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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE TO
TENDER OFFER STATEMENT
Under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934
(Amendment No. 2)
800-JR CIGAR, Inc.
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(NAME OF SUBJECT COMPANY)
JRC Acquisition Corp.
L&LR, Inc.
Lewis I. Rothman
LaVonda M. Rothman
(NAMES OF FILING PERSONS)
Common Stock, par value $0.01 per share
(TITLE CLASS OF SECURITIES)
282491109
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(CUSIP NUMBER OF CLASS OF SECURITIES)
Samuel B. Fortenbaugh III, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telephone: 212-309-6000
Facsimile: 212-309-6273
(NAME, ADDRESS AND TELEPHONE NUMBERS OF PERSONS
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSONS)
CALCULATION OF FILING FEE*
Transaction Valuation $45,772,467 Amount of Filing Fee $9,154.50
* Estimated for purposes of calculating the amount of the filing fee only. This
amount assumes the purchase of 3,520,959 shares of common stock, $0.01 par value
(the "Common Stock"), of 800-JR CIGAR, Inc. at a price of $13.00 per share of
Common Stock in cash. Such number of shares of Common Stock represents the
number of outstanding shares of Common Stock not owned by Lewis I. Rothman,
LaVonda M. Rothman and the Lewis Irving Rothman 1998 Trust #1 u/a/d November 10,
1998 as of August 29, 2000, including 434,500 shares of Common Stock issuable
upon the exercise of stock options. The amount of the filing fee calculated in
accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended,
equals 1/50th of one percent of the value of the transaction.
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/x/ Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or if the
Form or Schedule and the date of its filing.
Amount Previously Paid: $8,025.00
Filing Party: JRC Acquisition Corp., L&LR, Inc., Lewis I. Rothman and LaVonda
M. Rothman
Form or Registration No.: Tender Offer Statement on Schedule TO; File No.
5-59143
Date Filed: August 29, 2000
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
/x/ third-party tender offer subject to Rule 14d-1.
/ / issuer tender offer subject to Rule 13e-4.
/x/ going-private transaction subject to Rule 13e-3.
/ / amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: / /
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This Amendment No. 2 to Tender Offer Statement on Schedule TO amends and
supplements the Tender Offer Statement on Schedule TO originally filed on August
29, 2000 and first amended on September 1, 2000 (the "Schedule TO") by JRC
Acquisition Corp., a Delaware corporation (the "Purchaser") and wholly-owned
subsidiary of L&LR, Inc. (the "Parent"), the Parent, Lewis I. Rothman and
LaVonda M. Rothman (collectively, the "Rothmans"), relating to the tender offer
by the Purchaser to purchase all of the outstanding shares of common stock, par
value $0.01 per share ("Common Stock"), of 800-JR CIGAR, Inc., a Delaware
corporation (the "Company"), not already owned by the Rothmans and the Lewis
Irving Rothman 1998 Trust #1, at $13.00 per share, net to the sellers in cash,
without interest, upon the terms and subject to the terms and conditions set
forth in the Offer to Purchase, dated August 29, 2000 (the "Offer to Purchase")
and in the related Letter of Transmittal (which, together with the Offer to
Purchase, as each may be amended or supplemented from time to time, collectively
constitute the "Offer").
ITEM 11. ADDITIONAL INFORMATION.
THE FIRST PARAGRAPH OF "SPECIAL FACTORS, SECTION 6--PURPOSE AND STRUCTURE
OF THE OFFER AND THE MERGER" OF THE OFFER TO PURCHASE IS HEREBY DELETED IN ITS
ENTIRETY AND REPLACED WITH THE FOLLOWING:
The purpose of the Offer, the Merger and the Merger Agreement is to
provide the public stockholders a fair price for their Shares and to enable the
Parent Stockholders to acquire control of, and the entire equity interest in,
the Company. Over the last few years, a variety of alternatives have been
considered by the Rothmans and other members of the Company's management to
increase stockholder value, while at the same time enhancing the operations,
results and business prospects of the Company. After consideration of various
alternatives, the limited public float of Shares and various other financial and
economic factors, the Parent Stockholders and the Company concluded that it is
unlikely that any meaningful improvement in the value of the Shares or liquidity
of the Company will occur in the foreseeable future.
The determination to proceed with the Offer and the Merger at this time
would afford the Company's stockholders an opportunity to dispose of their
shares at a premium over market prices. The Parent Stockholders do not believe
that the $17.00 price per Share paid in the initial public offering of the
shares in June 1997 is particularly relevant to a stockholder's decision as to
whether or not to tender its Shares. Rather the Parent Stockholders believe that
the Offer creates value for the unaffiliated stockholders of the Company, in
light of various factors that have affected the Company and the entire tobacco
industry since the first quarter of 1998, including the general pattern of
decline in the trading price of the Shares, mounting regulatory, legislative and
public opinion pressures on the entire tobacco industry, sharply reduced demand
for certain cigar products and a general increase in tobacco taxes.
The Parent Stockholders believe that causing the Company to be
privately held will reduce management's commitment of resources with respect
to procedural and compliance requirements of a public company and will reduce
costs associated with the Company's obligations and reporting requirements
under the securities laws. Company management does not believe that the debt
incurred by the Company in connection with the Offer would unduly restrict
its operations or strategic alternatives. The decision to proceed with the
Offer and the Merger was made, in part, due to the belief of the Parent
Stockholders that the deteriorating public attitude
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toward tobacco products, including cigars, as a consequence of this confluence
of factors did, and would continue to, place the Company's management under
pressure to focus on short-term operating results, quarterly reporting, meeting
analysts' estimates and addressing investors' perceptions of the Company's
business and prospects, rather than allowing the Company's management to apply
their energies to longer term strategies.
THE FOLLOWING SENTENCE IS HEREBY INSERTED IN THE SUMMARY TERM SHEET ON
PAGE V OF THE OFFER TO PURCHASE IMMEDIATELY FOLLOWING THE DISCUSSION OF THE
POSITION OF THE COMPANY'S BOARD OF DIRECTORS WITH RESPECT TO THE TENDER OFFER
AND THE MERGER:
Pursuant to the terms of the Merger Agreement, 800-JR CIGAR and its officers,
directors and representatives may not solicit, or participate in, negotiations
or discussions with any third parties with respect to a sale of more than 35% of
the outstanding shares of common stock of 800-JR CIGAR, unless the Special
Committee is required to do so in order to properly discharge its fiduciary
duties.
THE THIRD PARAGRAPH IN "SPECIAL FACTORS, SECTION 1--BACKGROUND OF THE
OFFER AND THE MERGER" IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING:
On April 7, 2000, representatives of the Company met with its financial
advisor, First Union Securities, Inc. ("FIRST UNION"), to discuss the following
three strategic alternatives to maximize stockholder value: (i) a continuation
of the Company's stock repurchase program, (ii) a potential sale of the Company
and (iii) a going private transaction. First Union and the Company determined
that although a continuation of the stock repurchase program would provide
limited liquidity to stockholders, it would not be a preferred course of action
because it would not provide stockholders with a premium stock price for their
Shares and its benefits would be restricted to a limited number of stockholders.
In addition, continuation of the stock repurchase program would be hindered
by the light trading volume in the Shares on the Nasdaq National Market.
With respect to a potential sale of the Company, the Company
authorized First Union to conduct a solicitation of third party interest to
determine the interest of potential buyers. First Union and the Company
determined that there were only a few logical strategic companies in the
world that had both the desire to own a tobacco-related company and the
ability to finance an acquisition of the Company. First Union and the
Rothmans, through existing relationships with the senior executives at each
company, made inquiries of each company about a potential acquisition of the
Company. Each of these potential acquirors was familiar with the Company
through longstanding business relationships. These inquiries resulted in a
series of meetings and telephone conversations between senior representatives
of the potential acquirors and representatives of the Company regarding a
sale of the Company. Each of the potential acquirors subsequently terminated
these discussions. Based on the results of these conversations and the lack
of additional parties with the interest in and the ability to acquire the
Company, First Union concluded that no strategic buyers would be interested
in acquiring the Company. First Union further concluded that no financial
buyers would be interested in acquiring the Company because of (i) investor
disfavor of the tobacco industry, (ii) the Company's limited growth
prospects, (iii) the inability to leverage the Company's operations and (iv)
the difficult business environment for tobacco product. The Company and First
Union believe that the difficult business environment for tobacco product is
part of a potentially long lasting pattern caused by (i) increasing legal and
regulatory action against tobacco companies, (ii) health concerns associated
with tobacco use, (iii) decreasing consumption of tobacco products in general
and (iv) the perception that the cigar trend has lost favor.
In light of the foregoing, First Union and the Company do not
believe that any alternative transactions are avaliable to the Company at the
present time. First Union and the Company believe that their view is
supported by the fact that since the public announcement of the Offer, no
prospective purchasers have contacted First Union or the Company regarding an
acquisition.
THE FOLLOWING SENTENCE IS HEREBY ADDED IMMEDIATELY FOLLOWING THE THIRD
SENTENCE OF THE FIFTH PARAGRAPH OF "SPECIAL FACTORS, SECTION 1 - - BACKGROUND OF
THE OFFER AND THE MERGER":
These transactions include (i) the sale of Havatampa, Inc. to Tabacalera
International SA in December 1997, (ii) Swisher International Group Inc.'s going
private transaction in June 1999, (iii) the sale of Consolidated Cigar Holdings,
Inc. to Seita (Fr.) in December 1998 and (iv) the sale of majority ownership of
General Cigar Holdings, Inc. to Swedish Match in January 2000.
THE SECOND SENTENCE OF THE SEVENTH PARAGRAPH ON PAGE 5 OF THE OFFER TO
PURCHASE IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING:
Merrill Lynch discussed with the Special Committee its discussions with First
Union and its financial analyses and based on those discussions, the Special
Committee concluded that a price of approximately $13.00 per Share
represented the highest obtainable price for the Company. After full
discussion with its advisors, the Special Committee authorized Merrill Lynch
to make a counteroffer of $14.00 per Share in an attempt to obtain a
counteroffer from the Purchaser representing a higher price for the Company.
THE FOLLOWING SENTENCE IS HEREBY ADDED AT THE END OF THE FOURTH BULLET
POINT UNDER THE HEADING "SPECIAL FACTORS, SECTION 2--RECOMMENDATION OF THE BOARD
OF DIRECTORS AND THE SPECIAL COMMITTEE OF THE COMPANY":
In addition, the premium that the purchase price represents to the average price
of the Shares over the 30 trading days prior to August 25, 2000 was relevant to
the Special Committee because the Special Committee and its advisors believed
that the 30-day average was a sufficient period of time to remove the effect of
any unusual trading activity and, consequently, accurately represented the fair
market value of the Shares.
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THE SEVENTH AND NINTH BULLET POINTS UNDER THE HEADING "SPECIAL FACTORS,
SECTION 2--RECOMMENDATION OF THE BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE OF
THE COMPANY" ARE HEREBY DELETED IN THEIR ENTIRETY AND REPLACED WITH THE
FOLLOWING:
o Ownership by the Parent Stockholders and the Other Rothman Trusts of
approximately 78% of the currently outstanding common stock of the
Company substantially decreases the availability of strategic
alternatives available to the Company's public stockholders absent a
decision by the Rothmans to sell their controlling stake in the
Company.
o Trends in the cigar industry, including the fact that the decline in
premium cigar demand coupled with the proliferation of lower margin
products have caused earnings growth to decline and, consequently, have
caused, and may continue to cause, the market price of the Company's
common stock to decline.
THE FOLLOWING SENTENCE IS HEREBY ADDED TO THE END OF THE SECOND TO LAST
PARAGRAPH OF "SPECIAL FACTORS, SECTION 2--RECOMMENDATION OF THE BOARD OF
DIRECTORS AND THE SPECIAL COMMITTEE OF THE COMPANY":
In addition, neither the Board of Directors nor the Special Committee
believed that an appraisal of the liquidation value of the Company would be
relevant to determining the fair value of the Company because, due to the
nature of the Company's business, such a valuation would be well below the
Company's going-concern value, which was considered by Merrill Lynch as part
of its financial analysis, and well below the purchase price.
THE FOLLOWING DISCLOSURE IS HEREBY ADDED TO THE END OF THE THIRD BULLET
POINT OF "SPECIAL FACTORS, SECTION 2 - RECOMMENDATION OF THE BOARD OF DIRECTORS
AND THE SPECIAL COMMITTEE OF THE COMPANY" ON PAGE 7 OF THE OFFER TO PURCHASE:
, all of which the Special Committee believed, based on its knowledge of
the operations of the Company as well as the presentations of Merrill Lynch,
supported its view that the Share price would not appreciate in the
foreseable future to $13.00 per Share or more in the absence of the Offer.
THE FINAL PARAGRAPH OF "SPECIAL FACTORS, SECTION 2--RECOMMENDATION Of THE
BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE OF THE COMPANY" ON PAGE 10 OF THE
OFFER TO PURCHASE IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING:
The foregoing discussion of the information and factors considered by the
Special Committee and the Board of Directors as a whole is not meant to be
exhaustive, but includes the material factors considered by them in reaching
their conclusions and recommendations. In view of the variety of factors
considered in their reaching a determination, the Board of Directors, including
the members of the Special Committee, did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching their conclusions and recommendations. The Board of
Directors and the Special Committee did not form an opinion as to whether any
individual factor, positive or negative, considered in isolation supported or
failed to support their conclusions and recommendations. In addition, each
member of the Board of Directors, including each member of the Special
Committee, may have given different weights to different factors. The Board of
Directors and the Special Committee viewed their positions and recommendations
as being based upon the totality of the information presented to and considered
by them.
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THE FOLLOWING SENTENCE IS HEREBY ADDED TO THE BEGINNING OF THE LAST
PARAGRAPH UNDER THE SUBHEADING SELECTED COMPARABLE PUBLICLY TRADED COMPANIES
ANALYSIS IN THE SECTION ENTITLED "SPECIAL FACTORS, SECTION 3 - FAIRNESS
OPINION OF MERRILL LYNCH":
The Companies in the Selected Comparable Transaction Analysis were
selected by Merrill Lynch because they derive their revenue from the same
source as, and in the same manner as, the Company.
THE SECOND AND THIRD SENTENCES OF THE SECOND PARAGRAPH UNDER THE
SUBHEADING SELECTED COMPARABLE PUBLICLY TRADING COMPANIES ANALYSIS IN THE
SECTION ENTITLED "SPECIAL FACTORS, SECTION 3--FAIRNESS OPINION OF MERRILL
LYNCH" ARE HEREBY DELETED IN THEIR ENTIRETY AND REPLACED WITH THE FOLLOWING:
This analysis resulted in the following relevant ranges for the Specialty
Retail Comparable Companies as of August 25, 2000: a range of stock price as
a multiple of estimated 2001 EPS of 5.7x to 9.3x with a mean of 8.0x (as
compared to the Offer at 11.5x, Holt Cigar Holdings, Inc. was excluded from
the analysis because no 2001 EPS estimate was available) and a range of
enterprise value as a multiple of the latest twelve months ("LTM") earnings
before interest, taxes, depreciation and amortization (otherwise known as
"EBITDA") of 3.2x to 6.1x with a mean of 5.0x (as compared to the Offer at
6.5x). This analysis resulted in the following relevant ranges for the Direct
Mail Retail Comparable Companies as of August 25, 2000: a range of stock
price as a multiple of 2001 EPS of 6.8x to 15.6x with a mean of 12.3x (as
compared to the Offer at 11.5x, Blair Corporation was excluded from the
analysis because no 2001 EPS estimate was available) and a range of enterprise
value as a multiple of LTM EBITDA analysis of 4.0x to 9.6x with a mean of
6.5x (as compared to the Offer at 6.5x, J. Jill Group, Inc. was excluded from
the analysis because J. Jill Group, Inc. experienced an unusual rise in costs
in the latest twelve month period which was not in line with the previous
years and caused the enterprise value as a multiple of LTM EBITDA to be an
outlier).
THE FIRST SENTENCE OF "SPECIAL FACTORS, SECTION 4--POSITION OF THE
PARENT STOCKHOLDERS REGARDING FAIRNESS OF THE OFFER AND THE MERGER" IS HEREBY
DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING:
The Parent Stockholders have considered the analyses and findings of the
Special Committee and the Board of Directors and believe that the consideration
to be received by the stockholders of the Company (other than the Parent, the
Purchaser, the Parent Stockholders and the Other Rothman Trusts) pursuant to the
Offer and the Merger is fair.
THE SECOND TO THE LAST PARAGRAPH OF "THE OFFER, SECTION
2--ACCEPTABLE FOR PAYMENT" IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED
WITH THE FOLLOWING:
If the Purchaser is delayed in its acceptance for payment of, or
payment for, Shares or is unable to accept for payment, or pay for, Shares
pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer (including such rights as are set forth in
Sections 1 and 14) (but subject to compliance with Rule 14e-1(c) under the
Exchange Act, which obligates the Company to promptly pay for or return
tendered Shares following the expiration of the Offer), the Depository may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to exercise, and duly exercise, withdrawal rights as described in
Section 4.
THE SECOND SENTENCE OF "THE OFFER, SECTION 12--CONDITIONS TO THE OFFER" IS
HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING:
In addition, the Offer is conditioned upon the following conditions being
satisfied or waived by 12:00 Midnight (New York City time) on the Expiration
Date:
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SIGNATURE
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
correct.
Dated: September 15, 2000
/s/ Lewis I. Rothman
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Name: Lewis I. Rothman
/s/ LaVonda M. Rothman
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Name: LaVonda M. Rothman
L&LR, Inc.
By: /s/ Lewis I. Rothman
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Name: Lewis I. Rothman
Title: President
JRC Acquisition Corp.
By: /s/ Lewis I. Rothman
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Name: Lewis I. Rothman
Title: President
After due inquiry and to the best of my knowledge and belief, I certify
that the information required by Schedule 13E-3 with respect to the subject
company that is set forth in this statement is true, complete and correct.
Date: September 15, 2000
800-JR CIGAR, Inc.
By: /s/ Lewis I. Rothman
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Name: Lewis I. Rothman
Title: Chief Executive Officer
Lewis Irving Rothman 1998 Trust #1
u/a/d November 10, 1998
By: /s/ Samuel Bornstein
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Name: Samuel Bornstein
Title: Trustee
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