Vishay's goes fishing for International Rectifier; Waste Management sees rejection but does not raise offer

By Aaron Hochman-Zimmerman

New York, Aug. 15 - Acting on Vishay Intertechnology Inc.'s bid for International Rectifier Corp., investors traded the target's share price past the offer, but Vishay's shares sank as shareholders considered the old ghosts and history between the two.

Waste Management Inc. received Republic Services Inc.'s rejection of its higher offer and responded with a rebuttal of Republic's reasoning.

Waste Management reminded Republic that it thinks its own offer is superior the transaction with Allied Waste Industries Inc., but fell short of making its own offer any more enticing.

Many in the market expect Waste Management to eventually come back to Republic with a better offer, but for now the merger with Allied Waste Industries is proceeding as planned.

Meanwhile, the Dow Jones Industrial Average ended better by 43.97, or 0.38%, at 11,659.90, while the Nasdaq Composite Index slipped 1.15, or 0.05%, to finish at 2,452.52.

The S&P 500 tacked on 5.26, or 0.41%, to close at 1,298.19.

Vishay hits send on offer

International Rectifier's shares were on the move on Friday after the company received a $21.22 per share cash offer from fellow semiconductor producer Vishay Intertechnology.

The offer represents a 13% premium over Thursday's closing price and a 20% premium over the stock's 30-day moving average of $17.69.

Still, International Rectifier's stock traded passed the offer level, indicating to some that it may take a better number to sell the idea to shareholders.

International Rectifier has recently been suffering from a bout of low demand and high inventory, although "I don't think they need this," Longbow Research analyst Shawn Harrison said about the deal.

The company has set out on an 18 to 20 plus-month turnaround program, Harrison said.

The question before shareholders is whether or not the premium Vishay offered is enough to outshine the recovery plan.

For its part "Vishay would like to get the deal done," Harrison said, ideally at the current price, but it may be forced to sweeten the pot.

"[Vishay] is an acquisitive company," he said, "They've always been looking at International Rectifier" and recently the planets seemed to align in their favor.

International Rectifier's shares closed at the year's low of $16.64 on July 15 and Vishay has been carrying $750 million of cash on hand.

While the sun seemed to be shining on Vishay's offer, its own stock traded lower as Vishay's investors have a long memory of Vishay's $290 million deal to buy International Rectifier's power control systems unit in November, 2006.

An ongoing lawsuit claims International Rectifier "materially overstated the potential" of the unit, Harrison said.

"This deal is entirely distinct," Harrison said, but as a Vishay shareholder, "Do you want to go another round with International Rectifier?" he asked.

Shares of International Rectifier (NYSE: IRF) jumped $3.67, or 19.50%, to close the day at $22.49.

Shares of Vishay Intertechnology (NYSE: VSH) shed $0.81, or 7.96%, to finish at $9.37.

Republic stands by Allied

Late Thursday, Republic Services told Waste Management that its $37 per share, upped from $34 per share, "still substantially undervalues Republic," according to a press release.

Republic insisted it will proceed with its proposed merger with Allied Waste.

"Republic is not for sale and financial analyses described in our proxy statement support an independent standalone valuation of the merged company substantially above $37 per share," Republic's chairman and chief executive officer wrote to Allied Management's chief executive officer David Steiner.

"Our shareholders have expressed to us, privately and publicly, their appreciation of the potential value of the Republic-Allied Waste merger. Based upon our contacts with shareholders, our board believes that Republic shareholders would not want that potential value sold on the cheap," the letter continued.

Waste Management fired back with the unsurprising assertion that it believes its offer is superior to Republic's deal with Allied.

"We continue to believe that our revised proposal would provide superior value to Republic stockholders and, with Republic's cooperation, would be executable on a timely basis. We are disappointed with the action taken by Republic's board of directors and we will evaluate our options," Waste Management said in a press release.

Waste Management's reply may have expressed remorse or disappointment, but it did not express anything that would make Republic change its mind.

Still, "I doubt this is the end of it," said an equity analyst.

"Waste Management is going to be lobbying with Republic's shareholders" and "it wouldn't surprise me if they add some sort of stock kicker to it," he said.

"Waste Management is fairly committed to it, they're not going to let it drop that easily," he added.

Meanwhile, "Republic is pretty committed to the deal with Allied," he said.

Nothing, barring a "have to take it" offer from Waste Management seems like it will break up the deal already in progress.

"I think they genuinely believe they can create better value that way," he said about Republic.

Between the two proposals on the table, "I think it's more likely that the Allied deal gets done," he said.

Shares of Republic Services (NYSE: RSG) gave back $0.79, or 2.33%, to end at $33.15.

Shares of Waste Management (NYSE: WMI) inched up by $0.17, or 0.49%, to $34.78.

Shares of Allied Waste (NYSE: AW) took on $0.31, or 2.38%, to $13.32.

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