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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SIMULATION SCIENCES INC.
(NAME OF SUBJECT COMPANY)
SIMULATION SCIENCES INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
829213 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
CHARLES R. HARRIS
CHIEF EXECUTIVE OFFICER
601 VALENCIA AVENUE, SUITE 100
BREA, CALIFORNIA 92823
(714) 579-0412
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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COPIES TO:
JEFFREY D. SAPER, ESQ.
BARRY E. TAYLOR, ESQ.
MARTIN W. KORMAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650)493-9300
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INTRODUCTION
This Amendment No. 1 amends the Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") filed by Simulation Sciences Inc. (the
"Company") relating to an offer by S Acquisition Corp., a Delaware corporation
("Offeror") and an indirect wholly owned subsidiary of Siebe plc, a United
Kingdom public limited company ("Parent" or "Siebe"), to purchase all of the
Shares of Simulation Sciences Inc., a Delaware corporation. Capitalized terms
used herein and not otherwise defined herein shall have the meaning assigned to
them in the Schedule 14D-9.
The information provided in the Schedule 14D-9 under section (b) under
"Item 4. The Solicitation or Recommendation" is amended in full to read in its
entirety as set forth below.
(B) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION.
Background of the Offer
In October 1997, the Company's Executive Vice President of Sales, Marketing
and Engineering Services, Dirk Pfeiffer, met with Mark Davidson, Director of
Product Marketing of The Foxboro Company ("Foxboro"), an affiliate of Siebe, at
the Company's principal executive offices in Brea, California to discuss
generally, and exchange information regarding, their respective businesses,
technologies and products.
On February 13, 1998, Gary Foster, President, Software Services and
Corporate Marketing of Foxboro, telephoned Mr. Harris to discuss the possibility
of a strategic alliance with the Company, including a possible joint venture.
On March 3, 1998, Mr. Harris and other representatives of the Company met
with representatives of Siebe, including Bruce Robinson, President of Foxboro,
in Houston, Texas. At the meeting, both companies discussed their respective
businesses, products and growth strategies. The parties noted the synergies
between their respective technologies and discussed the possibility of a
strategic technology alliance, including the possibility of Foxboro becoming a
member of the Company's group of engineering service providers.
On March 26, 1997, Mr. Harris telephoned Mr. Robinson of Foxboro to
indicate the Company's willingness to continue their discussions regarding a
strategic alliance, and indicated a willingness to pursue a possible expansion
of that relationship.
On March 27, 1998, Allen Yurko, Managing Director and Chief Executive
Officer of Siebe, and Mr. Harris spoke regarding a possible acquisition of the
Company by Siebe and Mr. Yurko shared with Mr. Harris his views on the general
structure of the transaction and the role that the Company would play in the
combined entity. On March 31, 1997, Dr. George W. Sarney, President and Chief
Operating Officer of the Control Systems Division of Siebe, telephoned Mr.
Harris, at which time they agreed to set a date to have more in-depth
discussions regarding a possible combination and to further conduct due
diligence.
On April 7, 1998, representatives of the Company, including Mr. Harris,
Robert E. Grice, Jr., the Company's Executive Vice President, Finance and Chief
Financial Officer, and key technical personnel, and Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, the Company's financial advisor ("DRW")
met with representatives of Siebe, including Dr. Sarney and Mr. Robinson, and
Morgan Stanley & Co. Incorporated, Siebe's financial advisor ("Morgan Stanley"),
in Orange County, California to discuss a possible acquisition of the Company by
Siebe. Prior to the meeting, the parties executed the Mutual Nondisclosure
Agreement. See Item 3(b)(ii) above for a description of the Mutual Nondisclosure
Agreement, a copy of which is filed as Exhibit 99.1 hereto and incorporated
herein by reference. At the meeting, the Company provided Siebe with financial
information about the Company, including non-public information regarding the
Company's preliminary findings with respect to its operating results for the
quarter ended March 31, 1998, as well as information regarding its business,
products and strategies. At the meeting, Dr. Sarney indicated Siebe's continued
desire to acquire the Company and indicated that, subject to its due diligence
review, including a review of the Company's revised and reduced forecast for the
1998 fiscal year, it intended to propose a cash offer for the Company on April
10, 1998. Early in the morning on April 10, 1998, the Company provided Parent
with its preliminary revised and reduced forecast for the 1998 fiscal year.
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From April 8, 1998 to April 14, 1998, Siebe and its legal and financial
advisors conducted legal, financial and technical due diligence of the Company.
On April 9, 1998, legal counsel for Siebe sent a draft Merger Agreement and
draft Option Agreement to legal counsel for the Company.
On April 10, 1998, Morgan Stanley contacted DRW and indicated that, subject
to further due diligence, including a review of the Company's revised and
reduced estimates for its 1998 fiscal year, Siebe was prepared to offer $10.00
per share in cash for the Company.
Thereafter, commencing on April 10, 1998, the Company, Siebe and their
respective legal and financial advisors engaged in negotiations with respect to
a possible acquisition of the Company by Siebe.
On April 13, 1998, Siebe informed the Company that it would withdraw its
proposal if there were not a final agreement on or before the opening of the
U.S. trading markets on April 15, 1998.
The Merger Agreement and the Stock Option Agreement were executed and
delivered in the early morning on April 15, 1998.
During March and early April 1998, the Company held discussions and
exchanged information with two other parties that expressed an interest in a
business combination with the Company, and the Company's Board evaluated the
proposal with Siebe in light of these potential alternatives.
Reasons for the Recommendation.
At a meeting on April 15, 1998, the Board of Directors of the Company
unanimously approved the Offer and the Merger and determined that the terms of
the Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company, and unanimously resolved to recommend that
stockholders accept the Offer and tender their Shares.
In arriving at its decision to approve the Transactions and to recommend
acceptance of the Offer, the Board of Directors considered, among other things,
the following factors that supported its decision to approve the Transactions
and to recommend acceptance of the Offer: (i) the terms and conditions of the
Merger Agreement, including the amount and form of the consideration, which the
Board considered to be fair and reasonable for transactions such as the type
contemplated by the Offer and the Merger based in part on its review of the DRW
Fairness Opinion; (ii) the fact that the $10.00 per Share price represents a
premium of approximately 24.1% over the closing sale price of $8.06 per Share as
reported on the Nasdaq National Market on April 14, 1998, the last trading day
prior to the date the Board of Directors authorized and approved the
Transactions, taking into account the fact that the stock price had traded at a
range of prices from approximately $10.00 to $23.00 per share during the second
half of fiscal 1997 until the Company's announcement in early February 1998 of
its fourth-quarter results for fiscal year 1997 and from approximately $5.25 to
$11.00 per share following such announcement until April 14, 1998, and the
unlikelihood that the Company's stock price would be at such levels in future
periods in light of the Company's expected operating results in the quarter
ended March 31, 1998 and the remainder of fiscal 1998; (iii) the Board of
Directors' knowledge of the recent operating results of the Company, including
the fact that the Company's revenues during the quarter ended March 31, 1998
were significantly lower than expected and that the Company would incur a
substantial loss in that quarter; (iv) the Company's expectations regarding
fiscal 1998 operating results and the fact that such expectations were
significantly lower than previous expectations; (v) the negative effect that the
public announcement of March 31, 1998 quarterly operating results would have on
future customer prospects, including the potential damage to the Company's
competitive position as compared to the Company's competitors, which generally
have greater financial resources than the Company, and on the Company's stock
price and the likelihood that the Company's near term operating results would
further negatively affect such stock price; (vi) the effect that the public
announcement of March 31, 1998 quarterly operating results would have on the
Company's relationships with its employees, partners and customers, including
the potential damage to the Company's competitive position that may result from
lower than expected earnings and lower stock price and the willingness of
partners and customers to maintain or expand
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their business relationships with the Company, as well as the adverse effect on
the Company's ability to recruit and retain employees and on employee morale
generally; (vii) the likelihood that the proposed Merger would be consummated,
based on the experience, reputation and financial condition of Siebe and the
conditions to the Offer as set forth in the Merger Agreement; (viii) the
uncertainty of whether Siebe's $10.00 offer would be withdrawn after the April
15, 1998 deadline set by Siebe; (ix) the uncertainty of the timing and economic
value of a proposal from any third party and the uncertainty of whether there
would be a transaction with any third party that would yield greater value for
the Company's stockholders than the Offer and the Merger; (x) the effect that a
potential lower stock price following public announcement of March 31, 1998
operating results could have on the price levels that other potential third
party acquirors would be willing to pay for the Company; (xi) the advantages in
a competitive environment of strategically aligning with a large, well-
capitalized company; (xii) the fact that pursuant to the Merger Agreement, the
Company is not prohibited from responding to certain unsolicited offers to
acquire the Company; and (xiii) the opinion of DRW dated April 15, 1998, to the
effect that as of such date and based upon and subject to the various
assumptions and limitations set forth therein, the cash consideration to be
received by the holders of Shares in the Offer and the Merger is fair from a
financial point of view to such stockholders.
THE FULL TEXT OF DRW'S FAIRNESS OPINION HAS BEEN FILED AS EXHIBIT 99.5 TO
THE SCHEDULE 14D-9 AND IS ALSO ATTACHED THERETO AS ANNEX B. STOCKHOLDERS ARE
URGED TO READ SUCH OPINION IN ITS ENTIRETY.
The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current stockholders of the Company of the opportunity to
participate in the future growth prospects of the Company and, therefore, in
reaching its conclusion to approve the Transactions, determined that the recent
historical results of operations and future prospects of the Company are
adequately reflected in the $10 price per Share. In addition, the Board of
Directors considered the possibility that, in the event the Offer but not the
Merger is consummated, the number of stockholders could be reduced, which could
adversely affect the liquidity and market value of the Shares.
In light of all the factors set forth above, the Board of Directors
approved the Transactions. In view of the variety of factors considered in
connection with its evaluation of the Transactions, the Board of Directors did
not assign relative weights to the specific factors considered in reaching its
decision.
It is expected that if Shares are not accepted for payment by the Purchaser
in the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Directors, will continue
to manage the Company as an on-going business. However, the Company may, under
these circumstances, continue to explore other possible methods of maximizing
stockholder value.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
99.1* Form of Mutual Nondisclosure Agreement between Simulation
Sciences Inc. and Siebe plc dated April 7, 1998.
99.2* Press releases issued by the Company and Siebe plc on April
15, 1998.
99.3* Letter of Transmittal.
99.4* Letter to Stockholders dated April 21, 1998 from Charles R.
Harris, President and Chief Executive the Company.
99.5* Opinion of Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, dated April 15, 1998.
99.6* Offer to Purchase dated April 21, 1997.
99.7* Agreement and Plan of Merger dated as of April 15, 1998,
among the Company, Siebe plc, S Acquisition Corp. and S Sub
Corp.
99.8* Stock Option Agreement dated as of April 15, 1998 between
the Company and Siebe plc.
99.9* Certificate of Incorporation of the Company, as amended to
date.
99.10* Certificate of Designations of Rights, Preferences and
Privileges of Series A Participating Preferred Stock.
99.11* The Bylaws of the Company.
99.12* Form of Indemnification Agreement.
99.13* Form of Separation Agreement.
99.14* 1994 Stock Option Plan and related agreements.
99.15* 1996 Stock Plan and related agreements.
99.16* Employee Stock Purchase Plan for U.S. Employees and related
agreements.
99.17* Employee Stock Purchase Plan for Non-U.S. Employees and
related agreements.
99.18* Director Option Plan and related agreements.
99.19* The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.
</TABLE>
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* Previously filed.
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
SIMULATION SCIENCES INC.
By: /s/ CHARLES R. HARRIS
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Charles R. Harris
Chief Executive Officer
Dated: April 29, 1998
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