Read-Rite Merger Talks Likely Over

Applied Magnetics Corp. said Friday that it won’t raise its $1.23-billion hostile offer for larger rival Read-Rite Corp.

That could kill the transaction, because many Read-Rite shareholders are likely to reject the current terms of the stock-swap offer as too low, analysts said.

“It probably means there’s no deal,” said analyst Barry Bosak of Smith Barney.

Applied Magnetics, based in Goleta, Calif., is hoping that its stock price will increase, boosting the value of the deal.

Shares of Applied, which closed at $53 the day the bid was made, rose $1.625 to close at $38.625 Friday on the New York Stock Exchange. Applied offered .679 of its shares for each share of Read-Rite, so the value of the offer has fallen from nearly $1.8 billion when it was made Feb. 24 to $1.23 billion.

The offer valued Read-Rite at about $36 a share then, but only at little more than $26 a share Friday.

Read-Rite shares gained 56 cents to close at $31.125 Friday on Nasdaq. Read-Rite shares traded last year at $36 or above for much of the six months from June to November.

Milpitas, Calif.-based Read-Rite on Tuesday rejected Applied’s offer and adopted a “poison pill” plan to thwart it and any other hostile takeover offer.

Executives of both companies have been meeting with shareholders this week to state their case.

“We would not structure or engage in a transaction that is dilutive to the interests of Applied Magnetics,” Craig Crisman, Applied Magnetics chairman and chief executive, said Friday in a statement.

Read-Rite has said it wouldn’t accept a sweetened bid and that it prefers to remain independent.

Both companies make the heads used in computer disk drives. Read-Rite is much larger than Applied Magnetics, reporting revenue of $991 million in its last fiscal year, compared with $345 million for Applied Magnetics.