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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): July 1, 1999
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Commission File Number 000-23353
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Denali Incorporated
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(Exact Name of Registrant in its Charter)
Delaware 76-0454641
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1360 Post Oak Blvd., Suite 2250, Houston, Texas 77056
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(Address of Principal Executive Officers) (Zip Code)
713-627-0933
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(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 1, 1999, Denali Incorporated ("Denali") completed its tender offer
for the publicly held shares of Welna N.V. ("Welna"), a Dutch company listed on
the Official Market of the Amsterdam Stock Exchange. The tender offer commenced
in April 1999 pursuant to the terms of an Offer Document by and between Welna
and Denali. Denali purchased 99.5% of the outstanding stock of Welna for
approximately $40.7 million, or Euro 37 per share and assumed approximately
$14.3 million in debt, net of cash acquired, for a total purchase price of
approximately $55 million. The transaction was funded through an $11.1 million
borrowing under Denali's $35 million acquisition line of credit with Canadian
Imperial Bank of Commerce, ING (U.S.) Capital LLC, CIBC Inc., Key Corporate
Capital Inc., Bank of Oklahoma, N.A. and Southwest Bank of Texas, N.A., $15
million through a private placement of senior subordinated notes and warrants,
$4.5 million from a private placement of 489,190 shares of Denali common stock,
and approximately $11.7 million borrowed under a Dutch senior credit facility
with ABN AMRO Bank N.V. and ING Bank N.V. The warrants issued in conjunction
with the subordinated notes enable the holders to purchase up to 534,873 common
shares at $7.54 per share.
Welna currently operates through two major divisions. Welna Kunststoffen
designs, manufactures and installs all forms of FRP pipe systems, vessels and
other related equipment requiring high levels of corrosion resistance. Welna
Handel is a trading firm that specializes in high quality products and
engineered systems for power generation, water treatment and paper and chemical
processing industries. Welna markets its products through its subsidiaries in
the Netherlands, Germany, United Kingdom, Belgium, Sweden, France, Poland and
Thailand.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
As of the date of filing this Current Report on Form 8-K, the
financial statements required by this Item 7(a) are not available. In
accordance with Item 7(a)(4) of the Form 8-K, such financial
statements will be filed no later than September 14, 1999.
(b) Pro Forma Financial Information
As of the date of filing this Current Report on Form 8-K, the pro
forma financial information required by this Item 7(b) is not
available. In accordance with Item 7(b)(2) of Form 8-K, such financial
statements will be filed no later than September 14, 1999.
(c) Exhibits
10.59 Offer Document by Denali Incorporated to shareholders of Welna,
N.V.
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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 thereunto duly authorized.
DENALI INCORPORATED
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(Registrant)
Date: July 14, 1999 /s/ R. KEVIN ANDREWS
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R. Kevin Andrews
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
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<S> <C>
10.59 Offer Document by Denali Incorporated to shareholders of Welna, N.V.
</TABLE>
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EXHIBIT 10.59
RESTRICTIONS
General
The distribution of this Offer Document and the Offer may, in certain
jurisdictions, be restricted by law. Persons into whose possession this Document
comes are required to inform themselves of and observe all such restrictions.
Neither ING Barings, nor Denali, nor Welna accepts any liability for any
violation by any person of any such restriction.
United States of America
The Offer is not being made in the United States, or by use of the U.S. mails or
by any means or instrumentality of U.S. interstate or foreign commerce or any
facilities of any U.S. national securities exchange, and ING Barings does not
authorize the delivery of the Offer Document or any document(s) of title in
respect of the Offer to any address in the United States or to any person who is
unable to give such warranty as meant in the last sentence of the next
paragraph. Persons receiving the Offer Document must not distribute it in or
send or mail it to the United States or to any U.S. person or use any such means
or instrumentality in connection with the Offer made hereby, and so doing may
render invalid any relative purported acceptance.
Persons wishing to accept such Offer must not use the U.S. mails in, into or
from the United States or any other such means or instrumentality for any
purpose directly or indirectly related to the acceptance of such Offer.
Envelopes containing any forms of acceptance must not be post marked in the
United States or otherwise dispatched from the United States and all acceptors
must provide addresses outside the United States for the receipt of the Offer
Price. Presentation of Shares for the Offer Price constitutes a warranty that
the person making the presentation is not in the United States or a U.S. person
nor is such person acting on behalf or account of or for the benefit of any
person in the United States or a U.S. person.
Neither the US Securities and Exchange Commission nor any other securities
commission nor regulatory authority have confirmed the accuracy or determined
the adequacy of this Offer Document. Any representation to the contrary may be a
criminal offense.
The provisions in this paragraph supercede any terms of the Offer inconsistent
herewith.
As used herein, the United States means the United States of America, its
territories, and possessions, any state of the United States of America, and the
District of Columbia.
United Kingdom
The Offer Document may not be issued or passed on in the United Kingdom to any
person unless that person is of the kind described in article 11(3) of the
United Kingdom Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom this Offer Document may otherwise
be lawfully issued or passed on.
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Important information
The information contained in this Offer Document has been provided by Denali and
Welna. Welna bears sole responsibility for the accuracy and completeness of the
information which Welna has provided for inclusion in this Offer Document in
chapters 2.2C, 2.3 and 5, with the exception of the Auditors' Statement. Denali
bears sole responsibility for the accuracy and completeness of the information
provided by it in chapters 1.4, 2.2B and 4, with the exception of the Auditors'
Statement. Denali and Welna bear a joint responsibility for the accuracy and
completeness of the provided information in chapters 1.1, 1.2, 1.3, 1.5, 2.1 and
2.2A.
No party other than Denali, Welna or ING Barings is authorized to provide any
information or to make any statement relating to the Offer or the information
contained in this Offer Document. If such information is provided or such
statements are made, it may not be relied upon as if it were provided or issued
by or on behalf of Denali or Welna.
Shareholders are advised to study this Offer Document thoroughly and where
necessary seek independent advice in order to obtain a balanced impression of
the Offer.
The issue and distribution of this Offer Document in no way implies that the
information contained in this Offer Document will also be correct and complete
at any later date.
This Offer Document is governed by Netherlands law and is issued in both Dutch
and English languages. The English version alone is legally binding.
Copies of this Offer Document are available at:
ING Barings
Foppingadreef 7
1102 BD Amsterdam
The Netherlands
Ph: +31 20 563 8521
Amsterdam, 14th May 1999
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DEFINITIONS
<TABLE>
<S> <C>
ABN AMRO ABN AMRO Bank N.V.
Amsterdam Stock Exchange Amsterdam Exchanges N.V.
Articles of Association Articles of Association of Welna
Committee for Merger Affairs 'Commissie voor Fusieaangelegenheden' of the Social and Economic Council ('Sociaal-Economische
Raad')
Denali Denali Incorporated and its wholly owned subsidiary Denali Welna Europe B.V, a private limited
liability company according to Dutch law
EUR Euro
ING Barings ING Bank N.V. operating under the name of ING Barings
NLG Dutch guilders
Offer The offer by Denali for all the Shares
Offer Document The present offer document dated 14th May 1999, describing the Offer and the circumstances under
which the Offer will be declared unconditional
Offer Period The period during which Shareholders can accept the Offer, in accordance with the procedure for
acceptance as set out in section 3 of this Offer Document
Offer Price The cash amount of EUR 37.00 per Share which is offered to all Shareholders
SER Rules of Conduct Rules of Conduct as laid down in the SER-besluit Fusiegedragsregels 1975 (Resolution of the
Social and Economic Council on Rules relating to Mergers)
Share(s) One or more outstanding ordinary share(s) in the capital of Welna with a nominal value of NLG
1.00 per share
Shareholders Holders of one or more Share(s)
USD United States dollars
Welna Welna N.V.
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Restrictions .............................................................1
Important information ....................................................2
Definitions...............................................................3
1. The Offer.................................................................5
1.1 Terms and conditions of the Offer....................................5
1.2 Background and reasons for the Offer.................................5
1.3 The Offer Price......................................................6
1.4 Financing and Structuring the Offer..................................6
1.5 Future plans for the combined companies..............................6
1.5.1 Strategy.......................................................6
1.5.2 Board structure and organization...............................6
1.5.3 Legal structure................................................7
1.5.4 Social aspects.................................................7
2. Statements and Recommendations............................................8
2.1 Press releases.......................................................8
2.2 Statements required by the SER Rules of Conduct......................9
2.3 Recommendation of the Offer by the Supervisory and Executive
Boards of Welna.....................................................10
2.4 Fairness Opinion....................................................11
3. Invitation to Shareholders...............................................13
4. Information on Denali Incorporated.......................................14
5. Information on Welna.....................................................16
6. Advisers.................................................................21
</TABLE>
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1.THE OFFER
1.1 Terms and conditions of the Offer
On 18th March 1999, Denali and Welna jointly announced their intention to merge
by way of Denali making a public offer for all Shares. This intention has
resulted in an offer of EUR 37.- in cash per Share, subject to the conditions as
laid down in this Offer Document. This intention was confirmed by a joint press
release on 15th April 1999.
The Offer is subject to the following conditions:
(a) that the number of Shares that have been tendered for acceptance under the
Offer before the closing date of the Offer represents at least 70 percent
of the Shares that are outstanding at the closing date of the Offer Period;
(b) that the Committee for Merger Affairs does not issue, before the date upon
which the Offer is declared unconditional, any public reprimand relating to
the Offer in connection with any contravention of the Rules of Conduct set
forth in Sections I, II and III of the SER Rules of Conduct;
(c) that Welna, or any of its group companies, prior to the closing of the
Offer Period does not enter into any transaction involving the sale or
issue to third parties of any shares in its own share capital, and also
that no undertaking is given to do so; and furthermore that Welna has
neither bound itself in any way whatsoever to pay any dividend in the form
of share capital nor has made any payment of such dividend other than the
dividend that was declared on 28th April 1999;
(d) that the Works Council of Plasticon B.V. in Oldenzaal, the major subsidiary
of Welna, has not given a negative advice, in the sense of article 25 of
Works Council Act for the intended merger.
Denali reserves the right to declare the Offer unconditional even in the event
that one or more of the conditions mentioned above, with the exception of
condition (b), have not been met. The conditions can only be waived by Denali.
An Extraordinary General Meeting of Shareholders will be held on 4th June 1999.
The purpose of this Extraordinary General Meeting of Shareholders is to inform
the Shareholders about the Offer in accordance with Article 9 of the SER Rules
of Conduct. The meeting will be convened in the usual way, on a 15 days notice
prior to the meeting.
Denali did not have a direct or indirect interest in the outstanding share
capital of Welna at the time of the publication of this Offer Document.
1.2 Background and reasons for the Offer
The merger between Denali and Welna constitutes a strategic partnership from
which a joint strategy for profitable growth is envisaged. The merger will
create a business entity with a comprehensive product portfolio and a wide
distribution network covering all major markets around the world. The overall
company will be well positioned to pursue further growth opportunities, both
through internal growth and through acquisitions.
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The management of Denali and Welna believe that the combination of Denali and
Welna will create a comprehensive engineering, manufacturing and trading group
within the critical fluids handling industry. The combination will establish one
of the world's largest engineered fiberglass-reinforced plastics companies
specializing in products for process industries. Both companies' product range,
markets and technologies are highly complementary, providing the combined
business with an ability to offer industrial solutions that its customers
increasingly require.
1.3 The Offer Price
The Offer Price has been determined and agreed based on careful financial and
strategic analyses. Due consideration has been given to the strategic position
of both parties involved. In order to establish the Offer Price, Denali has
reviewed the historic and likely future development of the Welna's
profitability, cash flows and balance sheet. Consideration has also been given
to the historic market valuation of Welna and to relative stock market
valuations of comparable companies in related industrial manufacturing sectors,
including the market valuation of Denali Incorporated on the NASDAQ Stock
Exchange. The Offer price represents a premium of 23.3% or EUR 7.00 to Welna's
share price of 17th March 1999, the day before the announcement of the intention
of both companies to merge.
1.4 Financing and Structuring the Offer
Denali will finance the merger with Welna through a combination of bank debt and
private placement of subordinated debt and equity. Denali has secured the
required financing commitments with CIBC Oppenheimer, ABN AMRO and ING Barings.
In addition, Denali has secured commitments for the private placement of equity
and has secured bridge financing with CIBC Oppenheimer to support a subordinated
debt offering.
Denali Incorporated will purchase the Shares through its wholly owned subsidiary
Denali Welna Europe B.V., with the effect that Denali Welna Europe B.V. will be
the sole holder of all acquired Shares.
1.5 Future plans for the combined companies
1.5.1. Strategy
After the merger, the combination intends to pursue a growth strategy without
any large changes to the operational structure of both companies. The new
combination will seek to sell and distribute a comprehensive product range using
both Denali's and Welna's existing trademarks. It is envisaged that Welna shall
continue to operate autonomously and serve as the regional head office for the
combined group covering the European, Asian Pacific and African markets. Denali
and Welna will continue to invest in research and development combining
know-how, capital and human resources currently available in both companies.
1.5.2. Board structure and organization
After the successful completion of the Offer, Denali does not intend to change
the constitution of the Management Board of Welna. Denali and Welna intend and
shall use their best efforts to ensure that upon completion of the Offer,
Messrs. J.L. Drijver and C.P. Heijwegen shall resign from the Supervisory Board
of Welna. Denali intends and shall use its best efforts that upon completion of
the Offer, Mr. E. de Boer and Mr. R.K. Andrews will be appointed to the
Supervisory Board of Welna.
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Denali intends and shall use its best efforts to ensure that after completion of
the Offer, at all times two members of Welna's Management Board will have a seat
in the management team of Denali. The President of Welna's Management Board will
become Executive Vice President and the other member of Welna's Management Board
will become Vice President. Initially Mr. H.A. Kroes will be appointed as the
Executive Vice President and Mr. J.M.M.A. Siers will be appointed as the Vice
President.
Denali intends and shall use its best efforts to ensure that after the
completion of the Offer, at all times one member of Welna's Supervisory Board
will have a seat in the Board of Directors of Denali as non-executive director.
Initially Mr. B. Elfring will be appointed as the new non-executive director.
1.5.3. Legal structure
The combination intends to maintain Welna's existing legal structure of a large
company according to Dutch company law ('Structuurvennootschap'). The
combination reserves the right to propose, subject to the Shares having been
de-listed, to the General Shareholders Meeting to convert Welna into a private
limited company ('Besloten Vennootschap'), leaving the large company provisions
as they are.
1.5.4. Social aspects
The activities of both companies are to a large extent complementary. For these
reasons, Denali currently does not see any need to reduce the level of
employment at both companies as a result of the combination of Denali's and
Welna's business.
Denali and Welna will jointly address human resource issues, such as career
development, succession planning, pension schemes and other aspects of personnel
management. As stated above, it is Denali's intention to seek continuity in the
management of Welna.
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2.STATEMENTS AND RECOMMENDATIONS
2.1 Press releases
On 18th March 1999, Denali Incorporated and Welna jointly published a press
release of which an extract is presented below:
"Denali and Welna announce that they have entered into a letter of intent under
which both companies will merge. The transaction will create the world's largest
engineered fiberglass-reinforced plastics (FRP) company dedicated to provide
corrosion-resistant products and services to process industries, including
chemical processing, pulp and paper, microelectronics, power and others. Welna
also has a trading company that specializes in providing engineered systems for
power generation, water treatment, paper and chemical processing industries. The
company will have approximately USD 250 million in annual revenues and
manufacturing locations in the United States, The Netherlands, Germany, France,
United Kingdom, Poland, Venezuela, and Thailand. The Welna companies will
continue to operate autonomously.
Denali will make a public offer of EUR 37.00 per Share, as well as assume
approximately EUR 11.5 million in debt. The total transaction has an enterprise
value (market capitalization plus net debt) of approximately EUR 50 million or
USD 55 million.
According to Mr. E. de Boer, President and Chief Executive Officer of Denali:
'The combination of Denali and Welna creates a tremendous core of engineering
and manufacturing capabilities. The diversity and scope of our products,
markets, and technologies will allow Denali to provide more complete and
efficient solutions to our customers' needs, whether they are in North America,
Europe, Asia or South America. Between product and market synergies, technology
transfers, cross-selling opportunities, and our strategy for continued growth,
the next few years will be very exciting for our customers, our suppliers, our
shareholders and our employees.'
Mr. H.A. Kroes, Chief Executive Officer of Welna, commented: 'Denali and Welna
together create a promising opportunity for all stakeholders. The operating
characteristics and business philosophies of both companies are identical and
will create value in the future. Welna brings to the combination a strong
competitive position in the European market as well as good access to the
markets surrounding Europe, particularly through our subsidiaries in France and
the United Kingdom. Through its technology and market experience, Welna will
have a key role in the ongoing growth of the combined company and numerous
opportunities for Welna's personnel are present'."
On 15th April 1999, Denali Incorporated and Welna jointly published the
following press release:
"Following the press release on 18th March 1999, Denali Incorporated ('Denali')
and Welna N.V. ('Welna') announce that it is likely that a public offer will be
made for all outstanding ordinary shares of Welna by means of an offering
document, which will be made available on 14th May 1999. The shareholders of
Welna who accept this offer, will receive EUR 37.00 in cash per ordinary share
of Welna."
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2.2 Statements required by the SER Rules of Conduct
A. Denali and Welna jointly declare that:
(a) they have conferred with each other and this conferral has led to
agreement on the Offer;
(b) the personal disclosures mentioned in Article 8 of SER Rules of
Conduct have been or will be filed with the Committee for Merger
Affairs;
(c) after the Offer has been declared unconditional, two of a total of
three members of Welna's Supervisory Board intend to resign (please
refer to section 1.5.2 of this Offer Document). No payments other than
the regular compensation will be paid to the members of the
Supervisory Board;
(d) As part of this Offer, an arrangement is going to be made with the
holders of the Share options. This arrangement will not influence the
Offer Price. Denali will purchase the Shares acquired by the holders
of the options for the Offer Price or will compensate the holders of
the options for the difference between the Offer Price and exercise
price (please refer to chapter 5 of this Offer Document for more
information on the options mentioned above).
B. Denali further declares that:
(a) with due observance of and notwithstanding the restrictions stated in
section 1.1 of the Offer Document, the Offer extends to all Shares;
(b) at the time of the publication of this Offer Document, Denali did not
have a direct or indirect interest in the outstanding share capital of
Welna;
(c) no transactions have been entered into with natural persons and/or
corporate bodies as defined in Article 6, Paragraph 1 (p), (q) and (r)
of the SER Rules of Conduct;
(d) at the time of the publication of this Offer Document, no commitments
have been received by Denali from Shareholders that they will accept
the Offer.
C. Welna further declares that:
(a) the Committee for Merger Affairs, the trade unions involved and the
Amsterdam Stock Exchange have been informed about the Offer;
(b) confirmation of notifications relating to compliance with Sections II
and III of the SER Rules of Conduct has been received. The Committee
for Merger Affairs has assumed that the requirements of the SER Rules
of Conduct have been met or will be met correctly, unless data,
notifications or complaints will be made known to the Committee
possibly showing the contrary. Furthermore the Committee has indicated
that it has at all times the authority to ask for such information as
it deems necessary to judge any merger transaction sufficiently;
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(c) at the time of the publication of this Offer Document, no commitments
have been received by Welna from Shareholders that they will accept
the Offer.
2.3 Recommendation of the Offer by the Supervisory and Executive Boards of Welna
The Supervisory and Executive Boards of Welna, having given due consideration to
the strategic, financial and social aspects of the proposed transaction, have
concluded that the acquisition of Welna by Denali is in the interest of the
Shareholders and the other stakeholders of Welna. The Supervisory and Executive
Boards believe that the Offer Price is a fair reflection of the value of Welna
and therefore recommend the Shareholders to accept the Offer.
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2.4 Fairness Opinion
The Supervisory Board and Board of Management of Welna N.V.
P.O. Box 309
7570 AH OLDENZAAL
Amsterdam, 14th May 1999
Dear Sirs,
Referring to your request to ABN AMRO Bank N.V. in our role as your financial
advisor, to give an opinion regarding the reasonableness and fairness for the
holders of ordinary shares of Welna N.V. ('Welna') of the proposed offer of EUR
37.00 per share in cash by Denali Inc. ('Denali') to effectuate the merger of
Welna and Denali (the 'Merger'), we advise you as follows.
The Merger is to be consummated through, as described in the offer document
dated 14th May 1999, the obtainment by Denali of all issued ordinary shares with
a nominal value of NLG 1.00 each.
We have based our opinion on the reasons for the Merger and the subsequent
strategic and financial advantages for the companies involved and their
shareholders as expressed in the offer document dated 14th May 1999. Our opinion
is limited to a judgement of the proposed cash offer.
In connection with the opinion we have examined and considered the following
items:
(i) certain public information concerning Welna, including annual reports and
press releases;
(ii) information as provided by Welna, including:
- specific internal information, including financial information both on
a consolidated basis as well as per business unit, for the years 1996,
1997 and 1998 and projected financial information for the years 1999
and 2000;
- the verbal and written statements and explanations given by the
management regarding this information;
- discussions that we had with the management concerning past, present
and future developments as well as the financial situation.
(iii) financial information regarding the valuation of companies active in the
same sectors and markets as Welna and Denali;
(iv) the offer document dated 14th May 1999;
(v) other financial analyses and studies in so far as deemed relevant by us.
We have, in connection with this opinion, without independent verification,
trusted the correctness and completeness of all financial and other information
we have used to reach the opinion as mentioned in this letter. We therefore
assume no responsibility in this respect. We have not carried out an independent
inquiry regarding the valuation of the assets and liabilities. Our opinion does
not cover legal, fiscal and accounting related aspects of the Merger.
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Our opinion is based on the economic, monetary and market situation currently in
existence. Unexpected developments in this area can obviously change this
opinion and the basic assumptions on which it is based.
Allowing for the above and other relevant information, we are of the opinion
that the cash offer as proposed in the offer document dated 14th May 1999 is
reasonable and fair for the holders of ordinary shares in Welna and thereby does
justice to the interests of holders of ordinary shares in Welna.
This opinion was drawn up in the English language. A translation of this text is
available in Dutch. The English text of the opinion is the exclusively authentic
text, and as such prevails over the Dutch text.
Yours faithfully,
ABN AMRO Bank N.V.
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3.INVITATION TO SHAREHOLDERS
Referring to the statements contained in this Offer Document, Shareholders are
invited to submit their Shares for sale in the manner and under the conditions
given below:
(a) For each Share a payment of EUR 37.00 in cash is offered;
(b) Shareholders are requested to submit their Shares for exchange at ING
Bank N.V., Bijlmerdreef 888, in Amsterdam, through their bank or
stockbroker, no later than 15.00 hours (Netherlands time) on 21st June
1999;
(c) Institutions admitted to the Amsterdam Stock Exchange may only submit
Shares for cash in writing to ING Bank N.V. in Amsterdam. In submitting
the Shares, the admitted institutions declare that they have the
submitted Shares in their custody and the admitted institutions bind
themselves to surrender these Shares upon the Offer being declared
unconditional;
(d) For the terms and conditions under which this Offer will become
unconditional, reference is made to section 1.1 of this Offer Document;
(e) If the period for acceptance is extended with the result that the
obligation to declare whether or not the Offer is unconditional is
postponed, a public announcement to this effect will be made no later
than the third day of trading following the closing of the Offer
Period, with due observance of the provisions of article 7A, paragraph
3, of the SER Rules of Conduct. An acceptance is regarded irrevocable
unless otherwise provided by the SER Rules of Conduct. An advertisement
will be placed no later than five trading days after the closing of the
Offer Period in (at least) the 'Officiele Prijscourant' of the
Amsterdam Stock Exchange, stating whether the Offer is being declared
unconditional or not. In the event that the Offer is declared
unconditional, the sum of EUR 37,00 will be paid in cash within five
trading days for each Share that is transferred;
(f) Denali will pay institutions admitted to the Amsterdam Stock Exchange a
commission in accordance with Appendix II of the Rules of Seatholders
('Bijlage II van het Reglement Toegelaten Instellingen
AEX-Effectenbeurs') in relation to the exchange of Shares for cash,
with a maximum of EUR 15,000.-per depot. Any custody fees or withdrawal
costs payable will also be borne by Denali. The exchange of Shares for
cash will therefore be free of charge for Shareholders;
(g) The Offer is being made with due observance of such restrictions as
included in this Offer Document. Denali reserves the right to accept
any submission for cash made by or on behalf of Shareholders which does
not entirely meet the conditions laid down in this invitation.
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4. INFORMATION ON DENALI INCORPORATED
Denali Incorporated, based in Houston, Texas since 1994, is a leading critical
fluids handling products company that engineers and manufactures high-end,
corrosion resistant industrial process systems for the chemical processing,
petroleum equipment, pulp and paper, water/wastewater, and other industries.
Denali Incorporated manufactures fiberglass-reinforced plastic (FRP) piping
systems, process vessels, ducting and a variety of tanks as well as steel
aboveground storage tanks. Its operations are currently divided into two groups.
The first group, Containment Solutions, manufactures and markets products for
the petroleum equipment and water/wastewater industries. The second group,
Specialty Solutions, focuses on manufacturing and marketing high-end corrosion
resistant products for the pulp and paper, power, chemical, and water/wastewater
industries.
Denali Incorporated is the sole US based manufacturing company for the
engineered, fiberglass-reinforced plastics products specializing in the process
industries. It has twelve (12) manufacturing facilities in the USA, a joint
venture in Venezuela, and licensees in the United Kingdom, Spain, Canada,
Australia, and New Zealand. The merger with Welna marks the first major
expansion for the company outside the USA. It is part of the overall strategy of
Denali Incorporated to grow within existing markets, with new products, and into
new geographic markets. Denali Incorporated has over 1,150 employees.
FIVE-YEAR KEY FIGURES (USD Thousands)
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<CAPTION>
9 mths(2) 12 mths 12 mths 12 mths 6 mths(3)
Financial period(1) 98/Mar 99 97/98 96/97 95/96 94/95
--------- ------- ------ ------- --------
<S> <C> <C> <C> <C> <C>
Net sales 110,216 99,897 71,101 53,354 17,799
Gross profit 27,567 22,624 13,833 9,836 4,326
Selling, general & admin. expenses 20,571 17,843 11,874 9,604 3,771
Non-recurring compensation expense 682(7) 2,312(6) 0 0 0
Operating income 6,314 2,469 1,959 232 555
Operating margin(%) 5.7% 2.5% 2.8% 0.4% 3.1%
Profit (loss) before tax and
extraordinary items 4,312 1,462 610 (1,280) (44)
Net profit (loss) 2,396 329 317 (834) (43)
Shareholders' equity (deficit) 32,179 28,674 (541) (738) 216
Total long-term debt and notes
payable 40,160 29,896 24,024 18,661 13,810
Total assets 96,463 80,382 41,084 30,318 21,814
Earnings per share (USD)(4) 0.64 0.62 0.09 (0.44) (0.05)
Dividends per share (USD)(5) -- 0.01 0.05 0.05 0.03
</TABLE>
(1) The company operates on a 52/53 week fiscal year ending on the Saturday
closest to 30th June
(2) Reflects results for the nine month period ending 27th March 1999.
(3) Reflects results for the period 19th December 1994 (date of inception)
to 1st July 1995.
(4) Excluding non-recurring compensation expense and extraordinary items.
(5) Paid to preference shareholders only.
(6) Associated with the exchange of certain employee stock options in the
fiscal year 1998.
(7) The salary continuation agreement in the fiscal year 1999.
Source: Denali Incorporated
For a detailed business and financial description of Denali Incorporated
reference is made to the 1997/98 Annual Report of which copies can be obtained
from ING Barings.
14
<PAGE> 15
Independent Auditors' Statement
We have audited the consolidated balance sheets of Denali Incorporated and
subsidiaries (the 'Company') as of June 28, 1997 and June 27, 1998 and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years ended June 29, 1996, June 28, 1997 and June 27,
1998 and have issued our unqualified opinion dated July 31, 1998.
The five-year key figures on page 14 of this Offer Document for years ended July
1, 1995 through June 27, 1998 were derived from the audited financial statements
of the Company for each of the respective years and are consistent, in all
material respects, with the Annual Report (Form 10-K) for 1998, filed with the
Securities and Exchange Commission.
The key figures as of March 27, 1999 and for the nine months then ended were
derived from the unaudited financial information included in the Company's Form
10-Q for the nine months ended March 27, 1999 as filed with the Securities and
Exchange Commission. We make no opinion or representations to such key figures
included in this Offer Document. The key figures should be read in conjunction
with the consolidated financial statements of Denali Incorporated which are
available for review at the offices of ING Barings.
Ernst & Young LLP
Houston, Texas
May 12, 1999
15
<PAGE> 16
5.INFORMATION ON WELNA
For a detailed business and financial description of Welna reference is made to
the Annual Report. Copies can be obtained from Welna.
Profile Welna
Welna is a 122 year old company, with corporate seat in Enschede and
headquartered in Oldenzaal, Netherlands. Historically, Welna was a company
operating within the textile industry under the name of N.V. Spinnerij Tubantia
v/h Firma B.W. en H. ter Kuile. Forced by the restructuring of the textile
industry, Welna decided to alter its strategy in the 1950s. Welna responded to
the changing environment by diversifying its production. In particular due to
the acquisition of Plasticon, Welna positioned itself as an organization
specializing in plastics processing and ancillary services. Welna currently
operates through two major divisions. Welna Kunststoffen designs, manufactures
and installs all forms of FRP pipe systems, vessels and other related equipment
requiring high levels of corrosion resistance. Welna Handel is a trading firm
that specializes in high quality products and engineered systems for power
generation, water treatment and paper and chemical processing industries. Welna
markets its products through its subsidiaries in the Netherlands, Germany,
United Kingdom, Belgium, Sweden, France and Poland. Welna currently has 750
employees world wide of which 275 employees are located in the Netherlands.
Recent developments
The favorable market developments in Europe during the last couple of years are
showing signs of a slowing down. These developments have resulted in a slightly
lower sales level in 1999 to date than the projected level. Due to market
developments and anticipated order levels no statement can currently be given on
expected results of Welna for the first six months of 1999.
Capitalization
The authorized capital amounts to NLG 4.0 million, consisting of 2.0 million
Shares and 2.0 million preference shares, each with a nominal value of NLG 1.00
per share. As per 31st December 1998, 1,037,122 Shares were issued and fully
paid. The preference shares have not been issued. As per year end 1998, the
following option rights were held by management:
<TABLE>
<CAPTION>
Year Issued Number Exercise Price Expiry Date
NLG EUR
<S> <C> <C> <C> <C>
1996 20,000 47.54 21.57 13th December 2001
1997 20,550 64.80 29.40 21st December 2002
1998 20,742 54.38 24.68 31st December 2001
------
Total 61,292
</TABLE>
For the purpose of exercising the employee option plan, Welna bought 11,000
Shares in 1998 and 500 in 1999.
16
<PAGE> 17
Share price performance Welna (EUR per share)
<TABLE>
<CAPTION>
Year Highest Lowest Date Closing Remarks
<S> <C> <C> <C> <C>
1996 22.69 19.60 1/1/99 24.50
1997 38.34 22.10 17/3/99 30.00
1998 38.53 24.50 18/3/99 35.50 1st press release
15/4/99 36.25 2nd press release
</TABLE>
[SHARE PRICE WELNA (IN EURO) GRAPH]
Auditors' Statement
The annual figures 1998 and the comparative figures over 1997, as presented on
pages 18 to 20 of this Offer Document are in all material aspects consistent
with the annual report 1998 of Welna N.V., from which they have been derived. We
issued an unqualified auditors' report to the 1998 financial statements on 16th
March 1999.
Enschede, 10th May 1999
Deloitte & Touche
17
<PAGE> 18
CONSOLIDATED BALANCE SHEET OF WELNA
<TABLE>
<CAPTION>
1998 1997
EUR (x 1,000) NLG (x 1,000) NLG (x 1,000)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Fixed assets
Intangible fixed assets 41 90 89
Tangible fixed assets 17,595 38,774 29,370
Financial fixed assets 278 613 2,716
------- ------- -------
17,914 39,477 32,175
Current assets
Stocks 10,780 23,757 18,870
Receivables 16,601 36,583 29,597
Cash 1,912 4,213 3,808
------- ------- -------
29,293 64,553 52,275
------- -------- -------
Total Assets 47,207 104,030 84,450
======= ======== =======
LIABILITIES
Group equity
Shareholders' equity 14,355 31,634 35,355
Minority interests 455 1,004 650
------- ------- -------
14,810 32,638 36,005
Provisions 4,045 8,914 6,331
Long term liabilities 3,290 7,251 4,555
Current liabilities
Bank and repayment on loans 9,342 20,588 12,450
Other current liabilities 15,719 34,639 25,109
------- ------- -------
25,061 55,227 37,559
------- -------- -------
Total Liabilities 47,207 104,030 84,450
======= ======== =======
</TABLE>
18
<PAGE> 19
CONSOLIDATED PROFIT AND LOSS ACCOUNT OF WELNA
<TABLE>
<CAPTION>
1998 1997
EUR (x 1,000) NLG (x 1,000) NLG (x 1,000)
<S> <C> <C> <C> <C> <C> <C>
Net turnover 69,359 152,848 124,876
Cost of goods sold (33,591) (74,025) (66,875)
-------- ------- -------
Gross result 35,768 78,823 58,001
Labor costs (19,602) (43,197) (31,160)
Depreciation (1,817) (4,004) (3,135)
Other operating expenses (8,664) (19,092) (14,073)
-------- ------- -------
Total operating expenses (30,083) (66,293) (48,368)
-------- -------- -------
Operating result 5,685 12,530 9,633
Total financial result (626) (1,381) (254)
------- -------- -------
Result on ordinary activities
before tax 5,059 11,149 9,379
Taxation on result (1,589) (3,501) (2,950)
-------- -------- -------
Result on ordinary activities after tax 3,470 7,648 6,429
Results on participating
interests (135) (298) (120)
-------- -------- -------
Net profit 3,335 7,350 6,309
======== ======== =======
</TABLE>
19
<PAGE> 20
CONSOLIDATED CASH FLOW STATEMENT OF WELNA
<TABLE>
<CAPTION>
1998 1997
EUR (x 1,000) NLG (x 1,000) NLG (x 1,000)
<S> <C> <C> <C> <C> <C> <C>
Operating income 5,686 12,530 9,633
Depreciation 1,814 3,998 3,138
Change in provisions 1,172 2,583 (946)
Change in stocks (2,218) (4,887) (4,584)
Change in receivables (3,170) (6,986) (2,420)
Change in payables 201 442 2,308
Change in other liabilities 2,518 5,549 3,229
------ -------- -------
317 699 725
Cash flow from operating
activities 6,003 13,229 10,358
Received interest 425 936 727
Results on participating interests 16 35 708
Paid interest (1,067) (2,352) (1,689)
Paid taxes (789) (1,739) (1,107)
------ -------- -------
(1,416) (3,120) (1,361)
Cash flow from operating
expenses 4,587 10,109 8,997
Investments tangible fixed assets (3,222) (7,101) (5,076)
Divestments tangible fixed assets 188 415 261
Investments minority interest (7,073) (15,586) (9,081)
Divestments minority interests 70 154 0
------ -------- -------
Cash flow from investment
activities (10,037) (22,118) (13,896)
New loans & repayments 955 2,105 32
Buy/sell own shares (331) (729) 934
Issue new shares 8 18 1,050
Increase short term bank loans 3,693 8,138 4,181
Paid dividends (284) (625) (1,475)
------ -------- -------
Cash flow from finance
activities 4,042 8,907 4,722
Changes in exchange rate, consolidation
influences and other non cash changes 1,591 3,507 (2,911)
Change in cash 184 405 (3,088)
</TABLE>
20
<PAGE> 21
6.ADVISERS
DENALI
Financial advisers
ING Barings
Foppingadreef 7
P.O. Box 1800
1000 BV Amsterdam
Legal advisers
Van Gijzen Advocaten en Notarissen
Drentestraat 20
P.O. Box 7925
1008 AC Amsterdam
Auditors
Ernst & Young LLP
One Houston Center
1221 McKinney
Suite 2400
Houston, TX 77010-2007
WELNA
Financial advisers
ABN AMRO Bank
Foppingadreef 22
P.O. Box 283
1000 EA Amsterdam
Legal advisers
De Brauw Blackstone Westbroek
Tripolis 300
P.O. Box 75084
1070 AB Amsterdam
Auditors
Deloitte & Touche
P.O. Box 672
7500 AR Enschede
De Bussy -- Amsterdam -- 160290
21
