International Rectifier Corp. on Tuesday issued a scathing reply to Vishay Intertechnology Inc.'s $23 a share, $1.7 billion tender offer made on Monday, saying in a letter to its shareholders that Vishay does not have their best interests in mind, that it is trying to buy the company on the cheap and that the offer itself is highly conditional. It urged stockholders not to tender shares into the offer and to reject Vishay's three nominees to its board of directors.
In its letter, International Rectifier notes the opportunistic aspects of Vishay's offer, pointing out that it came right after IR had completed a restatement of its earnings, when its shares were trading at a five-year low and at a dip in the cycle of the semiconductor industry. It also notes that the offer is highly conditional, still requiring a financing commitment from Vishay's lenders.
After reviewing proxy solicitations from both companies, Friedman, Billings & Ramsey Inc. analyst Craig Berger sees "little chance" that International Rectifier will be sold to Vishay simply because the offer price is too low. In a research note published on Tuesday, Berger writes that he also doesn't expect IR shareholders to elect the Vishay candidates to the board of directors. Berger believes IR has an attractive risk-reward profile, noting that the downside in its shares should be limited to around $16 if arbitrage traders abandon their positions; the shares could potentially trade into the $40s if aggressive margin projections made by IR management are achieved. Berger maintains a $29 price target on the stock.
