<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 1, 1999
RELTEC Corporation
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(Exact name of registrant as specified in its charter)
Delaware 001-13947 94-3227019
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
5900 Landerbrook Drive, Suite 300, Cleveland, Ohio 44124-4019
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(Address of principal executive offices) (Zip Code)
(440) 460-3600
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(Registrant's telephone number, including area code)
N/A
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(former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
On March 1, 1999, RELTEC Corporation ("RELTEC"), a Delaware
corporation, and The General Electric Company, p.l.c. ("GEC, p.l.c."), jointly
announced that GEC Incorporated ("Parent"), a Delaware corporation and a wholly
owned subsidiary of GEC, p.l.c., GEC Acquisition Corp., a Delaware corporation a
wholly owned subsidiary of Parent ("Acquisition Sub") and RELTEC entered into an
Agreement and Plan of Merger, dated as of March 1, 1999 (the "Merger
Agreement"), pursuant to which Acquisition Sub would acquire all of the
outstanding shares of common stock of RELTEC at a price of $29.50 per share in
cash. The total consideration for the acquisition of RELTEC is approximately
$2.1 billion, including assumed debt of approximately $361 million. Pursuant to
the terms of the Merger Agreement, it is currently anticipated that Acquisition
Sub will commence a tender offer (the "Offer") for all of the outstanding shares
of RELTEC's common stock and, following the completion of the Offer, upon the
terms and subject to the conditions set forth in the Merger Agreement, will
merge (the "Merger") with and into RELTEC, with RELTEC surviving the Merger and
becoming a wholly owned subsidiary of Parent. Certain stockholders of RELTEC,
owning approximately 81.2% of the outstanding shares, entered into an agreement
with Parent and Acquisition Sub pursuant to which they have agreed, among other
things, to tender their shares in the Offer and grant, in certain circumstances,
to Acquisition Sub an option to purchase their shares. Consummation of the Offer
is conditioned upon, among other things, the valid tender of a majority of
RELTEC's outstanding shares of common stock and the expiration of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) The following exhibit is filed with this Current Report on
Form 8-K:
99.1 Press Release dated March 1, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 4, 1999
RELTEC CORPORATION
By: /s/ Valerie Gentile Sachs
---------------------------------
Name: Valerie Gentile Sachs
Title: Vice President, General
Counsel & Secretary
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EXHIBIT INDEX
99.1 Press Release dated March 1, 1999.
<PAGE>
EXHIBIT 99.1
MONDAY MARCH 1, 9:23 AM EASTERN TIME
COMPANY PRESS RELEASE
THE GENERAL ELECTRIC COMPANY, P.L.C. AGREES TO ACQUIRE
RELTEC CORPORATION IN $2.1 BILLION CASH TRANSACTION
LONDON & CLEVELAND--(BUSINESS WIRE)--March 1,
1999--The General Electric Company, p.l.c. ("GEC") and RELTEC Corporation
("RELTEC") (NYSE: RLT) today announce the agreement for the acquisition of
RELTEC for total consideration of $2.1 billion (BP1.3 billion) including assumed
net debt of $361 million, at an agreed price of $29.50 per share in cash. This
represents a premium of 36% to the closing price on Friday, 26 February 1999.
GEC and RELTEC have entered into a definitive merger agreement under which an
affiliate of GEC will commence a cash tender offer for all of RELTEC's shares at
$29.50 per share. Simultaneously, affiliates of Kohlberg Kravis Roberts & Co.,
L.P. ("KKR"), the controlling shareholders, have entered into a stockholder
agreement whereby they have agreed to tender their approximately 81.5 per cent.
stake in RELTEC into the Offer and to exercise rights to require holders of an
additional 5.9 per cent. to tender their shares into the Offer.
RELTEC, with revenues in excess of $1 billion, is a leader in the design,
manufacture and sale of telecommunication network products, including in the
high growth market for Access products in the US. Access products offer
broadband solutions to telecommunication companies faced with network capacity
constraints, resulting from the dramatic growth in data, video and voice traffic
over the local loop - the "last mile" connection to residential and business
subscribers. RELTEC's key customers for Access products in the US market include
a number of premier telecommunication companies.
The acquisition brings GEC an established North American market base, technical
expertise and enhanced North American distribution. This will further GEC's
position as a leading player in the Transmission and Access segments of the
global communications equipment market.
Lord Simpson, Chief Executive of GEC, said:
"This acquisition provides access to the important North American market and to
RELTEC's blue chip customers. It also reinforces our position in the high growth
Transmission and Access segment of the communications equipment market. The
acquisition is a further step in GEC's transformation and confirms our
commitment to the development of MARCONI Communications. GEC will drive growth
from this strong new platform."
Dudley Sheffler, President and CEO of RELTEC, said:
"The combination of RELTEC and MARCONI Communications creates a new global
player in broadband communications systems by leveraging RELTEC's leading
position in the local loop
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with MARCONI's leading position in Transmission. With this broader range of
capabilities, together we can now provide our respective customers with
integrated solutions to accelerate their participation in the explosive
growth for high-speed data, voice and video services. Joining with MARCONI
Communications will provide exciting new opportunities for our world-wide
employees."
Henry R. Kravis and George R. Roberts, Founding Partners of KKR, added:
"In an industry where size and geographic reach are becoming increasingly
important, this transaction will create a formidable, global enterprise with
clear competitive advantages, an enhanced suite of products and services for
customers and significant value to both sets of shareholders."
RELTEC - A leader in network telecommunications products
RELTEC, based in Cleveland, Ohio, is a leader in the design, manufacture and
sale of a broad range of telecommunications products and services in the US and
internationally. RELTEC has approximately 6,600 employees world-wide of which
approximately 4,700 are based in the US.
RELTEC's Access business supplies next generation broadband Access products and
has strong positions in the high growth Access market, including Next Generation
Digital Loop Carriers (NGDLC) and in fiber-to-the-curb systems, facilitating
high speed internet access to the home and office.
RELTEC's Network Components and Services business is a leader in the supply and
servicing of outside plant and power systems used in fixed line and wireless
base stations by telecommunication companies.
RELTEC's key US customers include Ameritech, AT&T, Bell Atlantic, BellSouth,
GTE, Level 3, SBC Communications, Sprint, US West, and WorldCom MCI, in addition
to a wide range of other service providers, original equipment manufacturers and
distributors.
RELTEC reported sales of $1,067 million for 1998 ($887 million for 1997).
Operating income before interest and non-recurring items was $80 million for
1998 ($72 million for 1997). Operating income before interest expense, income
taxes, depreciation, goodwill, intangible amortisation and non-recurring items
was $140 million for 1998 ($126 million for 1997).
As at 31 December 1998, RELTEC had net assets of $490 million and net debt of
$361 million.
Strategic rationale for the acquisition
Rapidly growing consumer demand for voice, video and data services requires
telecommunication equipment suppliers to offer flexible and compatible network
solutions that can be easily upgraded.
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RELTEC's range of NGDLC products enable these voice, video and data services
to be deployed to the end customer via existing copper or new optical fibre
networks. As demand continues to grow, network operators are expected to
upgrade their Access networks. Furthermore, RELTEC's new OSIRIS SONET Access
multiplexers combine with their NGDLC products to increase substantially
network capacity to satisfy this growing demand.
With its comprehensive range of Access products and services, together with its
well-established US infrastructure, RELTEC represents a compelling acquisition
for the following reasons:
- -- Market access in the United States: RELTEC's strong customer relationships
with leading telecommunication companies and its North American presence will
provide MARCONI Communications with a competitive, established platform to
penetrate the large US market for Transmission and Access products.
- -- Complementary technology and products: Complementary technologies between
MARCONI Communications and RELTEC create the potential for a powerful product
portfolio which can be tailored to either the North American or international
markets. This substantially increases the size of the Transmission and Access
markets now addressable by MARCONI Communications.
- -- Established services operation and installed base: RELTEC's service
operation, supporting both RELTEC and competitive equipment, together with its
large installed base, enhances the opportunities for the merged business to
supply RELTEC's US customer base with new products from the combined group.
- -- Enhanced development capabilities: RELTEC offers a strengthened portfolio of
products which will be sold to MARCONI Communications' existing customers.
MARCONI Communications has skills which can be applied to expand the capacity of
RELTEC's OSIRIS product range, based on new product architectures such as those
used within MARCONI Communications' comprehensive range of SDH products.
- -- US management and experience: RELTEC's management and employees bring a depth
of experience in sales, marketing and operations in the North American
telecommunications market. GEC are pleased that the current management team has
committed to continue to lead the business.
Financial impact on GEC
It is expected that the acquisition will immediately enhance earnings per share
before goodwill and group cash flow return on investment. GEC intends to finance
the transaction from its existing cash resources and from drawings under group
bank facilities.
Further details of the transaction structure
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GEC Incorporated and RELTEC have entered into a definitive merger agreement
(the "Merger Agreement") under which a newly formed US subsidiary of GEC
("Acquisition Corp.") will commence a cash tender offer (the "Offer") for all
of RELTEC's shares at $29.50 per share.
Simultaneously, on entering into the Merger Agreement, affiliates of KKR
entered into a stockholder agreement and proxy (the "Stockholders
Agreement"), whereby they have agreed to tender their approximately 81.5 per
cent. stake in RELTEC to Acquisition Corp. and to exercise rights to require
holders of an additional 5.9 per cent. to tender their shares into the Offer.
Affiliates of KKR have also given GEC an option to acquire their shares,
exerciseable in certain limited circumstances, although this option is of no
effect so long as the shares owned by such affiliates are tendered into the
Offer. Following completion of the Offer, GEC intends to effect a merger
between Acquisition Corp. and RELTEC (the "Merger"). Upon completion of this
Merger, RELTEC will be a wholly owned subsidiary of GEC.
The Merger Agreement and the Stockholders Agreement were approved by the
Boards of Directors of all the parties to such agreements. The Merger
Agreement and the Stockholders Agreement are conditional upon, inter alia,
required regulatory approvals. Assuming regulatory approvals are received, it
is anticipated that the acquisition of RELTEC will be completed during April
1999.
Enquiries:
GEC RELTEC Alasdair Jeffrey Scott Fine Tel: +44 171 306 1330 Tel: +1 440 460
3728
Brunswick KKR James Bradley Ruth Pachman Tel: +44 171 306 1329 Josh Pekarsky
Tel: +1 212 521 4800 Credit Suisse First Boston Mark Seligman Ben Mingay Tel:
+44 171 888 8888
Credit Suisse First Boston, which is regulated in the UK by the Securities
and Futures Authority Limited, is acting for GEC and no-one else in
connection with this transaction and will not be responsible to anyone other
than GEC for providing the protections afforded to customers of Credit Suisse
First Boston nor for giving advice in relation to this transaction.
Notes to Editors
Supplementary information
1. GEC
GEC is a major high technology company, focused on defence electronics,
communications and technology applied to medical and commercial systems. In
January 1999, GEC announced an agreement in principle to separate and merge
its defence electronics business with British Aerospace. GEC has substantial
business interests in the US including commerce systems (Gilbarco), medical
information technology (Picker International) and automatic data capture
(Videojet) which together employ around 10,000 personnel in the US.
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The Group is headquartered in London and has a market capitalisation of
BP13.3 billion ($21.3 billion). For the year ended 31 March 1998, the Group
reported revenues of BP11.1 billion ($17.8 billion) and profits before
exceptional items of BP1.1 billion ($1.8 billion).
The General Electric Company, p.l.c. is not affiliated with the similarly
named company which is based in the United States.
2. RELTEC
RELTEC is a provider of a broad range of systems, products and services to
wireline and wireless service providers and telecommunications OEMs in
North America and around the globe. Most of RELTEC's systems, products and
services can be found in the Access portion of the telecommunications
network, also referred to as the "local loop".
The Company was formed in July 1995 by management and partnerships affiliated
with KKR to acquire Reliance Comm/Tec Corporation from the Reliance Electric
Company, a subsidiary of Rockwell International Corporation. RELTEC was
listed on the New York Stock Exchange in March 1998. In September 1998,
RELTEC acquired substantially all of the outstanding shares of Positron Fiber
Systems Corporation ("PFS") for $202 million. Based in Montreal, Quebec,
Canada, PFS is a manufacturer of an advanced line of multiplexer products and
provides network element management capabilities. In the year ended 31
December 1998, RELTEC reported revenues of $1,067 million, and net income of
$30 million (before non-recurring items and credits). RELTEC is organised
into two primary businesses, Access Systems and Network Components and
Services. Further information is set out below.
a) RELTEC: Summary financial record
<TABLE>
<CAPTION>
Years ended 31 December
1996 1997 1998 CAGR
(unaudited) (1996-1998)
($m) ($m) ($m)
<S> <C> <C> <C> <C>
Net sales
Access Systems 192.3 283.6 354.0 36%
Network Components
and Services 497.1 603.6 712.8 20%
689.4 887.2 1,066.8 24%
Gross profit 206.5 253.8 309.6 22%
Operating income (1) 61.3 72.4 80.2 14%
EBITDA (2) 103.9 126.1 139.8 16%
</TABLE>
Notes
1. Before interest expense, income taxes and non-recurring items.
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2. EBITDA represents earnings before interest expense, income taxes,
depreciation, goodwill, intangible amortisation and non-recurring items.
b) RELTEC: Sales and employees by geographic region
<TABLE>
<CAPTION>
1998 Sales Employees
($m) (%) (No.) (%)
<S> <C> <C> <C> <C>
North America 916.2 86 4,700 71
Latin America 23.8 2 733 11
Europe 118.1 11 994 15
Asia 8.7 1 190 3
1,066.8 100 6,617 100
</TABLE>
c) RELTEC: Key business locations and employees by
business
<TABLE>
<CAPTION>
Business Employees Principal business
headquarter
locations
(No.)
<S> <C> <C>
Access Systems 1,062 Dallas (Access)
Montreal
(Transmission)
Network 5,446 Cleveland (Power)
Components and Cleveland
Services (Services)
Chicago (Outside
Plant)
Corporate 109 Cleveland (HQ)
6,617
</TABLE>
d) RELTEC: Key product offerings
<TABLE>
<CAPTION>
Business Product offerings
<S> <C>
Access Systems NGDLC (next generation digital
loop carriers - which incorporate
fibre optic connections between
the host digital terminal and the
central office terminal), Fibre-in-
the-loop (multiplexers), xDSL
(digital subscriber lines enabling
broadband communications over
copper), SONET multiplexers
Outside Plant Enclosures, Protection,
for Connection,
communications Heat Management, Systems
equipment Integration
Telecoms Power Power Supplies, Power Systems,
Systems Monitoring equipment for telecoms
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infrastructure
Telecoms Engineering, Installation, Project
Services Management, Servicing
</TABLE>
e) RELTEC: Customers
Some of the company's customers are listed below:
Ameritech Motorola
AT&T (including Nokia
Teleport)
Bell Atlantic Northern Telecom
(including NYNEX)
Bell Canada Rogers Communications
BellSouth SBC Communications (including
Pacific Telesis)
Cisco Systems Siemens
Cox Communications Sprint
GTE Telia
Italtel Telesp
Level 3 Telmex
Lucent Technologies US West
McLeod WorldCom MCI
f) RELTEC: Senior management team
Dudley P. Sheffler (54) has been President and CEO of RELTEC and a director
since August 1995. He has served as President since 1981. Mr Sheffler was a
director of Reliance Electric Company from 1993 to 1995.
W. Michael Corkran (45) has been President, North America and
Asia/Pacific and has had responsibility for the worldwide coordination of
wireline activities since July 1997. Prior to that, he was Vice
President/General Manager, Reliable Electric Division of the company (outside
plant) and has held various management positions at Reliance Electric
Corporation since 1976.
Patrick L. Welker (52) has been President, Europe and Latin America and has
responsibility for worldwide coordination of wireless activities since July
1997. Prior to that, Mr Welker was Vice President/General Manager, Access
Systems of RELTEC since 1993. From 1991 to 1993, Mr Welker was the Vice
President and General Manager of the Engineered Systems Division of Reliance
Comm/Tec Corporation and from 1990 to 1991, he served as General manager of
Reliance Comm/Tec Canada.
Scott A. Fine (39) has been Vice President, Finance since December 1997. Mr
Fine joined RELTEC in 1996 as Vice President, Strategic Planning and Business
Development after having been in the Investment Banking Division at Goldman,
Sachs & Co. for the previous 11 years.
Valerie Gentile Sachs (43) has been Vice President, General Counsel and
Secretary since December 1997. Prior to that, Mrs Sachs worked for M.A. Hanna
Company for over nine years, where her last
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position was Senior Associate Counsel.
David G. Phelps (48) has been Vice President, Human Resources for RELTEC
since 1986. Prior to assuming his current position, Mr Phelps was Director,
Human Resources for Transmission Products at Reliance Comm/Tec.
3. Exchange rate
Dollar and Pound Sterling equivalents are based on an exchange rate (at
close of business on 26 February 1999) of $1.6020 per Pound Sterling, as
appropriate.
4. Basis of calculation of Offer value
Total gross consideration of $2.1 billion is based on an offer price of
$29.50 per share applied to 56.4 million shares in issue and 5.7 million shares
under option as at 19 February 1999 after deducting related option exercise
proceeds expected to amount to some $65 million. Total gross consideration also
includes net debt outstanding at 31 December 1998 of $361 million.
Note: BP = British Pounds
CONTACT:
GEC RELTEC
Alasdair Jeffrey Scott Fine
Tel: +44 171 306 1330 Tel: +1 440 460 3728
OR
Brunswick KKR
James Bradley Ruth Pachman
Tel: +44 171 306 1329 Josh Pekarsky
Tel: +1 212 521 4800
OR
Credit Suisse First Boston
Mark Seligman
Ben Mingay
Tel: +44 171 888 8888
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