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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
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COMMERCIAL INTERTECH CORP.
(NAME OF SUBJECT COMPANY)
COMMERCIAL INTERTECH CORP.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON SHARES, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
201709 10 2
(CUSIP NUMBER OF CLASS SECURITIES)
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GILBERT M. MANCHESTER
VICE PRESIDENT AND GENERAL COUNSEL
COMMERCIAL INTERTECH CORP.
1775 LOGAN AVENUE
YOUNGSTOWN, OH 44501
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
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STUART Z. KATZ, ESQ. HERBERT S. WANDER, ESQ. LEIGH B. TREVOR, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & KATTEN, MUCHIN & ZAVIS JONES, DAY, REAVIS & POGUE
JACOBSON 525 WEST MONROE STREET--SUITE 1600 NORTH POINT
ONE NEW YORK PLAZA CHICAGO, ILLINOIS 60661-3693 901 LAKESIDE AVENUE
NEW YORK, NEW YORK 10004 (312) 902-5200 CLEVELAND, OHIO 44114
(212) 859-8000 (216) 586-7247
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This Amendment No. 2 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 (as amended, the "Schedule 14D-9") filed with the
Securities and Exchange Commission (the "SEC") on July 12, 1996 by Commercial
Intertech Corp., an Ohio corporation (the "Company"), relating to the offer by
Opus Acquisition Corporation, a Delaware corporation ("OAC") and an indirect
wholly owned subsidiary of United Dominion Industries, Ltd., a Canadian
corporation ("United Dominion"), to purchase for cash all outstanding common
shares, par value $1.00 per share (the "Common Shares"), of the Company,
together with the associated preferred share purchase rights (the "Rights"
and, together with the Common Shares, the "Shares"). Capitalized terms used
but not defined herein have the meanings previously set forth in the Schedule
14D-9.
1. ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4(a) is hereby amended and supplemented by adding the following:
On July 15, 1996, United Dominion and OAC issued a press release announcing
that they had increased the price to be paid pursuant to the tender offer from
$27 to $30 per Share, net to the seller in cash, without interest (the
"Revised Offer"). On July 16, 1996, United Dominion and OAC filed with the SEC
a Revised Offer to Purchase (the "Offer to Purchase") and related Letter of
Transmittal relating to the Revised Offer.
On July 17, 1996, the Board of Directors of the Company met to review United
Dominion's unsolicited Revised Offer with its financial and legal advisors.
The Board of Directors unanimously concluded that the Revised Offer is
inadequate and not in the best interests of the Company, its shareholders,
employees, customers, suppliers, labor organizations, the communities in which
the Company does business and its other constituencies, and does not
adequately reflect the long-term value or prospects of the Company. At that
meeting, the Board of Directors unanimously reaffirmed the Company's prior
determination to proceed with a plan to spin off 100% of the stock of the
Company's Cuno Incorporated fluid filtration and purification subsidiary
("Cuno") to the Company's shareholders (the "Spin-Off"). The Board also
unanimously reaffirmed its program to repurchase up to 2,500,000 Shares in
open market and privately negotiated transactions (the "Repurchase Program").
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS REJECT THE
REVISED OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE REVISED OFFER.
A copy of a letter to shareholders communicating the Board's recommendation
and a form of press release announcing such recommendations are filed as
Exhibits 99.1 and 99.2 hereto, respectively, and are incorporated herein by
reference.
(b) Reasons for the Recommendation.
In reaching the conclusions referred to in Item 4(a), the Board of Directors
considered numerous factors, including but not limited to the following:
(i) the Board's familiarity with the business, financial condition,
prospects and current business strategy of the Company, the nature of the
businesses in which the Company operates and the Board's belief that the
Revised Offer does not reflect the long-term values inherent in the
Company;
(ii) the Company's financial performance in recent years, including its
record results for its 1995 fiscal year and three consecutive years of
improving operating results, including strong improvements in operating
performance and profitability by Cuno;
(iii) the Company's long-term strategic plan to build value for its
shareholders by growing its core businesses;
(iv) the Company's plan to proceed with the Spin-Off, in light of the
belief of the Board of Directors and management that:
--the Spin-Off should enhance the abilities of the managements of the
Company and Cuno to focus more closely on the objectives of their
respective businesses, enhance the two companies' ability
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to create incentives that align the interests of their management and
employees with the performance of their respective companies, and
permit Cuno to use its publicly traded stock as a currency for
expansion through acquisitions; and
--the Spin-Off should enable shareholders of the Company to benefit
in the near term from the value of a high-growth, high-multiple
business, which has not previously received appropriate market
recognition because of the Company's mix of industrial businesses,
which typically trade at lower multiples. The Board of Directors took
into consideration that there is some risk that the tax-free nature of
the Spin-Off could be impacted, with attendant adverse tax consequences
to the Company and certain of its shareholders, in the event of an
acquisition of the Company by certain third parties (including United
Dominion) following a spinoff;
(v) the Board of Directors' belief that the Repurchase Program will
provide investors who desire to obtain liquidity for their investment in
the Company with an opportunity to sell all or a portion of their
investment in the Company; these shareholders may be more likely to support
actions that would make it more difficult for the Company to resist an
inadequate bid, which in the view of the Board of Directors would not be in
the best interests of the Company, its shareholders and its other
constituencies; accordingly, the Repurchase Program may stabilize the
Company's base of long-term shareholders and may give long-term
shareholders who desire to participate in the benefits of the Spin-Off and
the future growth of the Company and Cuno a greater opportunity to do so;
the Board of Directors also considered the fact that the Repurchase Program
is expected to be accretive to the Company's earnings per Share;
(vi) the Board of Directors' belief, in light of the Company's strategic
plan and its plan to proceed with the Spin-Off, that this is not the
appropriate time to sell the Company;
(vii) the Board of Directors' belief that the interests of the Company,
its shareholders and other constituencies would best be served by the
Company continuing as an independent entity, proceeding with its plans to
effect the Spin-Off, and effecting the Repurchase Program;
(viii) the opinion of Goldman Sachs, the Company's financial advisor,
after reviewing with the Board of Directors many of the factors referred to
above and other financial criteria used in assessing an offer, that the
Revised Offer is inadequate; and
(ix) the disruptive effect consummation of the Revised Offer would have
on the Company's employees, suppliers, customers and the communities where
the Company operates.
2. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 is hereby amended and supplemented by adding the following:
(a) Rights Agreement.
On the earlier of (i) a public announcement that, without the prior approval
of the Company, an Acquiring Person has acquired or obtained the right to
acquire the beneficial ownership of securities having 20% or more of the
voting power of all outstanding voting securities of the Company or (ii) 10
days (unless such date is extended by the Board of Directors) following the
commencement of, or a public announcement of an intention to make, a tender
offer or exchange offer which would result in any person or group of related
persons becoming an Acquiring Person (the earlier of such dates, the
"Distribution Date"), the rights under the Company's Shareholders Rights
Agreement (the "Rights Agreement") become exercisable. At its July 17, 1996
meeting, the Board of Directors of the Company resolved to delay a
"Distribution Date" under the Rights Agreement pursuant to clause (ii) of the
preceding sentence until either (i) the close of business on August 7, 1996,
or (ii) such earlier date prior to the expiration date of the Revised Offer as
the Board of Directors, or any duly authorized committee thereof, by
subsequent resolution duly approved, shall designate.
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(b) Proposed Special Meeting.
On July 12, 1996, United Dominion and OAC filed proxy solicitation materials
with the SEC in connection with a proposed solicitation of appointments of
designated agents ("agent designations") to call a special meeting of the
Company's shareholders (the "Special Meeting") at which, according to the Offer
to Purchase, they will, among other things, propose that the holders of Shares
(i) adopt a resolution calling upon the persons currently constituting the
Company's Board of Directors to redeem the Rights prior to their removal as
directors, (ii) remove all of the incumbent directors of the Company, (iii)
amend the Code of Regulations of the Company (the "Regulations") to reduce the
authorized number of directors of the Company from twelve to three and to
provide that the Company's Board of Directors shall not be classified and that
the directors shall serve as a single class, (iv) elect the nominees of OAC as
directors of the Company to fill the vacancies created thereby, (v) amend the
Company's Amended Articles of Incorporation to repeal Article SIXTH thereof and
(vi) if the Control Share Condition (as defined below) shall not theretofore
have been satisfied, amend the Regulations to provide that Section 1701.831 of
the ORC (the "Ohio Control Share Acquisition Law") shall not apply to
acquisitions of Shares. At the Board of Directors' meeting on July 17, 1996,
the Board of Directors of the Company fixed the close of business on September
3, 1996 as the record date for determining shareholders entitled to execute
agent designations for the purpose of calling the Special Meeting. The Company
is not, as of the date hereof, soliciting in opposition to the proposed
solicitation of agent designations by United Dominion and OAC. However, the
Company anticipates that it will solicit revocations of such agent
designations.
(c) Control Share Acquisition Law.
According to the Offer to Purchase, consummation of the Revised Offer is
conditioned upon the acquisition of Common Shares pursuant to the Revised Offer
by OAC being authorized by the shareholders of the Company pursuant to the Ohio
Control Share Acquisition Law at a special meeting of shareholders of the
Company (the "Ohio Control Share Acquisition Meeting") duly and validly called
and held in accordance with the Ohio Control Share Acquisition Law, or OAC
being satisfied, in its sole discretion, that the Ohio Control Share
Acquisition Law is invalid or inapplicable to the acquisition of Common Shares
pursuant to the Revised Offer (the "Control Share Condition").
OAC and United Dominion delivered to the Company on July 12, 1996 an
acquiring person statement relating to the original $27 per Share Offer. OAC
and United Dominion have requested that the Ohio Control Share Acquisition
Meeting not be held for at least 30 days after the receipt of the acquiring
person statement by the Company. Accordingly, the Ohio Control Share
Acquisition Meeting must be held no earlier than August 11, 1996 and no later
than August 31, 1996. At the Board of Directors' meeting on July 17, 1996, the
Board of Directors of the Company fixed the close of business on August 7,
1996, as the record date for determining shareholders entitled to vote at the
Ohio Control Share Acquisition Meeting and fixed August 30, 1996, in
Youngstown, Ohio, as the date and place for such meeting.
The Company is not, as of the date hereof, soliciting proxies with respect to
the Ohio Control Share Acquisition Meeting. However, the Company anticipates
that it will solicit proxies against any control share acquisition by OAC or
United Dominion.
(d) Litigation.
On July 15, 1996, United Dominion and OAC filed a Verified First Amended
Complaint for Temporary Restraining Order and for Preliminary and Permanent
Injunctive Relief and Declaratory Judgment ("First Amended Complaint") in the
action previously filed by them in the United States District Court for the
Southern District of Ohio, Eastern District (the "Court"). In addition to the
claims asserted in their first complaint, the plaintiffs seek a declaration
that: (1) the directors of the Company violated their fiduciary duties by
determining to engage in the Repurchase Program, undertaking to effect the
Spin-Off, and refusing to negotiate with United Dominion and OAC; (2) the
Company's Schedule 14D-9 contains misleading statements in violation of Section
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14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act");
and (3) the Company's repurchase of Shares violated Section 13(e) and 14(e) of
the Exchange Act. The plaintiffs seek to enjoin preliminarily and permanently:
(1) the Company's directors from refusing to negotiate with United Dominion
and OAC; (2) the Repurchase Program; and (3) the Company from refusing to
amend its Schedule 14D-9 with respect to the Repurchase Program and the Spin-
Off.
Also on July 15, 1996, the court scheduled a hearing for July 29, 1996 with
respect to plaintiffs' motion to enjoin preliminarily the enforcement of
Section 1701.01(CC)(2) and 1701.831(E) of Ohio Control Share Acquisition Law,
and the parties are commencing discovery with respect to that issue only.
Defendants plan to file on July 18, 1996 an answer to the plaintiffs' First
Amended Complaint denying all substantive allegations and claims and raising
certain counterclaims against the plaintiffs. Among other things, the
counterclaims:
(a) identify certain disclosure violations in the plaintiffs' state and
federal filings associated with the plaintiffs' tender offer and request an
order requiring the plaintiffs to cure those violations; and
(b) request that, if plaintiffs obtain proxies representing more than 10%
of the voting power of the Common Shares, seeking, among other things, to
remove the current board of directors, the plaintiffs be declared
"interested shareholders" under Ohio's Merger Moratorium Act and thus be
prohibited by the Merger Moratorium Act from engaging in certain
transactions with the Company, including completing their announced back-
end merger of the Company with OAC for a minimum of three years and
thereafter, unless they comply with the requirements of the Merger
Moratorium Act.
3. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 is hereby amended and supplemented by adding the following exhibits:
Exhibit 99.1. Letter, dated July 18, 1996, sent by Paul J. Powers, the
Chairman and Chief Executive Officer of the Company, to shareholders of the
Company.*
Exhibit 99.2. Press Release, dated July 18, 1996, issued by the Company.
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*Included in copies mailed to shareholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ Gilbert M. Manchester
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Name: Gilbert M. Manchester
Title: Vice President and General
Counsel
Dated: July 18, 1996
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EXHIBIT INDEX
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EXHIBIT NO. EXHIBIT
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Exhibit 99.1 Letter, dated July 18, 1996, sent by Paul J. Powers, the
Chairman and Chief Executive Officer of the Company, to the
shareholders of the Company.
Exhibit 99.2 Press Release, dated July 18, 1996, issued by the Company.
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[LOGO OF COMMERCIAL INTERTECH APPEARS HERE]
July 18, 1996
Dear Fellow Shareholders:
After careful consideration, Commercial Intertech Corp.'s Board of Directors
has voted unanimously to recommend that shareholders reject as inadequate the
revised unsolicited $30 per share tender offer by United Dominion Industries,
Ltd. In reaching this decision, your Board again reaffirmed the Company's
strategic plan and resolved to proceed with the initiatives, announced on July
12, 1996, to spin off to shareholders 100% of the Company's Cuno Incorporated
fluid filtration and purification subsidiary and to repurchase up to 2.5
million of the Company's 15.5 million common shares currently outstanding.
The Board determined that United Dominion's revised unsolicited offer is
inadequate and not in the best interests of Commercial Intertech, its
shareholders and other important constituents, and does not adequately reflect
the long-term value or prospects of the Company. In making its determination,
the Board again reviewed the Company's long-term strategic plan to build value
for its shareholders by growing its core businesses and establishing a
separate public market for Cuno. In connection with its determination, the
Board considered the opinion of its financial advisor, Goldman, Sachs & Co.,
that the revised United Dominion offer is inadequate.
Your Board and management remain focused upon building on Commercial
Intertech's record of strong financial performance over the past three years.
Pursuing our strategic plan, together with the repurchase program, will
provide a balanced package of long-term and short-term value that responds to
shareholders with different investment objectives and more accurately reflects
the Company's underlying worth. We believe this course will best protect and
enhance value for our shareholders and serve the interests of all our
constituencies.
The Company's directors and officers do not intend to sell any shares in
connection with the repurchase program, nor to tender into the United Dominion
offer. WE STRONGLY RECOMMEND THAT SHAREHOLDERS NOT TENDER THEIR SHARES INTO
THE REVISED UNITED DOMINION TENDER OFFER.
The enclosed Amendment No. 2 to Schedule 14D-9 describes your Board's
decision to reject the revised United Dominion offer and contains other
important information relating to its decision. We urge you to read it
carefully.
Once again, your Board of Directors and I greatly appreciate your continued
support and encouragement.
Sincerely,
/s/ Paul J. Powers
Paul J. Powers
Chairman and Chief Executive Officer
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Contact:
Bruce C. Wheatley Ruth Pachman/Jim Fingeroth/Andrea
Commercial Intertech Bergofin
330-740-8580 Kekst and Company
212-593-2655
FOR IMMEDIATE RELEASE
COMMERCIAL INTERTECH BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS REJECT REVISED UNITED DOMINION TENDER OFFER;
-- SEES GREATER VALUE TO BE ACHIEVED BY PURSUING ONGOING STRATEGIC PLAN,
INCLUDING SPIN-OFF OF CUNO SUBSIDIARY --
Youngstown, Ohio: July 18, 1996--Commercial Intertech Corp. (NYSE: TEC)
announced today that its Board of Directors has voted unanimously to recommend
that shareholders reject United Dominion Industries, Ltd's revised $30 per
share tender offer as inadequate and not in the best interests of the Company
and its constituencies.
The Board concluded that Commercial Intertech's implementation of its long-
term strategic plan, which includes the spin-off to shareholders of 100% of
the Company's wholly-owned Cuno Incorporated filtration subsidiary and the
repurchase of a portion of the Company's shares, offers greater value to
shareholders than United Dominion's revised offer. The Board also reaffirmed
its conclusion that in light of the Company's future prospects, now is not the
time to sell the Company. Therefore, the Board strongly recommends that
shareholders not tender their shares to United Dominion.
In making its determination, the Board considered the Company's long-term
strategic plan to create shareholder value by growing its core businesses and
establishing a separate public market for Cuno, as well as the advice of its
financial advisor, Goldman, Sachs & Co.
Paul J. Powers, Chairman and Chief Executive Officer of Commercial
Intertech, said, "Clearly, the United Dominion offer does not fully reflect
the value inherent in this Company. The fact that United Dominion raised its
offer less than two business days after its tender announcement confirms that
our Board's view of the inadequacy of their bid has been correct. United
Dominion's recent assertions are nothing more than an attempt to obscure that
fact.
"Our long-term strategic plan, including the spin-off of Cuno, together with
the repurchase of shares, is designed to provide a balanced package of long-
and short-term value that responds to shareholders with different investment
objectives and more accurately reflects the Company's underlying worth. United
Dominion's rhetoric about sharing "synergistic opportunities' only camouflages
the fact that it is trying to acquire a fluid filtration business at a
hydraulics market multiple. The Cuno spin-off will prevent that exploitation,"
Mr. Powers continued.
"The Board believes that pursuing our strategic course, spinning off Cuno
and repurchasing shares will best deliver value to our shareholders and other
constituencies in the near and long term. We are very optimistic about
Commercial Intertech's continued strong financial performance, including Cuno,
as evidenced by the record results we achieved in fiscal 1995, and by the past
three years of improved performance," Mr. Powers said.
Mr. Powers also noted that statements made by United Dominion in announcing
its revised offer are misleading and mischaracterize Commercial Intertech's
strategic actions. Mr. Powers said, "In contrast to United Dominion's
assertions, Commercial Intertech had an established plan to separate Cuno from
Commercial Intertech. We have simply eliminated the initial public offering as
a preliminary step, in order to provide direct and immediate value to
Commercial Intertech's shareholders. As to any question regarding disclosure
in connection with our plans to repurchase shares, the only information that
was not available to shareholders was United Dominion's secret plan to raise
its price."
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Commercial Intertech said that its directors and officers do not intend to
tender into the revised United Dominion offer, nor to sell shares in
connection with the repurchase program.
Commercial Intertech said that its Board of Directors fixed August 30, 1996,
in Youngstown, Ohio, as the date and place for a meeting of shareholders of
the Company to vote on whether to authorize the acquisition by United Dominion
of Commercial Intertech common shares pursuant to the Ohio Control Share
Acquisition statute. The Board of Directors fixed the close of business on
August 7, 1996 as the record date for determining shareholders entitled to
vote at the control share meeting. In addition, the Board of Directors fixed
the close of business on September 3, 1996 as the record date for determining
shareholders entitled to execute appointments of designated agents for the
purpose of calling a special meeting of shareholders to consider any or all of
the proposals covered by the Solicitation Statement filed by United Dominion
with the Securities and Exchange Commission on July 12, 1996. The Board of
Directors also determined to postpone the date on which separate rights
certificates evidencing the rights under the Company's shareholder rights
agreement would be issued.
Commercial Intertech is a multi-national manufacturer of Hydraulic Systems,
Building Systems and Metal Products, and Fluid Purification. Employing more
than 4,000 men and women around the world, the Company has 35 manufacturing
facilities in 10 countries.
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