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Allied Signal / AMP Merger Sees Complimentary Business

6 August 1998

Allied Signal / AMP Merger Sees Complimentary Business But Concerns Over Management Synergy

    OYSTER BAY, N.Y., Aug. 6 -- Allied Signal seeks to expand its
high value car parts presence through a hostile takeover bid for AMP.  After
shedding its commodity airbag and seat belt businesses in 1996 and 1997, and
retaining its transmissions and brake systems business, Allied is now moving
to position itself as a player in the explosively expanding, multi-billion
dollar intelligent transportation system (ITS) components market.  With the
AMP acquisition, Allied would be delivering vehicle electronics infrastructure
elements such as connectors, data buses, optic fiber cabling, and GPS
antennas.  Through the AMP subsidiary, M/A-COM, Allied would be selling
sensors for Obstacle Detection Devices, Parking Assistants, Collision
Detection Systems, and Security systems.  The AMP ITS component capabilities
alone could add several billion dollars annually to Allied's bottom line
within 5 years if the ITS market thrives as ferociously as analysts have
predicted.  In essence, Allied would be providing the electronic plumbing for
cars, businesses, homes, power transmission, cable TV, and many aircraft
systems.
    The businesses are highly complementary, with little overlap.  The
question may be the operational synergy.
    "Allied is a long-time military and aerospace supplier.  The AMP
acquisition would shift the company to having up to half of revenues
originating from private sector sources.  Allied cultural emphasis on
low-defect manufacturing would be a welcome continuity to the nuts and bolts
cabling and connector business that are at the core of the AMP operations.  It
is questionable whether this diversification into many different markets
simultaneously can be fully grasped by Allied management in the near term.
Other aerospace companies, such as Lockheed-Martin, have stumbled as they've
moved into business such as electronic toll collection simply because of the
learning curve.  How expensive will those lessons be for Allied?" said
Mike Kujawa (pronounced Koo-ya-vuh), senior analyst with Allied Business
Intelligence, Inc.