Samsung Bids $469 Million for Remaining Stake in AST

Samsung Electronics Co., the Korean giant that has come to the financial rescue of AST Research Inc. repeatedly in recent years, made a $469-million bid Thursday to acquire the computer manufacturer outright.

Saying that it could not “continue to pour money, technology and management resources into Irvine-based AST without having direct control,” Samsung offered to buy all of the company’s outstanding shares for $5.10 apiece, or about 35 cents more than the closing price of AST’s stock on Thursday.

Samsung, which already owns 49% of AST, would also assume $307 million in AST debt, much of it already guaranteed by Samsung as part of its efforts to prop up the struggling company.

“Samsung is at a crossroads in its relationship with AST,” said W.R. Choi, Samsung’s executive director for international finance. “Our view is that AST will find it difficult to be a viable independent company going forward without additional assistance.”

In fact, the Samsung deal was proposed just as AST reported its 11th consecutive quarter of losses, and a loss of $418 million for 1996.

Choi would not rule out the possibility of layoffs if the acquisition is completed and said Samsung would launch an extensive review of the computer manufacturer’s operations. AST has 4,200 employees worldwide, including 750 in Orange County.

But Choi said that the AST brand name would be preserved, that the company would still maintain U.S. headquarters in Irvine and that Samsung still believes AST has the potential to rebound.

“Despite the recent difficulties, Samsung’s firm belief is that AST still has tremendous value in its brand name and operations,” said Choi, speaking from Korea with the assistance of an interpreter.

Samsung’s offer was met with a cool reaction from AST. In a written statement, AST Chief Executive Y.S. Kim said the company had established a committee of three board members “to evaluate Samsung’s proposal, along with other options.”

“These events, while significant, do not alter our primary goal--to return AST to profitability,” Kim said. “It is business as usual.”

The move could herald the end of an era for AST, which was founded in 1980 in a Santa Ana garage by three immigrants who built the company from scratch into one of the top 10 computer manufacturers in the world.

Throughout the 1980s, AST was one of Southern California’s greatest high-tech success stories. But two of the company’s founders left after a series of management squabbles, and the company seemed to lose the decisiveness and reflexes that had long been its strengths. In recent years, AST has been losing market share and money at a worrisome pace.

Analysts said Thursday that the proposed acquisition would lend stability and credibility to a company that needs both.

“I don’t think Samsung would be investing the money if they didn’t think they could get a good return,” said Scott Miller, an analyst at Dataquest in San Jose. “What I see is Samsung with more at stake, and that’s a good thing.”

AST’s lost $417.7 million for the year ended Dec. 28, compared with a $128.6 million loss for the company’s fiscal 1995.

Revenue for the 12 months was $2.1 billion, down from $2.3 billion a year earlier. AST said its domestic sales fell just 1%, to $1.14 billion, while international sales plummeted 22% to $927.8 million.

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Cyber Courtship

Samsung Electronics Co. offered Thursday to buy the 51% of Irvine-based AST Research Inc. it doesn’t own for $469 million. Samsung has provided financial support to the troubled computer maker since February 1995. Some highlights of their relationship:

February 1995: Samsung agrees to pay $378 million for a 40% stake in AST.

April 1995: Sale of the 40% stake in AST to South Korea-based Samsung clears antitrust scrutiny.

December 1995: Samsung provides $300 million in financial support to AST.

June 1996: The memory-chip giant moves closer to swallowing AST by agreeing to raise its stake in the company to nearly 50% and by appointing Samsung executive Kwang-Ho Kim to replace AST co-founder Safi U. Qureshey as chairman.

August 1996: AST replaces its president and chief executive, effectively ceding operational control of the firm to Samsung, with Samsung executive Young-Soo Kim, who engineered the company’s original investment in AST.

December 1996: Struggling with a string of quarterly losses, AST says it has signed an agreement with Samsung for a $200-million two-year bank credit guarantee in exchange for 500,000 shares of nonvoting preferred stock.

Jan. 30: Samsung offers $469 million for the 51% of AST it doesn’t own.

Source: Times reports

Researched by JENNIFER OLDHAM / Los Angeles Times