Philips’ US banker Credit Suisse First Boston and law firm Salomon & Cromwell made the first official contacts after an invitation from Al Stein, VLSI’s chief executive.

Stein wrote to Arthur van der Poel, chairman of Philips Semiconductors, stating that “we will look forward to working out a process of discussions with you”, when the Dutchman appeared to soften his original threat to pursue an entirely hostile bid if VLSI did not open talks before early March.

Stein is nevertheless keeping Philips at arm’s length. His letter continued: “The most effective way to establish this process is to have your lawyers and investment bankers contact our counterparts.”

Philips had been seeking direct negotiations between the two companies’ boards.

VLSI has also tightened its `poison pill’ bid defence, which is being challenged by Philips in the US courts. The defence will flood the market with VLSI shares if any bidder or new shareholder secures more than 10% of the company.