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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): March 29, 1999
PALEX, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-22237 76-0520673
(State or other jurisdiction of (Commission (IRS Employer
incorporation) file Number) Identification No.)
1360 Post Oak Boulevard, Suite 800
Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 350-6030
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Item 5. Other Events
On March 30, 1999, PalEx, Inc., a Delaware corporation ("PalEx") and
International Food Container Organization ("IFCO") announced the execution of a
definitive agreement to merge their respective businesses. The combined entity,
to be named IFCO Systems, will include IFCO's European, U.S., Asian and Latin
American returnable packaging operations and PalEx's North American pallet and
industrial container operations. IFCO is comprised of three companies, IFCO
Europe Beteiligungs GmbH ("IFCO Europe"), MTS Okologistik Verwaltungs GmbH, and
Schoeller International Logistics Beteiligungsgesellschaft mbH, and their
respective subsidiaries. The three IFCO companies are wholly or majority owned
by Schoeller Packaging Systems GmbH ("SPS") or its affiliates. SPS will create
IFCO Systems to be the holding company for the three IFCO companies prior to
the merger.
This business combination will create a leading provider of supply chain
support services. The new company will own and manage the leading rental pool
of returnable plastic containers ("RPCs") in Europe and the second largest
rental pool of pallets in North America. It will also be the largest provider
of new pallets and pallet and container reconditioning services in North
America. The combined enterprise intends to accelerate the rollout of existing
early-stage IFCO RPC pools in the United States, Asia and Latin America. In
addition, it plans to bundle other supply chain support services with existing
IFCO operations by designing and managing closed-loop logistics and materials
handling systems for its customers.
IFCO owns and manages the leading RPC pool in Europe. It also has RPC
operations in the U.S., Latin America and Japan. Started in 1992, the European
pool now serves approximately 15,000 supermarket outlets in 15 countries in
Europe. The pool, which now consists of approximately 50 million collapsible,
reusable plastic containers, offers produce retailers and growers significant
economic, logistical and environmental advantages over disposable packaging
alternatives. IFCO leases the containers to produce growers, retrieves the
empty containers from supermarket customers, washes and in some cases repairs
the containers, and returns the cleaned containers to the growers. IFCO deploys
the containers from a logistical system that includes 91 depots strategically
located throughout Europe. Since 1993, IFCO's European revenues have grown from
approximately DM10 million to approximately DM200 million in 1998, representing
annual compound annual growth of 82%, all of which has been internally
generated.
Under the terms of the definitive agreement, PalEx will merge with a new
subsidiary of IFCO Systems. The outstanding shares of PalEx's common stock will
be exchanged for common stock of IFCO Systems representing between 32% and 35%
of IFCO Systems' outstanding shares prior to an initial public offering of
shares in IFCO Systems. The remaining shares of IFCO Systems prior to its
initial public offering will be owned by SPS and, assuming full conversion of
certain convertible debentures that may be outstanding, GE Capital Corporation
or certain of its affiliates.
Christoph Schoeller, a founder and Managing Director of IFCO, will serve as
Chairman of the Board of IFCO Systems, which will have joint headquarters in
Houston, Texas and Munich, Germany. Martin Schoeller, a founder and Managing
Director of IFCO, will serve as Chief Executive Officer and a member of the
Board of Directors of the new company. Vance Maultsby, PalEx's current Chief
Executive Officer, will serve as IFCO Systems' Executive Vice President,
Strategy and Finance. Jurgen Benz, currently CEO of IFCO Europe, will serve as
Executive Vice President, Marketing and Sales of IFCO Systems. The Board of
Directors of IFCO Systems is expected to consist initially of eight persons.
Sam Humphreys and John Drury, both current members of PalEx's Board of
Directors, will serve on the Board of Directors of IFCO Systems.
The merger will occur immediately before the completion of an initial
public offering of shares in IFCO Systems. In addition, the merger is subject
to stockholder approvals, the expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Act and compliance with similar
European requirements, the completion of the initial public offering on the same
day as the merger, and other customary conditions. The transaction is expected
to be completed in the second or third quarter of 1999.
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This report may contain statements that may be deemed "forward-looking"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements are based on the
Company's expectations and involve risks and uncertainties that could cause the
Company's actual results to differ materially from those set forth in such
statements. Such risks and uncertainties include, but are not limited to, risks
associated with closing the announced merger according to its terms, integrating
the combined companies and achieving their operational and growth objectives.
These include, without limitation, changes in national or international politics
and economics, currency exchange rate fluctuations, changes in capital and
financial markets, and the ability of the combined companies to effectively
integrate their operations. Management believes the assumptions reflected in
these statements are reasonable, but there can be no assurance that actual
results will not differ materially from these expectations. This announcement
should be read in conjunction with the filings made by the Company with the
Securities and Exchange Commission during 1997 and 1998 and the filings that
will be made relating to the planned merger. These filings disclose risk factors
and other information that could cause actual results to materially differ from
management's expectations.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit 99.1 - Press release dated March 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PALEX, INC.
Date: April 7, 1999 By: /s/ Edward Rhyne
-----------------------------------
Edward Rhyne
Vice President and General Counsel
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Exhibit 99.1
FOR IMMEDIATE RELEASE Investor Contact: Ned Maniscalco
(314) 982-1776
Media Contact: Jennifer Daniels
(941) 533-1148
PALEX AND IFCO ANNOUNCE MERGER AGREEMENT
Combined Company Will Be Global Leader In Supply Chain Support Services
HOUSTON--(BUSINESS WIRE)--March 30, 1999--PalEx, Inc. ("PalEx" or the
"Company") (Nasdaq: PALX) and International Food Container Organization
("IFCO") announced today that they have executed a definitive agreement to merge
their businesses. The combined entity, to be named IFCO Systems, will include
IFCO's European, U.S., Asian and Latin American returnable packaging operations
and PalEx's North American pallet and industrial container operations.
The merger will create a leading global provider of supply chain support
services, with expected 1999 revenues of approximately U.S. $550 million. The
new company will own and manage the leading rental pool of returnable plastic
containers ("RPCs") in Europe and the second largest rental pool of pallets in
North America. It will also be the largest provider of new pallets and pallet
and container reconditioning services in North America. The combined enterprise
intends to accelerate the rollout of existing early-stage IFCO RPC pools in
United States, Asia and Latin America. In addition, it plans to bundle other
supply chain support services with the existing IFCO operations by designing and
managing closed-loop logistics and materials handling systems for its customers.
Sam Humphreys, Chairman of PalEx, said, "This merger will enable PalEx to
participate in the dramatic growth opportunities presented by the global supply
chain support market. By integrating innovative logistics with high returnable
platforms and containers, we can increase the efficiency and reduce the cost of
our customers' retail and industrial distribution activities."
Christoph Schoeller, a founder and Managing Director of IFCO, added, "Our
supply chain support system is proven in Europe and is experiencing strong
growth. PalEx provides the logistical infrastructure for expanding that system
in North America. The new company will have the expertise to extend the combined
model worldwide and to
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expand our returnable packaging and services offerings. We intend to link our
international operations into a global network providing environmentally-
friendly supply chain solutions."
Under the terms of the agreement, PalEx will merge into a new subsidiary of
IFCO Systems. The outstanding shares of PalEx's common stock will be exchanged
for common stock of IFCO Systems representing between 32 percent and 35 percent
of its outstanding shares. The remaining shares of IFCO Systems will be owned by
Schoeller Packaging Systems. A subsidiary of the General Electric Company will
own a note convertible into shares of IFCO Systems. The merger will occur
concurrently with an initial public offering of shares in IFCO Systems.
IFCO owns and manages the leading RPC pool in Europe. It also has RPC
operations in the U.S., Latin America and Japan. Started in 1992, the European
pool now serves approximately 15,000 supermarket outlets in 15 countries in
Europe. The pool, which now consists of approximately 50 million collapsible,
reusable plastic containers, offers produce retailers and growers significant
economic, logistical and environmental advantages over disposable packaging
alternatives. IFCO leases the containers to produce growers, retrieves the empty
containers from supermarket customers, washes and in some cases repairs the
containers, and returns the cleaned containers to the growers. IFCO deploys the
containers from a logistical system that includes 91 depots strategically
located throughout Europe. Since 1993, IFCO's European revenues have grown from
DM10 million to DM200 million in 1998, representing compound annual growth of 82
percent, all of which has been internally-generated.
PalEx is North America's largest provider of new and recycled pallets and
of reconditioned drums, with 71 facilities in 23 states in the U.S. and seven
provinces in Canada. It owns and operates the second largest pallet rental pool
in North America and is engaged in rental of industrial containers. PalEx
reported revenues of $320 million in 1998.
Christoph Schoeller will serve as Chairman of the Board of Directors of
IFCO Systems, which will have joint headquarters in Houston, Texas and Munich,
Germany. Martin Schoeller, a founder and Managing Director of IFCO, will serve
as Chief Executive Officer and a member of the Board of Directors of the new
company. Vance Maultsby, currently CEO of PalEx, will serve as IFCO Systems'
Executive Vice President, Strategy and Finance. Jurgen Benz, currently CEO of
IFCO GmbH, will serve as Executive Vice President, Marketing and Sales of IFCO
Systems. The board of directors of the new enterprise is expected to consist
initially of eight persons. Sam Humphreys, a managing
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director of the merchant banking firm Main Street Merchant Partners, and John
Drury, the CEO of solid waste company Waste Management, Inc., both current
members of PalEx's board, will serve on the Board of Directors of IFCO Systems.
The closing of the merger is subject to the approval of shareholders,
expiration or termination of the applicable waiting period under the Hart-Scott-
Rodino Act, completion of the IPO of IFCO Systems, and other customary
conditions. The transaction is expected to be completed in the second or third
quarter of 1999.
This announcement may contain statements that may be deemed "forward-
looking" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements are based
on the Company's expectations and involve risks and uncertainties that could
cause the Company's actual results to differ materially from those set forth in
such statements. Such risks and uncertainties include, but are not limited to,
risks associated with closing the announced merger according to its terms,
integrating the combined companies and achieving their operational and growth
objectives. These include, without limitation, changes in national or
international politics and economics, currency exchange rate fluctuations,
changes in capital and financial markets, and the ability of the combined
companies to effectively integrate their operations. Management believes the
assumptions reflected in these statements are reasonable, but there can be no
assurance that actual results will not differ materially from these
expectations. This announcement should be read in conjunction with the filings
made by the Company with the Securities and Exchange Commission during 1997 and
1998 and the filings that will be made relating to the planned merger. These
filings disclose risk factors and other information that could cause actual
results to materially differ from management's expectations.
