-1/16 on news that Samsung has made an offer to scoop up the company's remaining stock.

Samsung offered to purchase the outstanding common shares it doesn't own for $5.10 each, or $469 million including the assumption of $307 million in debt.

Rather than jump on the offer, AST's board of directors has formed a special committee of three independent directors to evaluate the proposal and other possibilities. Analysts say this hesitation is just a formality.

"Basically it is a done deal, but they are just exploring other possibilities," said Hancock Institutional Equity Services analyst Gerald Fleming. "The committee wants to do what is in the best interest of the stockholders."

But, even if the committee came up with other options, such as another offer, it is unlikely that it would get though without resistance.

Because Samsung currently has 46-percent state in AST, it would be extremely difficult for an outside third party to get approval to step in. An investment banker who asked not to be named said that third parties often have a difficult time taking a stake in a company when there is an investor with even a 20-percent hold.

"It is a logical deal," said Fleming. "Samsung has been increasing their ownership for some time in AST and most people have been expecting this all along."

AST's other options are limited. It could do a variety of things, such as a second public offering, or a private placement of stock. But, because AST's stock is already trading at such a low price per share, those options are not likely to be successful, the investment banker said.

Because Samsung has such a large investment, it now has the opportunity to turn the company into profitability.

AST, which has been losing market share, posted a third-quarter loss of $135.3 million, its ninth consecutive losing quarter. AST also reported its fourth-quarter results, narrowing its loss compared to a year ago and to the previous quarter.

"I wouldn't think that anybody else would want them," said Fleming.

If the market thought that there were other parties interested in pursuing AST, the stock would have had a better reaction to the news, he added.

When one company is controlled by another, it limits the opportunity for growth. The stock's low trading price is a clear indication that people want to buy into independent company, not a company that is quasi-controlled, added Fleming.

 

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