ADT Ltd., the largest security company in the US and the UK, strengthened its shareholder rights plan a day before rejecting Western Resources Inc.'s $3.5 billion sweetened hostile takeover bid, a Securities and Exchange Commission filing revealed.

Western, which currently owns 27 percent of ADT, is trying to gain control of Bermuda-registered ADT by replacing ADT's 11 board members with two Western executives. Western has said it would then proceed with an amalgamation of ADT into a subsidiary of Western.

In its revised proxy statement, ADT said the company's board had amended its right plan to prevent directors nominated by Western from amending the plan or redeeming the rights.

A rights plan, or poison pill, results in more stock causing dilution. A hostile bidder must then buy more shares for the same controlling stake.

Another possible hurdle to Western's takeover are warrants held by Republic Industries Inc.

Republic, which owns 9.8 percent of ADT, holds warrants to acquire 15 million ADT shares. The warrants were given after Republic attempted a friendly $4 billion takeover of ADT last year. Republic's largest shareholder is Bermuda resident Michael DeGroote.

ADT believes because Western's board nominees are Western employees that they will act in the best interest of Western. The majority of ADT's current board are independent.

"In short, your board believes that Western is attempting to leverage its 27 percent holding to impose an unfavourable transaction on the company and the rest of its shareholders.

"The Western proposals (replacing the board) are not contingent on the outcome of the Western offer (the $3.5 billion bid), even though that offer is highly conditional and may never -- and in your board's view does not deserve to -- succeed.

"You are therefore being asked, by Western, to hand over management control of ADT to Western without any certainty that the Western offer will succeed.

ADT in new bid to thwart hostile takeover by Western "If the Western offer fails -- as your board believes that it should -- the effect of approving the Western proposals would be to give Western management control of ADT for nothing,'' ADT, in its revised proxy statement, said.

ADT shareholders are slated to vote on July 8 at the company's registered offices, the law firm of Appleby, Spurling & Kempe, on the board of director change. AS&K senior partner John Campbell is ADT secretary.

ADT has sent proxy forms to shareholders for the vote.

The poison pill was amended on Sunday and the bid rejected on Monday.

In the modified bid, the Kansas-based utility offered ADT shareholders $12.50 in Western stock and $10 cash. Earlier, the company offered $7.50 in stock and $15 in cash.

The maximum offer by Western is $22.50 per common share and represents only an 11.8 percent premium above the pre announcement price, ADT said.

The Wall Street Journal said the Western offer was a "shockingly low premium for ADT shareholders.'' ADT predicts its stock price will exceed Western's $22.50 bid by mid year and it targeted for $28-$30 by year end.

Since 1988, when the current management team took over, ADT has had a compound annual growth rate in excess of 36 percent in its residential security system unit sales.

And over the past three years ADT's share price has significantly outperformed the market while Western's stock price has significantly underperformed the market, ADT said.

"ADT's future is bright. Western's future is bleak,'' ADT said.

The board believes ADT is well-positioned to continue to lead the ongoing consolidation in the fragmented electronic security services industry and has recently entered marketing partnership arrangements with AT&T Corp., Radio Shack and USAA.

ADT says its shareholders should be aware of the risks which are included in Western's prospectus, among them -- deregulation of the utility industry.

Though Western does not disclose the magnitude of these costs ADT believes it could be as much as $1.65 billion if deregulation were to occur quickly, ADT said.

ADT also expects to enjoy significant earnings benefits from recent acquisitions and moves to sell car auction business.

As the leader, ADT believes it will benefit from market consolidation and continue to lead.

The $12.9 billion US electronic security services industry is highly fragmented and undergoing consolidation. The industry's top 100 companies have about 23 percent market share. ADT, the leader, has seven percent.

By revenue, ADT is over three times the size of the next largest competitor.

ADT believes in 1996 it installed more residential security systems than any of its competitors existing customer base.

ADT said Western has offered no support for the notion that ADT's nationwide customer base would have any interest in buying power from a Kansas utility or even that Western is capable of delivering electric power outside its Kansas base.

ADT added that it believes it has little to learn from Western about managing a national distribution system.