Creative Takeover News (ripped from yahoo):
Here's to Waging A Proxy Battle in 3D.(3Dfx Interactive Inc. considers sale )
Mergers & Acquisitions Report - Oct 26, 1998
By Judy Radler Cohen
The silicon chips may soon be flying as 3Dfx Interactive, Inc. squares off against a major customer
and shareholder that could attempt to push 3Dfx into selling itself.
Last Monday, Singapore-based Cre-ative Technology Ltd. filed a 13D on $160 million market cap
3Dfx, of which it owns 6.5%. In the filing, Creative stated it may contact other shareholders to
discuss "an extraordinary corporate transaction involving the issurer, and/or changes in the board of
directors or management."
The day of the filing, 3Dfx stock traded as high as $11.25 a share before closing, unchanged, at
$11.
Creative, whose U.S. sub, Creative Labs, Inc. is based in Milpitas, Calif., purchased its stake in 21
blocks from Sept. 8 through Oct. 16 for as low as $8.48 and as high as $12.91 per share. At
presstime, 3Dfx closed at roughly $10.56 a share.
Creative manufactures peripherals and multimedia products for the personal computer industry. A
marriage between 3Dfx and Creative would resolve 3Dfx's distribution problems, said a high-tech
equity analyst, speaking off the record.
"I think Creative will ultimately own 3Dfx," the analyst predicted. A 3Dfx takeover would be part of
the industry's natural progression of strong distributors buying chip companies, he said. Additionally,
Creative is sitting on $450 million in cash, he noted. And as far as takeout valuations, he stated,
"3Dfx is clearly worth, because of its brand recognition, $20 per share [or $312 million]." He
pegged $25 a share, or $390 million, as the "real high end."
Meanwhile, 3Dfx may still be viewing Creative's action as somewhat benign.
Creative's move was a "very friendly acquisition of 3Dfx [shares]," said a 3Dfx board member who
requested anonymity. Creative informed the company a few days prior to its filing, he noted.
He characterized the accumulation of 3Dfx shares as a "defensive move on Creative's part."
Creative is one of 3Dfx's largest customers, but, he added, "Creative is only one customer of
ours-we have a lot of customers." A public company since June, 1997, 3Dfx develops 3D media
processors and software for interactive electronic use.
And 3Dfx's plans for dealing with Creative's potential takeover/proxy battle designs?
At the next board meeting, the members will discuss putting anti-takeover provisions, such as a
poison pill, in the by-laws, the board member said. He could not pinpoint when the board would
convene next.
Regardless, 3Dfx is not for sale, he continued. When asked if the company's substantial venture
capital shareholder base was not contemplating cashing out, he remarked, "I can assure you not at
these levels." The company's stock has slid dramatically from its $35.25-per-share 52-week high,
which it hit this past May. It went public at $11 a share.
Dave Zacarias, the CFO of San Jose-based 3Dfx, did not respond to calls seeking comment.
Several calls placed to John Danforth and Craig McHugh, Creative Labs' general counsel and
president, respectively, were not returned by presstime.
For the third quarter, 3Dfx posted earnings of $3 million on revenue of $33 million, compared to a
loss of $872,000 on revenue of $10 million for the year-earlier period.
***********************
Creative has hired an investment firm to look into their M&A alternatives. If I get the name of the firm, I will forward it on.
Pat
|
