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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
VARCO INTERNATIONAL, INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
922126 10 7
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(CUSIP Number)
James F. Maroney, III
Tuboscope Inc.
2835 Holmes Road
Houston, Texas 77051
Tel No.: (713) 799-5100
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(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
With a copy to:
Patrick T. Seaver, Esq.
Latham & Watkins
650 Town Center Drive
Costa Mesa, California 92626
Telephone: (714) 540-1235
March 22, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box: [_]
Note: Schedules filed in paper format shall include a signed original and five
copes of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
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*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 922126 10 7
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NAMES OF REPORTING PERSONS
1. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Turboscope Inc.
I.R.S. Employer Indentification No. 76-0252850
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2. (a) [_]
(b) [_]
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SEC USE ONLY
3.
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SOURCE OF FUNDS
4.
WC, BK
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [_]
5.
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CITIZENSHIP OR PLACE OF ORGANIZATION
6.
Delaware
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SOLE VOTING POWER:
7.
NUMBER OF
13,023,985 Shares*
SHARES -----------------------------------------------------------
SHARED VOTING POWER:
BENEFICIALLY 8.
None
OWNED BY
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EACH SOLE DISPOSITIVE POWER:
9.
REPORTING 13,023,985 Shares*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER:
WITH 10.
None
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON:
11.
13,023,985 Shares*
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12. [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
13.
16.6%
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TYPE OF REPORTING PERSON:
14.
CO
___________
* Tuboscope Inc. ("Tuboscope") has the right, under certain circumstances, to
purchase up to 13,023,985 shares of the Common Stock ("Varco Common Stock") of
Varco International, Inc. ("Varco") pursuant to the terms and conditions of the
Varco Stock Option Agreement, dated as of March 22, 2000, between Varco and
Tuboscope. This option is not currently exercisable, and until the option
becomes exercisable and is exercised, Tuboscope does not have any right to vote
(or to direct the voting of) or dispose (or to direct the disposition of) any
shares of Varco Common Stock that may be purchased upon exercise of the option.
Accordingly, Tuboscope expressly disclaims beneficial ownership of all shares of
Varco Common Stock that may be purchased upon exercise of the option.
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Item 1. Security and Issuer.
This statement on Schedule 13D (this "Statement") relates to the Common Stock
("Varco Common Stock") of Varco International, Inc., a California corporation
("Varco"). The principal executive offices of Varco are located at 743 North
Eckhoff Street, Orange, California 92868.
Item 2. Identity and Background.
The name of the person filing this Statement is Tuboscope Inc., a Delaware
corporation ("Tuboscope"), with its principal office at 2835 Holmes Road,
Houston, Texas 77051. Tuboscope and its subsidiaries supply technical services
and highly-engineered products to the oil and gas drilling, completion,
production and transmission industries worldwide. The name, business address,
present principal occupation or employment, and citizenship of each director and
executive officer of Tuboscope are set forth on Schedule A hereto.
During the last five years, neither Tuboscope, nor to the best of its knowledge,
any of the persons listed on Schedule A attached hereto nor any other person
controlling Tuboscope, has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described in Item 4 hereof, Tuboscope has entered into the Varco
Stock Option Agreement (as defined in Item 4 below) with Varco. Pursuant to the
Varco Stock Option Agreement, Varco has, among other things, granted Tuboscope
an irrevocable option (the "Option") to acquire up to 13,023,985 shares of Varco
Common Stock (subject to adjustment), at an exercise price per share equal to
$14.56 (the "Exercise Price"). The Option may only be exercised upon the
happening of certain events, which are outlined in Item 4 hereof. If the Option
were to become exercisable, the aggregate exercise price required to purchase
all shares of Varco Common Stock subject to the Option would be $189,629,222. At
any time that the Option is exercisable pursuant to its terms, Tuboscope may
elect, in lieu of exercising the Option to purchase Varco Common Stock, to
require Varco to pay to Tuboscope an amount per share (the "Spread") equal to
the excess, if any, over the Exercise Price of the higher of (x) the Alternative
Purchase Price (as such term is defined in the Varco Stock Option Agreement) and
(y) the average of the closing sales price of Varco Common Stock on the New York
Stock Exchange (the "NYSE") for the five trading days ending five days prior to
the date notice is given by Tuboscope to Varco. Tuboscope currently anticipates
that all funds to be paid by it upon any exercise of the Option would be
provided by available working capital and borrowings under its existing Amended
and Restated Secured Credit Agreement, as amended, with Chase Bank of Texas,
N.A., ABN Amro Bank N.V., and the other lenders thereto, or other credit
facilities to be arranged prior to exercise.
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No monetary consideration was paid by Tuboscope to Varco in connection with
entering into the Merger Agreement (as such term is defined in Item 4 below) or
the Varco Stock Option Agreement. The description of the Varco Stock Option
Agreement contained herein is qualified in its entirety by reference to the
Varco Stock Option Agreement which is included as Exhibit 10.2 to the Current
Report on Form 8-K filed by Tuboscope on March 24, 2000
Item 4. Purpose of Transaction.
On March 22, 2000, Tuboscope and Varco entered into a stock option agreement,
dated as of March 22, 2000 (the "Varco Stock Option Agreement") pursuant to
which Varco granted Tuboscope the Option. The number of shares underlying the
Option is subject to adjustment in certain circumstances, provided that the
aggregate number of shares purchasable by Tuboscope upon the exercise of the
Option may not exceed 19.9% of the total outstanding shares of Varco Common
Stock immediately prior to the time of such exercise. The Option will, subject
to certain limitations, become exercisable upon the occurrence of an event the
result of which is that Tuboscope is entitled to receive the Varco Termination
Fee (as such term is defined in the Merger Agreement) pursuant to Section
8.03(e) of the Merger Agreement (a "Purchase Event"), as more fully set forth in
the Varco Stock Option Agreement and the Merger Agreement. In no event may the
Total Profit (as such term is defined in the Varco Stock Option Agreement) of
Tuboscope in respect of the Option and the Varco Termination Fee exceed $35
million. Also, in no event may the Option be exercised for a number of shares as
would, as of the date of the notice of exercise, result in a Notional Total
Profit (as defined in the Varco Stock Option Agreement) of Tuboscope in respect
of the Option and the Varco Termination Fee in excess of $35 million. No
Purchase Event has occurred at the time of this filing.
At any time that the Option is exercisable pursuant to its terms, Tuboscope may
elect, in lieu of exercising the Option in whole or in part, to require Varco to
pay to Tuboscope an amount per share equal to the Spread. In addition, if
Tuboscope exercises the Option, at any time prior to 30 days after the first
anniversary of the Merger Termination Date (as such term is defined in the Varco
Stock Option Agreement), Tuboscope may require Varco to repurchase any shares
purchased upon such exercise at a price per share equal to the greater of (i)
the Alternative Purchase Price (as such term is defined in the Varco Stock
Option Agreement) and (ii) the average of the closing sales prices of Varco
Common Stock on the NYSE for the five trading days ending five days prior to the
date notice is given by Tuboscope to Varco.
Varco generally has a right of first refusal over any shares purchased by
Tuboscope pursuant to the Option until the earlier of (i) the occurrence of a
Change in Control Event (as such term is defined in the Tuboscope Stock Option
Agreement) and (ii) 30 days after the first anniversary of the Merger
Termination Date. In addition, if a Change in Control Event has not occurred
prior to the first anniversary of the Merger Termination Date, Varco has the
right exercisable for 30 days following such anniversary to repurchase all, but
not less than all, of the shares purchased pursuant to the Option at the greater
of (i) the Exercise Price and (ii) the average closing price of Varco Common
Stock on the NYSE for the five trading days ending five days prior to the date
notice is given by Varco to Tuboscope.
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Tuboscope will have certain rights to require the registration under the
securities laws of any shares purchased pursuant to the Option if necessary for
Tuboscope to be able to sell such shares.
Tuboscope has granted to Varco a substantially similar option to purchase up to
8,908,653 shares of Tuboscope's Common Stock, at an exercise price of $17.00 per
share, pursuant to a stock option agreement (the "Tuboscope Stock Option
Agreement"), dated as of March 22, 2000, the provisions of which substantially
correspond to the related provisions of the Varco Stock Option Agreement.
Reference is hereby made to the Tuboscope Stock Option Agreement and the Varco
Stock Option Agreement (together, the "Stock Option Agreements"), which are
included as Exhibits 10.1 and 10.2, respectively, to the Current Report on Form
8-K filed by Tuboscope on March 24, 2000, for the full text of their terms,
including the conditions upon which they may be exercised. The Stock Option
Agreements are incorporated herein by reference in their entirety.
The Option was granted by Varco as an inducement to Tuboscope to enter into the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 22,
2000, by and between Varco and Tuboscope. Pursuant to the Merger Agreement and
subject to the terms and conditions set forth therein (including approval by the
stockholders of Varco and Tuboscope and various regulatory agencies), Varco will
merge with and into Tuboscope (the "Merger") with Tuboscope continuing as the
surviving corporation (the "Surviving Corporation"), and each issued and
outstanding share of Varco Common Stock (other than dissenting shares and any
shares owned by Tuboscope or Varco) will be converted into 0.7125 shares of
Tuboscope Common Stock. If the Merger is consummated, the Option expires and
cannot be exercised.
Pursuant to the Merger Agreement, at the effective time of the Merger, the
certificate of incorporation of Tuboscope will be amended to change its name to
Varco International, Inc., and as so amended, will be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law. The by-laws of Tuboscope, as in effect
immediately prior to the effective time of the Merger, will be the by-laws of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
If the Merger is consummated, the initial Board of Directors of the Surviving
Corporation will consist of 10 members, five to be designated by Varco and five
to be designated by Tuboscope. At the effective time of the Merger, Varco's
Chairman and Chief Executive Officer, George Boyadjieff, will be the Chairman
and Chief Executive Officer of the Surviving Corporation, Tuboscope's President
and Chief Executive Officer, John Lauletta, will be President and Chief
Operating Officer of the Surviving Corporation, and Tuboscope's Chief Financial
Officer, Joseph Winkler, will be Chief Financial Officer of the Surviving
Corporation.
As a result of the Merger, Varco Common Stock will no longer be listed for
trading on the NYSE.
Reference is hereby made to the Merger Agreement, which is included as Exhibit
2.1 to the Current Report on Form 8-K filed by Tuboscope on March 24, 2000, for
the full text of the terms
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and conditions of the Merger. The Merger Agreement is incorporated herein by
reference in its entirety.
Item 5. Interest in Securities of the Issuer.
Pursuant to the Option, the Company has the right under certain circumstances to
purchase up to 13,023,985 shares of Varco Common Stock at the Exercise Price,
subject to adjustment in certain events; provided, however, that in no event
will the number of shares for which the Option is exercisable exceed 19.9% of
the shares of Varco Common Stock issued and outstanding immediately prior to the
time of exercise. The Option becomes exercisable under the conditions described
in Item 4 hereof. Based on the number of shares of Varco Common Stock
outstanding on March 15, 2000, as represented by Varco in the Merger Agreement,
Tuboscope would beneficially own 16.6% of the shares of Varco Common Stock if
the Option were exercised in full. Tuboscope would have sole voting and
dispositive power with respect to any shares acquired upon exercise of the
Option, subject to Varco's right of first refusal and repurchase rights
described in Item 4 hereof.
Until the Option is exercised (if at all), Tuboscope has no right to receive
dividends from, or the proceeds from the sale of, the shares of Varco Common
Stock subject to the Option. If the Option is exercised by Tuboscope, Tuboscope
or its designee, if any, would have the sole right to receive dividends on the
shares of Varco Common Stock acquired pursuant thereto.
Prior to such time, if any, that the Option becomes exercisable, Tuboscope
expressly disclaims beneficial ownership of the shares of Varco Common Stock
subject to the Option. Neither the filing of this Schedule 13D nor any of its
contents shall be deemed to constitute an admission that Tuboscope is the
beneficial owner of the shares of Varco Common Stock subject to the Option for
purposes of Section 13(d) or 16 of the Securities Exchange Act of 1934, as
amended, or for any other purpose and such beneficial ownership is hereby
expressly disclaimed.
Other than in connection with the Option, neither Tuboscope nor, to the best
knowledge of Tuboscope, any of the persons listed on Schedule A hereto
beneficially owns any shares of Varco Common Stock. No transactions in Varco
Common Stock were effected by Tuboscope or, to the best knowledge of Tuboscope,
any of the persons listed on Schedule A hereto, during the preceding 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as provided in the Merger Agreement and the Stock Option Agreements,
neither Tuboscope nor, to the best knowledge of Tuboscope, any of the persons
listed on Schedule A, has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with respect to any
securities of Varco, including, but not limited to, transfer or voting of any of
Varco's securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the giving
or withholding of proxies.
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Item 7. Material to be Filed as Exhibits.
Exhibit 1: Agreement and Plan of Merger, dated as of March 22, 2000, by
and between Varco International, Inc., a California corporation, and Tuboscope
Inc., a Delaware corporation (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of Tuboscope Inc. filed on March 24, 2000).
Exhibit 2: Tuboscope Stock Option Agreement, dated as of March 22, 2000,
by and between Varco International, Inc., a California corporation, as grantee,
and Tuboscope Inc., a Delaware corporation, as grantor (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Tuboscope Inc.
filed on March 24, 2000).
Exhibit 3: Varco Stock Option Agreement, dated as of March 22, 2000, by
and between Tuboscope Inc., a Delaware corporation, as grantee, and Varco
International, Inc., a California corporation, as grantor (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K of Tuboscope Inc.
filed on March 24, 2000).
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SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: March 31, 2000
TUBOSCOPE INC.
By: /s/ James F. Maroney, III
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James F. Maroney, III
Vice President, General Counsel
and Secretary
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SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF TUBOSCOPE INC.
The name, citizenship, business address, title, present principal
occupation or employment of each of the directors and executive officers of
Tuboscope Inc. are set forth below.
<TABLE>
<CAPTION>
Name/Citizenship* Position Employment and Address
----------------- -------- ----------------------
<S> <C> <C>
L.E. Simmons Chairman of the Board President, LE. Simmons & Associates
c/o SCF Partners
6600 Chase Tower
600 Travis, Ste. 6600
Houston, TX 77002
Eric L. Mattson Director Chief Financial Officer, Netrail,
Inc.
230 Peachtree St., Ste. 1700
Atlanta, GA 30303
John F. Lauletta Director, President and Chief c/o Tuboscope Inc.
Executive Officer 2835 Holmes Road
Houston, Texas 77051
Jeffrey A. Smisek Director Executive Vice President, General
Counsel and Secretary,
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77210-4607
Douglas E. Swanson Director President, Chief Executive Officer
and Chairman of the Board,
Cliffs Drilling Company
50 Briar Hollow Ln., Ste. 490E
Houston, Texas 77027
Joseph C. Winkler Executive Vice President, Chief c/o Tuboscope Inc.
Financial Officer and Treasurer 2835 Holmes Road
Houston, Texas 77051
Haynes B. Smith Vice President-Western Hemisphere c/o Tuboscope Inc.
Operations 2835 Holmes Road
Houston, Texas 77051
Peter Stuart Vice President-Eastern Hemisphere c/o Tuboscope Inc.
Operations 2835 Holmes Road
Houston, Texas 77051
</TABLE>
11
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<TABLE>
<CAPTION>
Name/Citizenship* Position Employment and Address
----------------- -------- ----------------------
<S> <C> <C>
James F. Maroney, III Vice President-Secretary and General c/o Tuboscope Inc.
Counsel 2835 Holmes Road
Houston, Texas 77051
Martin Greenberg Vice President-Controller, Assistant c/o Tuboscope Inc.
Secretary and Assistant Treasurer 2835 Holmes Road
Houston, Texas 77051
Kenneth Nibling Vice President-Human Resources and c/o Tuboscope Inc.
Administration 2835 Holmes Road
Houston, Texas 77051
</TABLE>
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*Each person listed is a citizen of the United States.
12
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INDEX OF EXHIBITS
Exhibit 1: Agreement and Plan of Merger, dated as of March 22, 2000, by
and between Varco International, Inc., a California corporation, and Tuboscope
Inc., a Delaware corporation (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of Tuboscope Inc. filed on March 24, 2000).
Exhibit 2: Tuboscope Inc. Stock Option Agreement, dated as of March 22,
2000, by and between Varco International, Inc., a California corporation, as
grantee, and Tuboscope Inc., a Delaware corporation, as grantor (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Tuboscope Inc.
filed on March 24, 2000).
Exhibit 3: Varco Stock Option Agreement, dated as of March 22, 2000, by
and between Tuboscope Inc., a Delaware corporation, as grantee, and Varco
International, Inc., a California corporation, as grantor (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K of Tuboscope Inc.
filed on March 24, 2000).
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