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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
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Date of Report (Date of earliest event reported): May 31, 1999
WITCO CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 001-4654 13-187000
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
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One American Lane
Greenwich, Connecticut
06831-2559
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (203) 552-2000
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Witco Corporation, a Delaware corporation ("Witco"), Crompton & Knowles
Corporation, a Massachusetts corporation ("Crompton") and Park Merger Co., a
Delaware corporation and wholly owned subsidiary of Crompton ("Newco"), have
entered into an Agreement and Plan of Reorganization, dated as of May 31, 1999
(the "Merger Agreement"). The Merger Agreement provides for, among other
things: (a) the merger of Crompton with and into Newco (the "First Step
Merger"), to be immediately followed by (b) the merger of Witco with and into
Newco (the "Second Step Merger," and, with the First Step Merger, the
"Merger"). The name of the combined company will be "C & K Witco Corporation"
and its headquarters will remain in the State of Connecticut. Vincent A.
Calarco, Chairman, President and Chief Executive Officer of Crompton, will be
the President and Chief Executive Officer of the combined company. E. Gary
Cook, Chairman, President and Chief Executive Officer of Witco will be the
Chairman of the Board of the combined company. The board of directors of the
combined company will consist of seven directors appointed by Crompton and
seven directors appointed by Witco. The Merger is expected to be (a) accounted
for under the "purchase" method of accounting and (b) a "reorganization" under
the Internal Revenue Code of 1986, as amended.
At the effective time of the First Step Merger, (a) each share of common
stock, par value $.10 per share, of Crompton ("Crompton Common Stock")
outstanding immediately prior to the effective time of the First Step Merger
will be converted into one share of common stock, par value $.01 per share of
Newco ("Newco Common Stock"), and (b) all rights with respect to Crompton
Common Stock pursuant to stock options outstanding at such effective time,
whether or not then exercisable, shall be converted into and become rights
with respect to Newco Common Stock on otherwise similar terms. At the
effective time of the Second Step Merger, (a) each share of common stock, par
value $5.00 per share, of Witco ("Witco Common Stock") outstanding immediately
prior to the effective time of the Second Step Merger will be converted into
the right to receive 0.9242 shares (the "Exchange Ratio") of Newco Common
Stock and (b) all rights with respect to Witco Common Stock pursuant to stock
options outstanding at such effective time, whether or not then exercisable,
shall be converted into and shall become rights with respect to Newco Common
Stock on otherwise substantially similar terms, adjusted to reflect the
Exchange Ratio.
Consummation of the Merger is subject to a number of conditions, including
(a) the adoption of the Merger Agreement by the stockholders entitled to vote
thereon of each of Crompton and Witco, (b) receipt of all requisite
governmental approvals and (c) certain other customary conditions. Each of the
parties has also agreed to pay a fee of $30 million (the "Termination Fee") to
the other party in the event that the Merger Agreement is terminated under
certain circumstances relating to a competing transaction.
In connection with the Merger Agreement, Witco and Crompton have also
entered into cross stock option agreements, each dated May 31, 1999. Pursuant
to the Witco stock option agreement, Witco granted to Crompton an irrevocable
option to purchase, under circumstances in which the Termination Fee is
payable by Witco, up to 11,471,159 shares of Witco Common Stock at a price,
subject to certain adjustments, of $17.50 per share (the "Crompton Option").
Pursuant to the Crompton stock option agreement, Crompton granted to Witco an
irrevocable option to purchase, under circumstances in which the Termination
Fee is payable by Crompton up to 13,025,917 shares of Crompton Common Stock at
a price, subject to certain adjustments, of $18.375 per share (the "Witco
Option" and, with the Crompton Option, the "Options"). Each of the Options, if
exercised by the grantee thereof, is intended to provide the grantee, before
giving effect to the exercise of such Option, 19.9% of the total number of
shares then issued and outstanding and is subject to a profit limitation of
$30 million. Under certain circumstances, each of the parties may be required
to repurchase the applicable Option or the shares acquired pursuant to the
exercise of such Option.
A copy of the joint press release of June 1, 1999, regarding the Merger is
attached as Exhibit 99.1 hereto, and is hereby incorporated herein by
reference.
A copy of the presentation to investors, dated June 1, 1999, regarding the
Merger and given jointly by Crompton and Witco is attached as Exhibit 99.2
hereto and is hereby incorporated herein by reference.
The exhibits to this current report on Form 8-K contain forward looking
statements with respect to the financial conditions, results of operations and
businesses of each of Crompton and Witco and, assuming the consummation of the
Merger, a combined Crompton/Witco, including statements relating to: (a) the
cost savings and accretion to reported earnings that will be realized from the
Merger; (b) the impact on revenues of the Merger; and (c) the restructuring
charges expected to be incurred in connection with the Merger. These forward
looking statements involve certain risks and uncertainties. Factors that may
cause actual results to differ from those contemplated by such forward looking
statements include, among others, the following possibilities: (a) expected
cost savings from the Merger cannot be fully realized or realized within this
expected time-frame; (b) revenues following the Merger are lower than
expected; (c) competitive pressure among companies in the chemical products
industry increases significantly; (d) costs or difficulties related to the
integration of the businesses of Crompton and Witco are greater than expected;
(e) general economic conditions, either internationally or nationally or in
the states in which the combined company will be doing business, are less
favorable than expected; or (f) legislation or regulatory requirements or
changes adversely affect the business in which the combined company would be
engaged.
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Such forward-looking statements speak only as of the date on which such
statements were made, and Witco undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which any such statement is made to reflect the occurrence of unanticipated
events.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
- Not Applicable
(b) Pro forma financial information.
- Not Applicable
(c) Exhibits.
99.1 Joint press release, dated June 1, 1999, issued by Crompton &
Knowles Corporation and Witco Corporation.
99.2 Investor Presentation Materials, dated June 1, 1999, regarding
the Merger.
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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.
WITCO CORPORATION
(Registrant)
Date: June 4, 1999 By: /s/ Camillo DiFrancesco
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Name: Camillo DiFrancesco
Title: Senior Vice President &
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description of the Exhibit
99.1 Joint press release, dated June 1, 1999, issued by Crompton &
Knowles Corporation and Witco Corporation.
99.2 Investor Presentation Materials, dated June 1, 1999, regarding the
Merger.
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EXHIBIT 99.1
CROMPTON & KNOWLES WITCO
FOR IMMEDIATE RELEASE
CROMPTON & KNOWLES AND WITCO TO MERGE, CREATING $3.2
BILLION SPECIALTY CHEMICAL COMPANY
Merger of Equals Will Create C&K Witco
STAMFORD AND GREENWICH, CT -- JUNE 1, 1999 - Crompton & Knowles
Corporation (NYSE: CNK) and Witco Corporation (NYSE: WIT), two of the world's
leading producers of specialty chemicals, today announced that their boards of
directors have approved a definitive agreement for a tax-free, stock-for-stock
merger of equals.
The combined company, to be named C&K Witco Corporation, will be one of
the world's largest specialty chemical companies with a total capitalization
of approximately $3.9 billion. Headquartered in Connecticut, C&K Witco will
have approximately 10,000 employees and hold global market leadership
positions in additives, polymers and processing equipment, and specialty
chemicals.
Under the agreement each share of Crompton & Knowles common stock will be
converted into one share of C&K Witco and each share of Witco common stock
will be exchanged for 0.9242 shares of common stock of the new company. The
combined company will be owned (on a fully diluted basis) approximately 55% by
current shareholders of Crompton & Knowles and approximately 45% by current
shareholders of Witco. The combination will be treated as a purchase for
accounting purposes.
"This merger is about focused growth, fit and scale," said Vincent A.
Calarco, chairman, president and chief executive officer of Crompton &
Knowles. "Both our companies are committed to the principle that specialty
chemical companies succeed by being leaders in the business sectors in which
they compete. The unique fit of our two companies in a broad range of customer
and geographic markets will provide us with new opportunities for growth. At
the same time, in a consolidating industry, size increases our strategic
options and lowers our cost of capital."
"Strategically, we are going to be able to do more together than we ever
could have done apart," said E. Gary Cook, chairman, president and chief
executive officer of Witco. "Crompton & Knowles has proven its ability to
integrate acquisitions and provide solid returns to shareholders. Witco has
demonstrated the ability to enhance growth potential through innovative
solutions for our customers. Together, we will be not only more capital and
cost efficient, but
More...
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also more responsive to our customers' current and future needs. These
benefits should lead to better performance and more attractive returns for our
shareholders."
MERGER BENEFITS
"This merger is driven by its revenue growth potential, not merely its
cost reduction potential," Calarco added. "The breadth and strength of our
combined product platform will provide us with an excellent foundation for
future expansion, both internal and external, once our business operations
have been fully integrated."
C&K Witco's portfolio of businesses will have enhanced market
position. The Additives business will have almost $1.3 billion in sales,
including a broad range of products to improve performance of plastics,
rubber and lubricants. The Specialty Chemicals business, including crop
protection, silicones, and industrial surfactants, will have sales of
approximately $1.1 billion. The Polymers and Processing Equipment
business will have almost $816 million in sales, including EPDM,
urethanes and plastics processing equipment.
C&K Witco expects to capitalize on numerous opportunities for
revenue growth by offering more products to existing customers, by more
quickly bringing new technologies to the marketplace and by achieving
broader global reach.
C&K Witco anticipates net merger savings ramping up to approximately
$60 million per year by the second full year of combined operations.
These savings are expected to result from increased purchasing power, the
elimination of duplicative corporate and administrative programs and
greater efficiencies in operations and business processes. C&K Witco will
seek to minimize workforce effects of the merger through a combination of
programs, including reduced hiring and attrition.
As a result of the scale of the combined company, C&K Witco will
have the flexibility to pursue a much more comprehensive range of
strategic options.
MANAGEMENT AND BOARD
C&K Witco will be led by a management team with extensive experience in
the specialty chemicals business and a trick record of success. E. Gary Cook,
currently chairman, president and chief executive officer of Witco will serve
as chairman of the board of C&K Witco, and Vincent A. Calarco, currently
chairman, president and chief executive officer of Crompton & Knowles will
serve as president and CEO of C&K Witco. In integrating the two companies, C&K
Witco will adopt the best practices of each organization and management
selections will be made based on the best qualifications for the position. The
board of directors will consist of a total of 14 members, seven from each of
the Boards of Directors of Crompton & Knowles and Witco.
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DIVIDEND
It is anticipated that the C&K Witco Board will set a dividend consistent
with its peer companies in the specialty chemical industry, "C&K Witco will
strike an appropriate balance in our uses of cash," said Calarco. "Management
is convinced that paying down debt and investing for growth are effective
vehicles for increasing shareholder value."
APPROVALS AND TIMING
The merger is conditioned, among other things, upon the expiration or
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the approvals of both companies'
shareholders. The companies anticipate that the merger will be completed in
the third quarter of 1999.
Crompton & Knowles and Witco have entered into certain reciprocal option
agreements, each granting to the other company the right to acquire, under
certain circumstances, up to 19.9% of its outstanding common shares at a
pre-announcement closing price per common share. The options would become
exercisable by, and an additional fee would be paid to, either Crompton &
Knowles or Witco in connection with the termination of the merger agreement,
under certain circumstances.
Crompton & Knowles Corporation and Witco Corporation are both global
manufacturers of specialty chemicals providing high-value products for a wide
range of customers.
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This press release contains statements that are not historical facts and are
forward looking. Forward looking statements include, among others, statements
relating to anticipated product plans, profitability, cost savings, revenue
growth and strategic plans and goals. Such statements involve risks and
uncertainties that could cause the company's results to differ materially from
what is projected, including without limitation risks and uncertainties
relating to: higher raw material costs or other expenses, increased
competitive pricing pressure or other increases in competition, fluctuation in
demand for the company's products, currency fluctuations and the outcome of
pending or future litigation and claims including those related to
environmental laws and regulations. In addition, the company's forward looking
statements could be affected by general industry and market conditions and
growth rates, general domestic and international economic conditions. Further
information can be found in the companies' filings with the Securities and
Exchange Commission.
# # #
CONTACTS FOR CROMPTON & KNOWLES: CONTACTS FOR WITCO:
Robert Harwood MEDIA: Patricia McLean
(203) 353-5437 (203) 552-2273
Gene Donati INVESTORS: Robert Bennett
(Clark & Weinstock) (203) 552-2282
(212) 953-2550
EXHIBIT 99.2
[Crompton & Knowles Logo] Witco
June 1, 1999
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[Crompton & Knowles Logo] Witco
E. GARY COOK
Chairman, President &
Chief Executive Officer
Witco
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The Specialty Chemicals Model
Characteristics Benefiting
Customers & Shareholders
- -- Clear objectives & positioning
- -- Scale & global reach
- -- Market leadership
- -- Technology leadership & innovation
- -- Customer focus
[Crompton & Knowles Logo] Witco
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The Benefits of Scale
[bar graph showing Market Cap from less than 1.2 B and greater than 5B, and and
P/E Ratio between 0 and 20]
Source: CMR 5/10/99
-- Customer & supplier relationships
-- Market liquidity
-- Latitude in portfolio management
-- Lower cost of capital
-- Recruiting and retaining top talent
[Crompton & Knowles Logo] Witco
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C&K Witco Management & Board
Vincent A. Calarco President & Chief Executive Officer
E. Gary Cook Chairman, Board of Directors
14 Member 7 members from C&K
Board of Directors 7 members from Witco
[Crompton & Knowles Logo] Witco
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[Crompton & Knowles Logo] Witco
VINCENT A. CALARCO
Chairman, President &
Chief Executive Officer
Crompton & Knowles
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Transaction Overview
Enterprise Value $3.9 Billion
Structure Merger of Equals
Tax-free Exchange of Stock
Purchase Accounting
Share Exchange Ratio C&K 1 to 1
Witco 0.9242 to 1
Closing Target Third Quarter 1999
Ownership 55% by C&K Shareholders
45% by Witco Shareholders
[Crompton & Knowles Logo] Witco
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Merger Benefits
STOCK APPRECIATION POTENTIAL
- -- Enhanced top-line growth
- -- Immediately cash flow accretive
- -- Cost savings
- -- Strategic flexibility through scale
- -- Reinforces world-class technology
- -- Greater stock liquidity
[Crompton & Knowles Logo] Witco
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Process to Completion
Hart-Scott-Rodino
File and Mail Proxy
Shareholder Meetings & Vote
THIRD QUARTER CLOSING
[Crompton & Knowles Logo] Witco
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Crompton & Knowles
[Pie Chart]
Crop Protection 17%
Colors 14%
Polymers 19%
Polymer Processing Equipment 22%
Performance Chemicals 28%
1998 Sales
$1.58 Billion*
* Excludes: Ingredient Technology (sold 1/99)
Joint-Venture of Gustafson Seed Treatment
Joint-Venture of Paracril Nitrile Rubber
Leading Market Positions
EPDM #1 in N. America
Castable Urethanes #1 Worldwide
Rubber Chemicals #3 Worldwide
Seed Fungicides #1 Worldwide
Seed Treatment #1 in N. America
Miticides #1 Worldwide
Lubricant Additives #1 in Key Prod.
Plastic Additives #1 in Key Prod.
Polymerization Inhibitors #1 in Key Prod.
Poly Extrusion Systems #1 Worldwide
[Crompton & Knowles Logo] Witco
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Witco
[Pie Chart]
Performance Chemicals 42%
Organo-silicones 27%
Polymer Chemicals 31%
1998 Sales
$1.58 Billion*
*Excludes Oleochemicals and Derivatives
Leading Market Positions
Polymer Stabilizers #1 in N. America
Lubricants #1 in N. America
Aluminum Alkyl Catalysts #2 Worldwide
Silanes #1 Worldwide
Silicone Surf. & Catalysts #1 Worldwide
Refined Products #2 Worldwide
Agrigultural Surfactants #1 in N. America
Oilfield Emulsions #2 in N. America
Urethane Chemicals #1 in Key Prod.
Metal Working Sulfonates #1 Worldwide
[Crompton & Knowles Logo] Witco
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Introducing C & K Witco
-- A leading $3.2 billion global specialty
chemical company
-- Business groupings:
-- Additives
-- Specialty chemicals
-- Polymers & processing equipment
-- International sales - 44%
[Crompton & Knowles Logo] Witco
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C&K Witco Products
Witco C&K
[pie chart with showing breakdown of the following catergories
but no numerical information]
Polymers and Processing Equipment
Specialty Chemicals
Additives
[Crompton & Knowles Logo] Witco
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C&K / Witco
Overlapping End Use Markets
[pie chart showing breadown of the following
catergories but no numerical information]
Market Overlap = 84%
Rubber & Polymer Processing
Elastomers & Urethanes
Agriculture
Lubricants
Textiles
Other
[Crompton & Knowles Logo] Witco
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Expands International Presence
International Sales - $1.4 Billion
[pie chart showing the breadown of the following
catergories but no numerical information]
Europe
North America
Latin America
Asia
[Crompton & Knowles Logo] Witco
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Key Drivers for Top-Line Growth
-- Value-added products with leadership positions
-- Customer base overlap
-- Enhanced customer offerings
-- Leverage regional presence
[Crompton & Knowles Logo] Witco
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Customer First Culture
-- Small business values
-- Entrepreneurial approach
[Crompton & Knowles Logo] Witco
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Financial Goals
-- EPS growth - 10% per year
-- Credit rating - investment grade
-- Free cash flow $150-$200 million in addition to
divestiture proceeds
-- Debt reduction
-- Acquisitions
-- Share repurchase
-- Dividend consistent with peer group
[Crompton & Knowles Logo] Witco
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Cost Savings
Target: $60 Million
[Crompton & Knowles Logo] Witco
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Financial Impact
-- Additive to EPS in 2001
-- Assumes $1.60 in 1999, $1.75 in 2000
and $1.90 for 2001 for C&K stand alone
-- $60 million of pre-tax savings
-- Immediately accretive to cash flow per share
-- Single digit cash flow accretive in 1999
-- Double digit cash flow accretive in 2000
[Crompton & Knowles Logo] Witco
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Aggressive Asset Management
C&K
- -- Operating cash flow of $385 million
since 1996 Uniroyal merger
-- Reduced debt by $400 million or 38%
- -- Increased value of business
portfolio with joint ventures and
divestitures
- -- 25% compounded annual return to
shareholders over past 15 years
Witco
- -- Third and final year of restructuring
-- $678 million in capital improvements
-- 12 plants closed
-- Employment reduced by 1535
-- Working capital reduced by 25%
- -- Increased value of business portfolio
with joint ventures, swaps, and
divestitures
[Crompton & Knowles Logo] Witco
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December 31, 1998 Pro Forma
Balance Sheet Items
Combined
Total Debt $1.6 billion
Total Equity $1.1 billion
Total Debt/Total Market Cap 42%
Total Debt/EBITDA 3.1
EBITDA/Interest Expense 4.2
[Crompton & Knowles Logo] Witco
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Winning Combination
Creates
A Leading Global Specialty Chemical Company
With
Strong Global Market Positions in Key Markets
Led by
A Winning Management Team
[Crompton & Knowles Logo] Witco
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[Crompton & Knowles Logo] Witco
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[Crompton & Knowles Logo] Witco
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[Crompton & Knowles Logo] Witco
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CROMPTON & KNOWLES Witco
[Crompton & Knowles Logo] Witco
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CROMPTON & KNOWLES Witco
[Crompton & Knowles Logo] Witco
