UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): FEBRUARY 24, 1997
APPLIED MAGNETICS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-6635 95-1950506
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
75 ROBIN HILL ROAD
GOLETA, CALIFORNIA 93117
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE: (805) 683-5353
Exhibit Index on Page 3
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Item 5. OTHER EVENTS
Attached hereto as Exhibit 99.1 is the Press Release
dated February 24, 1997 announcing an exchange tender offer by
Applied Magnetics Corporation to the stockholders of Read-Rite
Corporation (the "Exchange Tender Offer").
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
Exhibit No. Description of Exhibit
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99.1 Press Release dated February 24, 1997
announcing the Exchange Tender Offer.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
APPLIED MAGNETICS CORPORATION
By: /s/ Craig D. Crisman
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Craig D. Crisman
Chairman of the Board and
Chief Executive Officer
(Principal Financial Officer)
Dated: February 24, 1997
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INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
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99.1 Press Release dated February 24, 1997
announcing the Exchange Tender Offer. 4
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EXHIBIT 99.1
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Contacts: Media Investors and Analysts
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Robinson Lerer & Montgomery: MacKenzie Partners, Inc.:
David Allan John K. Kelly
415-434-9100 805-683-5353 or
Michael Bulger 310-284-3110
212-484-7413
APPLIED MAGNETICS CORPORATION PROPOSES
A BUSINESS COMBINATION WITH READ-RITE CORPORATION
Transaction Valued at $37.50 Per Read-Rite Common Share
Applied Magnetics Corporation - February 24, 1997. Applied Magnetics Corporation
announced today that it has proposed a $1.8 billion business combination between
Applied Magnetics Corporation and Read-Rite Corporation which would create one
of the leading disk head suppliers and the leading thin film inductive disk head
supplier. The combined entity would have annualized sales of more than $1.8
billion, an equity market capitalization of approximately $3.4 billion and
combined capacity of approximately 40 million head gimbal assemblies ("HGAs")
per quarter.
Under the terms of the proposal, Read-Rite's stockholders would receive .679
common shares of Applied Magnetics for each common share of Read-Rite. Based on
the closing price of Applied Magnetics' stock on February 21, the exchange ratio
would produce a value of $37.50 for each Read-Rite common share. This represents
a premium of 33% over the closing price for Read-Rite's stock on February 21,
1997. The transaction is structured to be tax-free to Read-Rite's stockholders
and it is intended that the transaction would qualify for pooling of interests
accounting, but is not conditioned on such treatment.
Applied Magnetics also announced that it will simultaneously proceed with a
consent solicitation aimed at replacing Read-Rite's current Board of Directors
with a new Board that would, subject to their fiduciary duties, endorse the
transaction.
Craig D. Crisman, Chairman and Chief Executive Officer of Applied Magnetics,
stated, "We believe that the strategic advantages which would result from a
business combination of Applied Magnetics and Read-Rite would be of great
benefit to the stockholders, employees and customers of both companies. Through
this combination, we will create a powerful global company better positioned to
be a leader in an increasingly competitive business environment."
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Mr. Crisman cited several specific advantages which would result from the
proposed transaction:
* Formation of one of the leading disk head suppliers and
the leading thin film inductive disk head supplier with
quarterly capacity of approximately 40 million HGAs,
annualized sales of more than $1.8 billion, an equity
market capitalization of approximately $3.4 billion and
an exceptionally strong balance sheet;
* Creation of the leading producer in advanced thin film,
inductive disk heads, with a strengthened position in
emerging magnetoresistive (MR) technology,
* Combination of technical expertise and production
capacity to meet the increasingly competitive
challenges from foreign and domestic suppliers; and
* Significantly enhanced earnings potential. The
combination of cost savings, manufacturing efficiencies
and revenue enhancements should produce estimated
incremental gains in pre-tax earnings of more than
$100 million in the twelve-month period following the
transaction.
Mr. Crisman added, "We have developed a business plan for the combined company
which, through cost savings, manufacturing efficiencies, and revenue
enhancements, will result in incremental gains in pre-tax earnings of more than
$100 million in the twelve-month period following the transaction.
"The combination of Applied Magnetics and Read-Rite would create a company which
would have greater operational and capacity planning flexibility and all of the
advantages associated with greater scale. We view the highly motivated employee
groups of both companies as critically important assets, and the combination
will provide an increased level of opportunity and satisfaction for our combined
employee group."
In a letter dated February 24, 1997 to Cyril J. Yansouni, Chief Executive
Officer and Chairman of the Board of Directors of Read-Rite Corporation, Mr.
Crisman noted that on a number of occasions Applied Magnetics had, in direct
discussions, expressed its desire to negotiate a friendly transaction. Repeating
Applied Magnetics' preference for an amicable business combination, Mr. Crisman
said that Read-Rite's lack of interest in such discussions, despite the clear
advantages which would result from a business combination of the companies, make
it appropriate for Applied Magnetics to present an offer directly to Read-Rite's
stockholders. [Editor's note: the full text of the letter follows the end of
this release.]
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Mr. Crisman concluded, "Through the combination of the resources of Applied
Magnetics and Read-Rite, we are convinced we will build a stronger, more
profitable company that will maintain leadership in technology and production
while responding effectively to stiff competition. Stockholders, employees and
customers of the two companies, as well as the communities where we both
operate, will benefit from this combination. We are committed to achieving this
goal."
Gleacher NatWest is acting as financial advisor to Applied Magnetics and will
act as dealer manager for the proposed exchange offer, and MacKenzie Partners,
Inc. will act as information agent for the proposed exchange offer.
* * * * * * * *
This news release is neither an offer to exchange nor a solicitation of an offer
to exchange shares of common stock of Read-Rite. This document contains certain
forward looking statements with respect to the financial condition, results of
operations and business of Applied Magnetics and, assuming the consummation of
the proposed business combination, a combined Applied Magnetics/Read-Rite
corporation. In addition, the ability of Applied Magnetics to realize increases
in operating income resulting from potential cost savings is also subject to the
following uncertainties, among others: (a) the ability to integrate the Applied
Magnetics and Read-Rite management and R&D and operations functions on a timely
basis; and (b) the ability to eliminate duplicative functions while maintaining
acceptable performance levels. Further information on other factors which could
affect the financial results of the combined company after the proposed business
combination and the conditions of the proposed offer is included in filings by
Applied Magnetics with the Securities and Exchange Commission (the
"Commission"), including a registration statement on Form S-4 filed with the
Commission on February 24, 1997, and the Commission filings incorporated by
reference therein.
SHARES OF READ-RITE COMMON STOCK HELD BY APPLIED MAGNETICS, ITS DIRECTORS AND
EXECUTIVE OFFICERS AND CERTAIN EMPLOYEES, OTHER REPRESENTATIVES AND OTHER
PERSONS WHO MAY SOLICIT PROXIES OR CONSENTS, AND CERTAIN TRANSACTIONS BETWEEN
ANY OF THEM AND READ-RITE:
Applied Magnetics and certain other persons named below may solicit proxies or
consents to (i) remove all six of the present members of the Board of Directors
of Read-Rite (the "Read-Rite Board") and any person or persons elected or
designated by any of such directors to fill any vacancy or newly created
directorship; (ii) amend Section 3.2 of Article III of Read-Rite's By-laws (the
"Read-Rite By-laws") to fix the number of directors of Read-Rite at two;
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(iii) elect two nominees of Applied Magnetics as directors of Read-Rite; and
(iv) repeal each provision of the Read-Rite By-laws or amendments thereto
adopted subsequent to December 20, 1996 and prior to the effectiveness of any of
the foregoing proposals. The participants in this solicitation may include
Applied Magnetics; the directors of Applied Magnetics (Craig D. Crisman, Harold
R. Frank, Herbert M. Dwight, Jr., Dr. R.C. Mercure, Jr. and Jerry E. Goldress);
the following executive officers or employees of Applied Magnetics (Peter
Altavilla, Paul Frank and Steve Beal).
As of the date of this communication, Applied Magnetics is the owner of 200
shares of Read-Rite common stock. Other than as set forth herein, as of the date
of this communication, neither Applied Magnetics nor any of its directors,
executive officers or other representatives or employees of Applied Magnetics,
or other persons known to Applied Magnetics, who may solicit proxies or consents
has any securities holdings in Read-Rite. Applied Magnetics disclaims beneficial
ownership of any securities of Read-Rite held by any pension plan or other
employee benefit plan of Applied Magnetics or by any affiliate of Applied
Magnetics. Applied Magnetics further disclaims beneficial ownership of any
securities of Read-Rite held by Applied Magnetics or any of its subsidiaries for
the benefit of third parties or in customer or fiduciary accounts in the
ordinary course of business.
Although Gleacher NatWest Inc. ("Gleacher NatWest"), financial advisor to
Applied Magnetics does not admit that it or any of its directors, officers,
employees or affiliates are a "participant," as defined in Schedule 14A
promulgated under the Securities Exchange Act of 1934 by the Commission, or that
such Schedule 14A requires the disclosure of certain information concerning
Gleacher NatWest, Gleacher NatWest may assist Applied Magnetics in such a
solicitation. Gleacher NatWest engages in a full range of investment banking
services. As of the most recent practicable date prior to the date hereof as
such information was available, Gleacher NatWest does not hold any shares of
Read-Rite common stock.
Except as disclosed above, to the knowledge of Applied Magnetics, none of
Applied Magnetics, the directors or executive officers of Applied Magnetics, the
employees or other representatives of Applied Magnetics has any interest, direct
or indirect, by securities holding or otherwise, in Read-Rite.
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[Letterhead of Applied Magnetics Corporation]
February 24, 1997
Mr. Cyril J. Yansouni
Chief Executive Officer and
Chairman of the Board of Directors
Read-Rite Corporation
Dear Mr. Yansouni:
As you know from our conversations and those you have had with Gleacher NatWest,
our independent financial advisor, Applied Magnetics Corporation has been
interested for some time in effecting a business combination with Read-Rite
Corporation. Applied Magnetics believes strongly that the strategic advantages
which would result from a business combination of our two companies would be of
great benefit to our respective stockholders, employees and customers. At the
same time, the business combination would create a significantly stronger entity
in an increasingly competitive business environment.
In the course of our recent discussions, we have made clear our willingness to
enter into a friendly, negotiated agreement to bring about this business
combination. We have, over the past twelve months, been respectful of your
desire to proceed at a slow pace but, in light of the demands of a rapidly
changing global marketplace and your apparent decision to delay further
consideration of this combination, we have concluded that it is in the best
interests of the stockholders of both companies for Applied Magnetics to proceed
with an offer to acquire Read-Rite.
Accordingly, the Board of Directors of Applied Magnetics has authorized me to
propose a transaction in which each share of Read-Rite would be converted into
.679 shares of Applied Magnetics. Based on the closing price for Applied
Magnetics stock on February 21, 1997, this exchange ratio would produce a value
of $37.50 for each Read-Rite share, a 33% premium over Read-Rite's current
market price. The transaction is structured to be tax-free to Read-Rite's
stockholders and it is intended that the transaction would qualify for pooling
of interests accounting, but is not conditioned on such treatment.
In light of the premium we are offering for Read-Rite's shares, we believe that
Read-Rite's Board of Directors has a fiduciary responsibility to provide its
stockholders with the opportunity to consider and take advantage of our offer.
We will file today with the Securities and Exchange Commission a public
registration statement which, when effective, will put our offer directly to
your stockholders. In support of our offer, we will proceed with a consent
solicitation which, in the absence of a negotiated agreement, would remove
Read-Rite's Board of Directors and replace it with a Board which would,
consistent with its fiduciary duties, pursue a Applied Magnetics/Read-Rite
combination.
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We believe that the combination of our companies offers significant benefits to
both the stockholders of Read-Rite and those of Applied Magnetics, including:
* Formation of one of the leading disk head suppliers
and the leading thin film inductive disk head
supplier with quarterly capacity of approximately
40 million HGAs, annualized sales of more than
$1.8 billion, an equity market capitalization of
approximately $3.4 billion and an exceptionally
strong balance sheet;
* Creation of the leading producer in advanced thin
film, inductive disk heads, with a strengthened
position in emerging magnetoresistive (MR)
technology;
* Merger of technical expertise and production capacity
to meet the increasingly competitive challenges from
foreign and domestic suppliers; and
* Significantly enhanced earnings potential. We
estimate that the combination of cost savings,
manufacturing efficiencies and revenue enhancements
should produce incremental gains in pre-tax earnings
of more than $100 million in the twelve month period
following the transaction.
We would prefer to move forward on a friendly basis, using a one-step format. As
I have indicated, I am open-minded as to the appropriate composition of the
Board and the role in the combined entity of the senior executives of each
company. This transaction is driven solely by our desire to create a more
competitive market participant, offering substantial benefits to our
stockholders and customers.
We are convinced that this proposed combination of our resources will result in
a stronger, more profitable company. We look forward to hearing from you and
working constructively with you to finalize the transaction.
Sincerely yours,
/s/ Craig D. Crisman
cc: Board of Directors of Read-Rite
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