January 30, 1997 5:30 PM PST

Samsung's bid for AST

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AST Research (ASTA) announced today that its largest shareholder, Samsung Electronics, has proposed to buy the troubled computer maker.

Samsung has 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. AST, which made the announcement after the market's close, finished the day at 4-3/4 a share, up 1/8 of a point.

Seoul-based Samsung currently holds a 46 percent stake in AST as well as options which, if exercised, would increase its holdings to 49.9 percent.

AST's board of directors has formed a special committee to evaluate the proposal and other possibilities. The committee consists of three independent directors.

The proposed buyout had long been suspected by analysts and employees, as Samsung continued to increase its ownership in the financially strapped computer maker and took an active role in managing its operations, placing former and current Samsung executives atop AST's management structure.

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.

The company reported a net loss of $67.9 million, or $1.18 a share, for the quarter ending December 31, compared with a loss of $128.6 million, or $2.88 a share, a year ago. The losses, which represent ten consecutive quarters of red ink, were an improvement over the third quarter, however.

Revenues, meanwhile, fell to $611.4 million for the quarter from $612.9 million a year ago.

And for the year, AST reported a whopping $417.7 million loss, up from a loss of $263.2 million in fiscal 1995. Revenues for the year also declined to $2.1 billion, from $2.3 billion.

Last fall, Young-Soo Kim, a former Samsung vice president who played an instrumental role in getting the Korean electronics maker to invest in AST, was named chief executive and president after Ian Diery, former CEO, was forced out of the company.

Within two weeks, Joseph Norberg, chief financial officer, suddenly resigned and was replaced by Won Suk Yang, a director of PC manufacturing for Samsung.

Kim, at the time of Norberg's departure, told CNET in an interview that Samsung had no plans to increase its stake in AST or transform the company into a subsidiary of Samsung.

In a letter to AST independent directors, Samsung president and chief executive Jong Yang Yun wrote: "It is apparent that in order for AST to continue as a viable competitor in the intensely competitive PC industry, significant further support from Samsung will be necessary. The acquisition of 100 percent ownership of AST by Samsung would give AST direct access to Samsung's resources and would provide AST with the best reasonably available way to return to profitability.

"Without Samsung's ongoing operational and financial support, AST's ability to survive as an independent company is questionable. Accordingly, we believe our proposal is in the best interest not only of AST's stockholders, but all of AST's constituents, including its employees, customers and suppliers."

Samsung stepped up its role in the company following a $60 million investment in AST earlier this year. The deal was designed to allow AST to repay a portion of a promissory note to Tandy, which, losing marketshare, had sold its PC manufacturing operations to the computer maker. The arrangement gave Samsung control of 49.9 percent of AST, including the options.

And in December, AST completed a deal to increase its line of credit to $300 million from $200 million. Samsung had agreed to be the guarantor of the funds, which were to be used to repay a short-term $50 million loan AST had received from Samsung.

 

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