A bid to create the world's second-largest computer company ended abruptly yesterday when Detroit-based Burroughs Corp. terminated its proposal to merge with Sperry Corp.
In a statement, a Burroughs spokesman said "various concerns of Sperry's management made it impossible to negotiate an alliance within a reasonable time. Publicly traded companies cannot responsibly remain in open merger discussions for an extended period."
Under the terms of the proposal, which was approved by the investment bankers for both sides, Sperry shareholders would have received $65 worth of Burroughs stock per share in a deal valued roughly at $4 billion.
Sperry's stock sagged on the news while Burroughs' stock climbed. Sperry was the most active New York Stock Exchange issue, falling 4 3/8 to 51 1/8 on 2.34 million shares. Burroughs closed up 7/8 to 56 1/8 on 988,000 shares.
"It's like letting air out of the balloon," said Ulric Weil of Morgan Stanley & Co. "It brings the stock more in line with the level before all the merger rumors spread."
The merger discussions were publicly disclosed last Thursday when Burroughs and Sperry -- respectively, the world's third- and seventh-largest mainframe computer manufacturers -- issued a tersely worded confirmation.
Wall Street analysts were generally negative about the merger, asserting that the two companies had competing and incompatible product lines that would be difficult to blend in a strategic marketing approach.
Burroughs, with $4.7 billion in annual revenue, and Sperry, with $5.2 billion in revenue, are part of a second tier of mainframe computer companies that compete for a share of the roughly $60 billion a year mainframe market. The industry leader is International Business Machines Corp., with $50 billion a year in sales.
A source close to the negotiations said Burroughs intitiated contact with Sperry in the wake of that company's failed talks with ITT Corp. some three months ago. Reportedly, Ford Motor Co. also viewed Sperry, with its extensive government and military contracts, as a potential acquisition candidate.
According to the Burroughs statement, the merger would have left separate marketing and mainframe technology organizations but "significant savings would have been realized by rationalizing duplicative operations in areas such as procurement, manufacturing, engineering research and administration," plus standardizing such peripheral devices as printers and disc drives.
However, Sperry Corp. said in a statement that Burroughs had set a deadline that required Sperry to reach an agreement in principle with Burroughs before the opening of the stock market yesterday.
According to the statement, Sperry's board said that it needed more information "to allay customer base and antitrust concerns."
But a Burroughs spokesman dismissed the antitrust concern as "ridiculous," citing recent Justice Department actions allowing mergers in other industries that, he said, effectively eliminates antitrust concerns for this proposed merger.
"It comes down to people questions," he said. "This had the business logic, it had the strategic logic, but you can't do a deal without the personalities."
Executives from both companies and representatives of the investment banks advising the companies declined to comment.
The attempted merger between Burroughs and Sperry came in the midst of a slump in the computer industry, marked by frequent layoffs as companies retrench.
Two such actions were announced yesterday. Massachusetts-based Data General Corp. said it would lay off 1,300 employes from its worldwide work force and idle its U.S. manufacturing plants for five days this summer in the wake of the industrywide recession.
In a less extreme cost-cutting move, Hewlett-Packard Co., the diversified electronics and computer firm, said it would require its 84,000 employes to take an additional three days vacations -- paid or unpaid -- over the Fourth of July weekend.