SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE l3D
Under the Securities Exchange Act of 1934
(Amendment No. 3 )*
JLK DIRECT DISTRIBUTION INC.
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(Name of Issuer)
Class A Common Stock, par value $.01
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(Title of Class of Securities)
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46621C105
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(CUSIP Number)
with a copy to:
Alexander J. Roepers Allen B. Levithan
Atlantic Investment Management, Inc. LOWENSTEIN SANDLER PC
750 Lexington Avenue 65 Livingston Avenue
New York, New York 10022 Roseland, New Jersey 07068
(212) 688-6644 (973) 597-2500
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(Name, Address and Telephone Number
of Person Authorized to Receive
Notices and Communications)
September 20, 1999
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(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule l3G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), (f) or (g), check the following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule l3d-7(b) for other
parties to whom copies are to be sent.
*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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CUSIP NO. 46621C105
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1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only):
Atlantic Investment Management, Inc.
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2) Check the Appropriate Box if a Member of a Group (See Instructions):
(a) (b)
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3) SEC Use Only
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4) Source of Funds (See Instructions):OO
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5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e):
Not Applicable
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6) Citizenship or Place of Organization: Delaware
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Number of 7) Sole Voting Power: 335,700*
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Shares Beneficially 8) Shared Voting Power: 0
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Owned by
Each Reporting 9) Sole Dispositive Power: 335,700*
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Person With: 10) Shared Dispositive Power: 0
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11) Aggregate Amount Beneficially Owned by Each Reporting Person:
335,700*
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12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions):
Not Applicable
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13) Percent of Class Represented by Amount in Row (11):
7.9%*
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14) Type of Reporting Person (See Instructions): IA
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* Includes: (i) 146,625 shares (3.4%) of the Issuer's Class A Common Stock, par
value $.01 per share ("Shares"), beneficially owned AJR International (BVI),
Inc., a British Virgin Islands company, (ii) 42,035 Shares (1.0%) beneficially
owned by Quest Capital Partners, L.P., a Delaware limited partnership, and (iii)
147,040 Shares (3.4%) held in two managed accounts ("Managed Accounts"). The
Reporting Person, serving as the investment advisor of the foregoing parties and
the Managed Accounts, has sole voting and dispositive power over all Shares
beneficially owned by such parties or held in the Managed Accounts. See Items 2
and 5 for additional details.
<PAGE>
Item 1. Security and Issuer
Atlantic Investment Management, Inc., a Delaware corporation (the
"Reporting Person"), hereby amends its statement on Schedule 13D filed with the
Securities and Exchange Commission on November 20, 1998, as amended, with
respect to the Class A Common Stock, par value $.01 per share (the "Shares"), of
JLK Direct Distribution Inc. (the "Issuer"). The Issuer has its principal
executive offices located at 1600 Technology Way, P.O. Box 231, Latrobe,
Pennsylvania 15650.
Item 2. Identity and Background
(a) This statement is filed by the Reporting Person, with respect to
335,700 Shares over which the Reporting Person has sole dispositive and voting
power by reason of serving as the investment advisor to (i) AJR International
(BVI) Inc., a British Virgin Islands company ("AJR"), (ii) Quest Capital
Partners, L.P., a Delaware limited partnership ("Quest") and (iii) the Managed
Accounts. Mr. Alexander J. Roepers serves as the president and sole shareholder
of the Reporting Person and the general partner of Quest.
(b) The business address of both the Reporting Person and Mr. Roepers
is 750 Lexington Avenue, 16th Floor, New York, New York 10022.
(c) The principal business of the Reporting Person is that of an
investment advisor engaging in the purchase and sale of securities for
investment with the objective of capital appreciation on behalf of AJR, Quest,
the Managed Accounts and two other equity funds, Cambrian Fund (BVI), Ltd. and
Cambrian Partners, L.P. The principal occupation of Mr. Roepers is serving as
the president and managing officer of the Reporting Person.
(d) Neither the Reporting Person nor Mr. Roepers has, during the past
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Neither the Reporting Person nor Mr. Roepers has, during the past
five years, been a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is now
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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.
(f) Mr. Roepers is a citizen of The Netherlands.
Item 3. Source and Amount of Funds or Other Consideration
The Shares purchased by the Reporting Person on behalf of AJR, Quest
and the Managed Accounts were purchased with the investment capital of such
entities. The aggregate amount of funds used in making the purchases reported on
this Amendment No. 3 to Schedule 13D was approximately $50,900.
Item 4. Purpose of Transaction
The Reporting Person acquired, on behalf of AJR, Quest and the Managed
Accounts, and continues to hold the Shares reported herein for investment
purposes. The Reporting Person intends to evaluate the performance of the Shares
as an investment in the ordinary course of business. The Reporting Person
pursues an investment objective that seeks capital appreciation. In pursuing
this investment objective, the Reporting Person analyzes the operations, capital
structure and markets of companies in which the Reporting Person's clients
invest, including the Issuer, on a continuous basis through analysis of
documentation and discussions with knowledgeable industry and market observers
and with representatives of such companies.
The Reporting Person will continuously assess the Issuer's business,
financial condition, results of operations and prospects, general economic
conditions, the securities markets in general and those for the Shares in
particular, other developments and other investment opportunities. Depending on
such assessments, the Reporting Person may acquire additional Shares or may
determine to sell or otherwise dispose of all or some of the Shares presently
held by AJR, Quest and the Managed Accounts in the open market or in private
transactions. Such actions will depend upon a variety of factors, including,
without limitation, current and anticipated future trading prices for the
<PAGE>
Shares, the financial condition, results of operations and prospects of the
Issuer, alternative investment opportunities, general economic, financial market
and industry conditions and other factors that the Reporting Person may deem
material to its investment decision.
In its capacity as a shareholder, the Reporting Person has in the past
and will continue in the future to have active discussions with the management
of both the Issuer and the Issuer's largest shareholder, Kennametal Inc.
("Kennametal"), with respect to (i) the strategic direction of the Issuer and
actions which might be taken by the management of either the Issuer or
Kennametal to maximize shareholder value of the Issuer and (ii) improving the
Issuer's investor relations. In addition, the Reporting Person may hold
discussions with other parties who might engage in shareholder value enhancing
activities for the benefit of all of the Issuer's shareholders. There can be no
assurance that the Reporting Person will take any of the actions described in
the previous sentence. The Reporting Person is also one of the largest
institutional shareholders of Kennametal.
The Reporting Person has no present plans or proposals which relate to
or would result in any of the transactions required to be described in Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) Based upon the information contained in the Issuer's Quarterly
Report on Form 10Q filed with the Securities and Exchange Commission on February
12, 1999, there were issued and outstanding 4,273,310 Shares as of February 1,
1999.
(b) The Reporting Person does not directly own any Shares. The
Reporting Person has entered into an investment advisory agreement with each of
AJR, Quest and the Managed Accounts, pursuant to which the Reporting Person has
investment authority with respect to the securities held by each entity or in
each account. This authority includes the power to dispose of and the power to
vote the Shares. By reason of the provisions of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended, the Reporting Person is deemed to be the
beneficial owner of the Shares held by such entities. Accordingly, the Reporting
Person is deemed the beneficial owner of 335,700 Shares or 7.9% of the
outstanding Shares.
(c) The following table details the transactions by the Reporting
Person, on behalf of AJR, Quest and the Managed Accounts, in the Shares during
the past 60 days:
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Date Quantity Price Type of Transaction
7/30/99 1,000 $9.75 Open Market Purchase
8/31/99 5,000 8.23 Open Market Purchase
Except for the transactions listed above, neither the Reporting Person,
nor any entity for which the Reporting Person serves as investment advisor, nor
any person or entity controlled by the Reporting Person, has traded Shares
during the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
Not Applicable
Item 7. Material to be filed as exhibits
Exhibit 1 - Letter from Atlantic Investment Management, Inc.
to Kennametal Inc. dated September 20, 1999.
<PAGE>
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.
September 20, 1999
ATLANTIC INVESTMENT MANAGEMENT, INC.
By: /s/ Alexander J. Roepers
Alexander J. Roepers, President
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT
CONSTITUTE FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001).
<PAGE>
Exhibit 1
ATLANTIC INVESTMENT MANAGEMENT
INCORPORATED
September 20, 1999
Markos I. Tambakeras
President and CEO
Kennametal Inc.
P.O. Box 231
Latrobe, PA 15650-0231
Dear Markos:
Pursuant to my letter of July 12th to you and our subsequent
discussions, I am writing you to reiterate our strong belief that Kennametal
("KMT") should acquire the Class A shares of its 82%-owned JLK Direct
Distribution ("JLK").
Taking JLK private is a non-operational issue with numerous benefits
for both firms and their respective shareholders, which should therefore be
implemented without delay.
With a float of only 4.27 million shares at $8.25, JLK's A shares have
a paltry $35 mln. market value. The shares are down almost 80% from their 1998
high of $39 and trading in the shares has dried up to a few thousand shares per
day. Analysts have lost interest in this stub equity and JLK's investor
relations effort has been virtually non-existent. We believe the main reason for
JLK to be public, i.e. to unlock underlying value embedded in KMT, is long gone.
In fact, JLK shares are now more of a drag on KMT's further shareholder value
enhancement.
As you know, we own over 7% of JLK's Class A shares and control about
3% of KMT's shares. As such, our investment in KMT shares is much larger than
our stake in JLK. Clearly, we will only support a transaction to resolve the JLK
Class A shareholder predicament, which would also be beneficial to KMT
shareholders.
Assuming a 50% premium over the current JLK share price, a cash deal
would be accretive to KMT's EPS by 6 cents. A stock-for-stock deal would be
close to neutral for KMT's EPS. In our calculations, we assumed a modest $500K
in SG&A savings (no more annual reports, SEC filings, board meetings, etc.) and
a 15-year goodwill amortization period.
Clearly, in addition to being a favorable deal for KMT shareholders,
JLK shareholders would be pleased to receive a substantial premium over the
recent trading range. In the stock-for-stock deal, JLK shareholders would get
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the liquidity that KMT shares (average daily trading volume of 200,000 shares)
offer vis-a-vis JLK Class A shares. KMT shareholders benefit further from the
increased market capitalization of KMT (as a result of the larger number of
shares outstanding) and the resulting increase in its trading volumes.
Furthermore, we believe this transaction would have a number of
important qualitative benefits to KMT management and shareholders, namely:
(i) JLK management can now fully focus on its operational duties
and objectives, without the distraction of dealing with
investors and analysts, producing annual reports, SEC filings,
etc.
(ii) KMT management will also face less distraction as JLK is again
100%-owned, resolving numerous actual or potential areas of
conflict in allocation of expenses, sales, references,
customers, etc.
(iii) The transaction removes one set of disgruntled shareholders,
while being a net positive to KMT shareholders.
It is clear to us that this proposed transaction is a win-win situation
for shareholders and management of both JLK and KMT. I strongly urge you, the
KMT and JLK Board of Directors to act promptly on this proposal.
We have filed this letter as an exhibit to our 13D amendment.
Sincerely,
/s/ Alexander J. Roepers
Alexander J. Roepers
President
