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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
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Daniel Industries, Inc.
(Name of Subject Company)
Emerson Electric Co.
Emersub LXXIV, Inc.
(Bidders)
Common Stock, $1.25 Par Value
(Title of Class of Securities)
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236235-10-7
(CUSIP Number of Class of Securities)
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W. Wayne Withers, Esq.
Senior Vice President, General Counsel and Secretary
Emerson Electric Co.
8000 West Florissant Avenue
St. Louis, Missouri 63136-8506
(314) 553-2000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
-----------------------
With Copies to:
Phillip R. Mills, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
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<PAGE>
CUSIP
No. 236235-10-7
- ------- -----------
1. NAMES OF REPORTING PERSONS
IRS IDENTIFICATION NOS. ABOVE PERSONS (ENTITIES ONLY)
EMERSON ELECTRIC CO.
IRS IDENTIFICATION NO. 43-0259330
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- ------- ----------------------------------------------------------------------
3. SEC USE ONLY
- ------- ----------------------------------------------------------------------
4. SOURCE OF FUNDS
WC; OO; BK
- ------- ----------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(e) OR 2(f) [ ]
- ------- ----------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
MISSOURI
- ------- ----------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE
- ------- ----------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- ------- ----------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ------- ----------------------------------------------------------------------
1
<PAGE>
CUSIP
No. 236235-10-7
- ------- -----------
1. NAMES OF REPORTING PERSONS
IRS IDENTIFICATION NOS. ABOVE PERSONS (ENTITIES ONLY)
EMERSUB LXXIV, INC.
IRS IDENTIFICATION NO. 43-1850428
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- ------- ----------------------------------------------------------------------
3. SEC USE ONLY
- ------- ----------------------------------------------------------------------
4. SOURCE OF FUNDS
AF
- ------- ----------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(e) OR 2(f) [ ]
- ------- ----------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- ------- ----------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE
- ------- ----------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- ------- ----------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ------- ----------------------------------------------------------------------
2
<PAGE>
This Amendment No. 3 amends and supplements the Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") originally filed with the Securities and
Exchange Commission (the "Commission") on May 18, 1999 by Emersub LXXIV, Inc.,
a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Emerson
Electric Co., a Missouri Corporation ("Parent"), as amended by Amendment No. 1
filed with the Commission on May 24, 1999 and Amendment No. 2 filed with the
Commission on May 27, 1999, relating to the offer by Purchaser to purchase all
outstanding shares of Common Stock, $1.25 par value (the "Common Stock"), of
Daniel Industries, Inc. (the "Company"), including the related right as to
each share to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, $1.00 par value, of the Company (singularly, a
"Right" and collectively, the "Rights") (singularly, a share of such Common
Stock, including the related Right, a "Share" and collectively, the "Shares"),
at $21.25 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated as of May 18, 1999 and
in the related Letter of Transmittal (which together constitute the "Offer"),
copies of which are attached as Exhibits (a)(1) and (a)(2), respectively, to
the Schedule 14D-1.
All capitalized terms used in this Amendment No. 3 without definition
have the meanings attributed to them in the Schedule 14D-1.
Item 10. Additional Information
Item 10(c) is hereby amended and supplemented by adding to the end
thereof the following:
The 15-day waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the purchase of Shares
pursuant to the Offer expired on June 3, 1999. On June 4, 1999, Parent and the
Company issued a joint press release regarding such expiration. The full text
of the joint press release is attached hereto as Exhibit (a)(10) and is
incorporated herein by reference.
Antitrust -- Canada. The statutory waiting period under the Competition
Act (Canada) applicable to Purchaser's acquisition of the Shares pursuant to
the Offer expired on June 2, 1999. The Commissioner of Competition retains
jurisdiction to challenge such an acquisition for up to three years after its
consummation.
Item 10(e) is hereby amended and supplemented as follows:
On June 4, 1999, the parties to the litigation brought against the
Company, Purchaser and the members of the Company's board of directors
(collectively, "Defendants") by a Company stockholder purportedly on behalf of
all Company stockholders entered into a memorandum of understanding (the
"Memorandum of Understanding") setting forth the parties' agreement in
principle to the terms of a proposed settlement of that action. Under the
Memorandum of Understanding, Defendants agreed, in order to avoid the burden
and expense of further litigation and to put to rest all claims arising out of
or relating in any way to the Offer or the Merger and to permit the Offer to
proceed without risk of injunctive relief, that the Company will (i) mail to
the Company's stockholders an amendment to the Company's Schedule 14D-9 that
will contain certain supplemental disclosures and (ii) issue a press release
announcing that the parties to the action have reached a settlement in
principle, subject to the approval of the Court of Chancery of the State of
Delaware in and for New Castle County (the "Court"). The settlement
contemplated in the Memorandum of Understanding is subject to a number of
conditions, including the mailing of the amendment referred to in clause (i)
of the preceding sentence to the Company's stockholders on or before June 7,
1999; the consummation of the Offer; the completion by plaintiff of
appropriate discovery reasonably satisfactory to plaintiff's counsel; the
drafting and execution of definitive settlement documents; and final Court
approval of the settlement and dismissal of the action with prejudice and
without costs to any party except as provided below. If the Court approves the
settlement that is contemplated in the Memorandum of Understanding, Defendants
and certain other parties will be released from all claims that were or could
have been raised against them in the action (or that relate in any way to the
Merger, the Merger Agreement or the Offer) and the action will be dismissed
with prejudice as to plaintiff and a class consisting of all persons (other
than Defendants and their affiliates) who owned or have owned stock on or
after May 21, 1999
3
<PAGE>
through and including the closing of the Merger (the "Class"). The Company
will cause the dissemination of the notice of the settlement to members of the
Class in accordance with Delaware law and will pay all costs and expenses
incurred in providing such notice to the members of the Class. In connection
with the Court approval of the settlement contemplated in the Memorandum of
Understanding, plaintiff's counsel may apply to the Court for an award of fees
and expenses of up to an aggregate amount of $200,000 which, if awarded, will
be paid by the Company to the receiving agent for plaintiff's counsel.
Defendants and other releasees will not take any position regarding such
application for fees and expenses. This description of the terms of the
proposed settlement is qualified in its entirety by reference to the
Memorandum of Understanding, a copy of which is attached as Exhibit (g)(4) and
is incorporated herein by reference. On June 7, 1999, Parent and the Company
issued a joint press release regarding the proposed settlement. The full text
of the joint press release is attached hereto as Exhibit (a)(11) and is
incorporated herein by reference.
Item 11. Material to Be Filed as Exhibits
Item 11 is hereby amended and supplemented as follows:
(a)(10) Text of Joint Press Release issued by Emerson Electric Co. and
Daniel Industries, Inc. on June 4, 1999
(a)(11) Text of Joint Press Release issued by Emerson Electric Co. and
Daniel Industries, Inc. on June 7, 1999.
(g)(4) Memorandum of Understanding dated June 4, 1999
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After due 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.
June 7, 1999 EMERSON ELECTRIC CO.
By: /s/ Robert M. Cox, Jr.
------------------------------------
Name: Robert M. Cox, Jr.
Title: Senior Vice President -
Acquisitions and Development
EMERSUB LXXIV, INC.
By: Robert M. Cox, Jr.
-----------------------------------
Name: Robert M. Cox, Jr.
Title: Vice President
5
Exhibit No. EXHIBIT INDEX
- ----------- ---------------------------------------------------------------
(a)(10) Text of Joint Press Release issued by Emerson Electric Co. and
Daniel Industries, Inc. on June 4, 1999
(a)(11) Text of Joint Press Release issued by Emerson Electric Co. and
Daniel Industries, Inc. on June 7, 1999
(g)(4) Memorandum of Understanding dated June 4, 1999
6
EXHIBIT (a)(10)
Emerson contact:
William K. Anderson
or Carter L. Dunkin
314-982-1700
Daniel contact:
Sean P. O'Neill
713-827-3892
FOR IMMEDIATE RELEASE
EMERSON ELECTRIC CO. AND DANIEL INDUSTRIES, INC.
ANNOUNCE EXPIRATION OF HSR WAITING PERIOD
ST. LOUIS, June 4, 1999 -- Emerson Electric Co. (NYSE:EMR) and Daniel
Industries, Inc. (NYSE:DAN) announced today that the 15-day waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
applicable to the purchase of shares of common stock, par value $1.25 per
share, of Daniel Industries, Inc. by Emersub LXXIV, Inc., a wholly owned
subsidiary of Emerson Electric, pursuant to the tender offer commenced on May
18, 1999, expired on June 3, 1999.
As previously announced, the offer and withdrawal rights under Emersub's
tender offer will expire at 12:00 midnight, New York City time, on Tuesday,
June 15, 1999, unless the offer is extended.
Emerson Electric, based in St. Louis, is a global manufacturer with market
and technology leadership in the areas of process control, industrial
automation, electronics, HVAC, appliance components, electric motors, tools and
storage products. Fiscal 1998 sales totaled $13.4 billion.
Daniel Industries is an international leader in fluid measurement and flow
control products and services for the oil and gas industry. Daniel provides a
wide variety of flowmeters, valves, actuators, control systems and engineered
solutions, primarily for producers, transporters, refiners and processors of
oil and natural gas. The company reported revenues of $283.2 million in 1998.
EXHIBIT (a)(11)
Emerson contact:
William K. Anderson
or Carter L. Dunkin
314-982-1700
Daniel contact:
Sean P. O'Neill
713-827-3892
FOR IMMEDIATE RELEASE
EMERSON ELECTRIC CO. AND DANIEL INDUSTRIES, INC.
SETTLE PURPORTED CLASS ACTION LAWSUIT
BROUGHT BY A DANIEL STOCKHOLDER
ST. LOUIS, June 7, 1999 -- Emerson Electric Co. (NYSE:EMR) and Daniel
Industries, Inc. (NYSE:DAN) announced today an agreement in principle, subject
to court approval, to settle litigation filed by a Daniel stockholder with
respect to the transactions contemplated by the merger agreement providing for
the acquisition of Daniel by a wholly owned subsidiary of Emerson.
The lawsuit was purportedly filed on behalf of the stockholders of
Daniel.
A memorandum of understanding provides that Daniel will furnish certain
supplemental disclosures in an amendment to its Schedule 14D-9, which was filed
today with the Securities and Exchange Commission and which is being mailed
today to Daniel stockholders. The memorandum of understanding will also be filed
today with the SEC as an exhibit to both an amendment to Daniel's Schedule 14D-9
and an amendment to Emerson's Schedule 14D-1.
Pursuant to the merger agreement, Emerson's wholly owned subsidiary
commenced a tender offer on May 18, 1999, for all outstanding shares of common
stock of Daniel Industries, Inc. The offer and withdrawal rights under the
tender offer will expire at midnight, EDT, on Tuesday, June 15, 1999, unless
the offer is extended.
Emerson Electric, based in St. Louis, is a global manufacturer with
market and technology leadership in the areas of process control, industrial
automation,
1
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electronics, HVAC, appliance components, electric motors, tools and storage
products. Fiscal 1998 sales totaled $13.4 billion.
Daniel Industries is an international leader in fluid measurement and
flow control products and services for the oil and gas industry. Daniel
provides a wide variety of flowmeters, valves, actuators, control systems and
engineered solutions, primarily for producers, transporters, refiners and
processors of oil and natural gas. The company reported revenues of $283.2
million in 1998.
2
EXHIBIT (g)(4)
MEMORANDUM OF UNDERSTANDING
WHEREAS, there is now pending a putative class action lawsuit in the Court
of Chancery of the State of Delaware in and for New Castle County (the "Court")
entitled "Miller v. Daniel Industries, Inc., et al., C.A. No. 17175" (the
"Action"), brought on behalf of the stockholders of Daniel Industries, Inc.
("Daniel" or the "Company");
WHEREAS, the Class Action Complaint was filed in this Action on May 21,
1999 (hereinafter, the "Complaint");
WHEREAS, the Complaint challenges public disclosures concerning a merger
agreement among Daniel, non-party Emerson Electric Co. ("EEC") and Emersub
LXXIV, Inc. ("Emersub"). Pursuant to the agreement for the merger (the "Merger
Agreement"), Emersub has commenced a tender offer (the "Tender Offer") for any
and all shares of Daniel at $21.25 per share, which Tender Offer will be
followed by a cash out merger (the "Merger") at the same price. The Complaint
alleges, inter alia, that Daniel's Board of Directors (the "Individual
Defendants") breached their fiduciary duties to Daniel's stockholders by
failing to disclose all material information concerning the Tender Offer and
Merger, including inter alia, failing to provide information to enable the
shareholders to understand why Daniel's Board decided to sell the Company,
failing to disclose information concerning the range of values for the company
that were considered by Daniel's Board, not disclosing the assumptions that
were made in connection with certain projections of the future operating
performance of Daniel, and
<PAGE>
omitting information regarding the potential of alternative transactions and
the nature or amount of any competing bid for Daniel;
WHEREAS, on May 21, 1999, plaintiff moved to preliminarily enjoin the
Tender Offer and Merger, and the Court scheduled a preliminary injunction
hearing for June 11, 1999;
WHEREAS, plaintiff's counsel has reviewed documents made available on an
expedited basis by Daniel relating to the allegations made in the Complaint;
WHEREAS, plaintiff's counsel and defendants' counsel engaged in
arm's-length negotiations concerning a possible settlement of the action;
WHEREAS, Daniel and the Individual Defendants maintain that they were not
required to issue any supplemental disclosures and all defendants maintain that
they have committed no breaches of fiduciary duties or disclosure violations
whatsoever; and
WHEREAS, counsel for the parties have reached an agreement in principle
providing for the settlement of the Action between and among plaintiff, on
behalf of himself and the putative class of persons on behalf of whom plaintiff
has brought the Action, and defendants, on the terms and subject to the
conditions set forth below (the "Settlement");
NOW, THEREFORE, as a result of the foregoing and the negotiations among
counsel to the parties, the parties to the Action have agreed in principle as
follows:
2
<PAGE>
1. Daniel shall mail to all stockholders as soon as practicable an
amendment to its current Schedule 14D-9, which amendment shall contain the
supplemental disclosures attached hereto as Exhibit A.
2. Daniel will issue a press release as soon as reasonably practicable,
announcing that the parties to the Action have reached a settlement in
principle, subject to Court approval.
3. The mailing described in Paragraph 1 will be accompanied by a letter to
Daniel's stockholders stating that: (a) the mailing is being made prior to the
closing date of the Tender Offer, which is currently scheduled to close on June
15, 1999; (b) the mailing is being made pursuant to an agreement in principle
to settle the Action, and that the stockholders will receive a Notice of
Settlement in more detail at a future date; and (c) nominees are requested
promptly to forward copies of the letter and its enclosures to any beneficial
holders for whom they act as nominees.
4. Daniel and the Individual Defendants maintain that they were not
required to issue any supplemental disclosures and all defendants maintain that
they have committed no breaches of fiduciary duties or disclosure violations
whatsoever.
5. The parties to the Action will attempt in good faith to agree upon and
execute as promptly as practicable but, in no event more than 45 days, an
appropriate Stipulation of Settlement (the "Stipulation") of all claims
asserted in the Complaint filed in the Action and all other claims (as
described hereinafter), if
3
<PAGE>
any, arising out of or relating, in whole or in part, to the Tender Offer or
the Merger, and such other documentation as may be required in order to obtain
any and all necessary or appropriate Court approvals of the Settlement, upon
and consistent with the terms set forth in this Memorandum of Understanding,
including that for the consideration set forth above, the Stipulation shall
provide for the dismissal of all such claims with prejudice and without costs
to any party (except as set forth herein). The Stipulation will also expressly
provide, inter alia:
a. for class certification pursuant to Delaware Chancery Court Rule
23(b)(1) and (b)(2) of a non-opt out settlement class consisting of all
persons (other than defendants and their affiliates) who owned or have
owned stock of Daniel on or after May 21, 1999, and their successors in
interest and transferees, immediate and remote, through and including the
closing of the Merger (the "Class");
b. that all defendants have denied, and continue to deny, that they
have committed any violations of law, and that defendants are entering
into the Stipulation because the proposed Settlement would eliminate the
burden and expense of further litigation, would finally put to rest all
claims arising out of or relating in any way to the Tender Offer or the
Merger and would permit the Tender Offer to proceed without risk of
injunctive relief;
c. for the release of all claims of Class members, whether known,
unknown or unknowable, asserted or unasserted against defendants and
4
<PAGE>
any of their present or former officers, directors, employees, agents,
attorneys, accountants, financial advisors, commercial bank lenders,
investment bankers, representatives, affiliates, associates, parents,
subsidiaries, general and limited partners and partnerships, heirs,
executors, administrators, successors and assigns, whether under state,
federal, common or administrative law (including claims arising under the
federal securities laws), and whether directly, derivatively,
representatively or arising in any other capacity, and in connection with,
or that arise out of any claim that was or could have been brought in the
Action or that relates in any way to the Merger (whether or not such claim
could have been asserted in the Action), the negotiation, consideration or
formulation of the Merger and the Merger Agreement, or the Tender Offer,
the fiduciary obligations of any of the defendants or other persons to be
released in connection with the Tender Offer or Merger, or the disclosure
obligations of any of the defendants (or persons to be released) in
connection with the Tender Offer or Merger, or any other claim relating in
any way to any of the foregoing;
d. the parties to the Action will present the Settlement to the Court
for hearing and approval as soon as practicable and, following appropriate
notice to members of the Class, will use their best efforts to obtain
final Court approval of the Settlement, and the release and dismissal of
the Action with prejudice as against plaintiff and the Class,
5
<PAGE>
with no right to opt-out of the Settlement and without awarding costs to
any party (except as provided herein). It is expressly acknowledged that
the Tender Offer may be, and is expected to be, closed prior to final
Court approval of the Settlement. As used in this Memorandum of
Understanding, "final Court approval" of the Settlement means that the
Court has entered an Order approving the Settlement in accordance with the
Stipulation, and that Order is finally affirmed on appeal or is no longer
subject to appeal;
e. provided that the Stipulation has been executed and final Court
approval of the Settlement (including the Class release) and dismissal of
the Action by the Court with prejudice has been obtained in accordance
with the Stipulation, plaintiff's counsel of record in the Action may
apply to the Court for an award of attorneys' fees and reasonable
out-of-pocket disbursements. Subject to the terms and conditions of this
Memorandum of Understanding and the contemplated Stipulation, plaintiff's
counsel may apply for an award of fees and expenses the total amount of
which shall not exceed $200,000, to be paid by Daniel to Goodkind Labaton
Rudoff & Sucharow, L.L.P., as receiving agent for plaintiff's counsel,
within ten (10) days after the Court's award of attorneys fees and
expenses becomes final. Defendants and other releasees will not take any
position regarding such an application for fees and expenses; and
6
<PAGE>
f. Daniel shall cause the dissemination of notice of the Settlement
to members of the Class in accordance with Delaware law and shall pay all
costs and expenses incurred in providing such notice to the members of the
Class.
6. The consummation of the Settlement is subject to: (a) the mailing of
materials to stockholders of record as described in Paragraph 1 on or before
June 7, 1999; (b) the consummation of the Tender Offer; (c) the completion by
plaintiff of appropriate discovery in the Action reasonably satisfactory to
plaintiff's counsel; (d) the drafting and execution of the Stipulation and
other agreements necessary to effectuate the terms of the proposed Settlement;
and (e) final Court approval (as defined above) of the Settlement and dismissal
of the Action with prejudice and without awarding costs to any party except as
provided herein. Any of the defendants shall have the right to withdraw from
the proposed Settlement in the event that any claims arising out of or
relating, in whole or in part, to the Tender Offer or the Merger (whether
direct, derivative or otherwise) are commenced against any person in any court
prior to final Court approval of the Settlement, and such claims are not
dismissed or stayed in contemplation of dismissal. Plaintiff shall have the
right to withdraw from the proposed Settlement in the event that plaintiff's
counsel in the Action determine subsequent to the execution of this Memorandum
of Understanding but prior to the execution of the Stipulation that the
Settlement is not fair and reasonable. This Memorandum of Understanding shall
be null and void and of no force and effect in the event of any
7
<PAGE>
such withdrawal by any party or if, for any other reason, the Settlement is not
consummated. In such event, this Memorandum of Understanding shall not be
deemed to prejudice in any way the respective positions of the parties with
respect to the Action, and neither the existence of this Memorandum of
Understanding nor its contents shall be admissible in evidence or shall be
referred to for any purpose in the Action or in any other litigation or
proceeding.
7. The parties to the Action agree that except as expressly provided
herein, the Action shall be stayed pending submission of the proposed
Settlement to the Court for its consideration. Plaintiff's counsel agrees that
the defendants' time to answer or otherwise respond to the Complaint in the
Action is extended without date. Counsel shall enter into such documentation as
shall be required to effectuate the foregoing agreements.
8. This Memorandum of Understanding may be executed in counterparts by any
of the signatories hereto, including by telecopier, and as so executed shall
constitute one agreement.
9. This Memorandum of Understanding and the Stipulation contemplated by it
shall be governed by, and construed in accordance with, the laws of the State
of Delaware, without regard to Delaware's conflict of law rules.
10. This Memorandum of Understanding may be modified or amended only by a
writing signed by the signatories hereto.
11. This Memorandum of Understanding shall be binding upon and inure to
the benefit of the parties and their respective agents, executors, heirs,
8
<PAGE>
successors and assigns. Plaintiff and his counsel represent and warrant that
none of the claims or causes of action asserted in the Action have been
assigned, encumbered or in any manner transferred, in whole or in part.
Dated: June 4, 1999
Of Counsel: ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
Jonathan M. Plasse
GOODKIND LABATON RUDOFF
& SUCHAROW, L.L.P.
100 Park Avenue /s/ Norman M. Monhait
New York, NY 10017 ---------------------------------------
(212) 907-0700 Norman M. Monhait
Mellon Bank Center, Suite 1401
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
Of Counsel: MORRIS, NICHOLS, ARSHT &
TUNNEL
Gerard G. Pecht
FULBRIGHT & JAWORSKI, L.L.P.
1301 McKinney, Suite 5100
Houston, TX 77010-3095 /s/ A. Gilchrist Sparks, III
(713) 651-5151 ---------------------------------------
A. Gilchrist Sparks, III
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302) 658-9200
Attorneys for Defendants Daniel
Industries, Inc., Ronald C. Lassiter,
Thomas J. Keefe, Michael M.
Carroll, W.A. Griffin, Brian E.
O'Neill, Ralph F. Cox, Leo E.
Linbeck, Jr., Nathan M. Avery and
Gibson Gayle, Jr.
9
<PAGE>
Of Counsel: RICHARDS, LAYTON & FINGER
Arthur F. Golden
Frances E. Bivens
DAVIS POLK & WARDWELL /s/ Allen M. Terrell, Jr.
450 Lexington Avenue ---------------------------------------
New York, NY 10017 Allen M. Terrell, Jr.
(212) 450-4000 Russell C. Silberglied
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Defendant Emersub
LXXIV, Inc.
10
<PAGE>
Exhibit A
Background of the Transaction
On March 4, 1999, the Company received an unsolicited written proposal for
a business combination with another company in which the Company's stockholders
would receive cash and stock of the other company aggregating $15 per share of
Common Stock. On the same date, the Company retained Simmons & Company
International ("Simmons"), as the Company's financial advisor, to assist the
Company in its consideration of the business combination proposal.
On March 16, 1999, the Board of Directors of the Company met to consider
the business combination proposal. At that meeting the Board discussed the
proposal with Simmons and the Company's management and legal advisors. The
Board, with the assistance of its advisors, also considered the Company's
business, historical and projected future performance, historical trading
prices for the Company's stock, market conditions, competition, possible
alternative transactions (including a sale of the Company) for maximizing value
for the Company's stockholders, the potential values for the Company using
discounted cash flows, various multiples and comparable transactions analyses
and the range of possible values that could be achieved if the Company were to
remain independent or pursue its other alternatives. After considering all of
those factors, the Board (i) determined that the business combination proposal
was inadequate and rejected it and (ii) decided to initiate a strategic review
to evaluate its options for maximizing the value of the Company to its
stockholders, including a possible business combination with a larger company.
Later on March 16, 1999, the Company announced publicly that its Board of
Directors had received and rejected the unsolicited proposal described above
and that the Board had decided to initiate a strategic review to evaluate its
options for maximizing the value of the Company to its stockholders. The
Company also announced that it had retained Simmons to assist the Company with
its strategic review.
In the course of the Company's review, 28 potential purchasers for the
Company were given the opportunity to sign confidentiality agreements. The
Company and Simmons believed that these 28 parties constituted the companies
that could be expected both to have an interest in pursuing a transaction with
the Company and to be able to consummate a transaction at an acceptable price.
Nineteen of these parties, including Parent, agreed to execute confidentiality
agreements. Thereafter, Simmons distributed the Company's Confidential
Descriptive Memorandum prepared by Simmons and the Company to each of the
interested parties that had executed a confidentiality agreement. The
Confidential Descriptive Memorandum contained a more detailed analysis of the
Company's business than was available publicly and included portions of the
Company's strategic business plan, projections for the Company as a whole as
well as for its business units and a description of the key underlying
assumptions by business unit used in developing the projections.
Interested parties were invited to submit preliminary indications of
interest on April 19, 1999 based on the information provided, subject to
confirmatory due diligence, stating the price and form
<PAGE>
of consideration (including cash, stock or a combination of the two) that they
would be willing to pay in an acquisition transaction involving the Company.
Subsequent to the receipt and review of the preliminary indications of
interest, the Company invited nine of those interested parties separately to
attend a presentation by the Company's management, to tour the Company's plant
and office facilities in Houston, Texas and to review selected due diligence
materials in a data room at the Company's offices. Eight of those interested
parties, including Parent, participated in that due diligence review of the
Company. Each of these eight interested parties was also provided with two
versions of the Company's proposed merger agreement, one for use with a stock
for stock acquisition and the other for use in a cash acquisition.
The eight interested parties were invited to submit firm proposals by May
24, 1999 which were to state, among other things, the price each was willing to
pay to acquire the Company, the form of consideration to be paid to the
Company's stockholders and any financing or other contingencies, and to include
their comments on the applicable version of the Company's proposed form of
merger agreement.
Throughout the proposal solicitation process, the Company and its advisors
were in regular contact with the interested parties regarding their due
diligence investigation of the Company and their bids for the Company.
At the request of Parent, C.F. Knight, Chairman & CEO of Parent, and D.N.
Farr, Senior Executive Vice President of Parent responsible for the Process
Control business of Parent, met on May 7, 1999 with key management of the
Company, including R.C. Lassiter, the Chairman of the Board and CEO of the
Company. Following that meeting, Mr. Knight proposed to Mr. Lassiter that
Parent acquire the Company for $21.25 per Share in cash. Messrs. Lassiter,
Knight and Farr discussed Parent's proposal and tentatively agreed on it,
subject to the approval of the Boards of Directors of the Company, Parent and
Purchaser, negotiation of definitive agreements and receipt by the Company of a
fairness opinion from Simmons.
Among other things, Parent's offer of $21.25 in cash per Share was higher
than any indication of interest submitted previously by any other party and, in
the Company's opinion, was likely to be superior to any bid that any other
potential purchaser was likely to make. In addition, Parent's proposed terms
permitted another bidder to make a superior proposal which Parent could respond
to with a more favorable proposal; or if the Parent did not do so, the Company
could terminate its Merger Agreement with Parent and the Purchaser and, subject
to paying certain termination fees and expense reimbursement to Parent, enter
into a merger agreement with the alternative bidder. To date, the Company has
not received any proposal or indication of interest higher than $21.25 per
Share.
Between May 7, 1999 and May 12, 1999, representatives of the Company and
Parent (including financial and legal advisors) met to negotiate the terms of
the Merger Agreement and the Stock Option Agreement.
2
<PAGE>
On May 12, 1999, at a meeting of the Board of Directors of the Company,
the Board received a presentation by Simmons and its opinion that, as of that
date, and based on the assumptions made, matters considered and limits of
review set forth therein, the consideration to be received by the holders of
the Shares (other than Parent and its affiliates) in the Offer and the Merger
is fair to such holders from a financial point of view. After discussion and
consideration of the factors previously described in item 4 of the Company's
Schedule 14D-9, the Board unanimously approved the Offer and the Merger
(including the execution of the Merger Agreement and the Stock Option
Agreement) based on its conclusion that Parent's offer of $21.25 in cash per
Share was superior to all other options available to the Company for maximizing
value to its stockholders, including the option to remain independent. The
Board also unanimously recommended that stockholders tender their Shares
pursuant to the Offer.
