SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as Permitted
[ X ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
- -------------------------------------------------------------------------------
Echlin Inc.
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
SPX Corporation
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
- -------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11:
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3) Per unit price or other underlying transaction computed
pursuant to Exchange Act Rule 0-11:
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting was paid previously. Identify the previous filing
by registration statement number, or the Form of Schedule and
the date of its filing:
1) Amount Previously Paid:
---------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------
SPX Corporation
"Keeping Vehicles on the Road"
Update
March - 1998
FORWARD LOOKING STATEMENTS
--------------------------
Certain statements contained in these slides that are not historical
facts are forward-looking statements and are thus prospective. These
forward-looking statements are subject to risks, uncertainties and
other factors which could cause actual results to differ materially
from future results expressed or implied by such forward-looking
statements. More information regarding such risks can be found in
SPX's 1996 Form 10-K, three-month, six-month, and nine-month Forms
10-Q and SPX's Registration Statement on Form S-4, filed February 17,
1998.
AGENDA
------
. Successful Turnaround Story
- Stock Price Increased Over 5 Times Value in 2 Years
- Exceeded Every Commitment
. SPX 1998 Guidance
- 30% EPS Improvement
- Double Digit Sales Growth
. SPX Offer for Echlin
- "Win-Win" for Echlin & SPX Shareholders
. SPX Roadmap for Echlin Turnaround
- Significantly Accretive in First Full Year
Sign Gold Card to Demand Special Meeting
of Echlin Shareholders
SPX Corporation Stock Price
---------------------------
The Value of $100 Invested
on January 1, 1992
[CHART SHOWING VALUE OF $100 INVESTED IN
SPX STOCK ON 1/1/92 OVER FOUR-YEAR PERIOD]
The Old SPX
Similar to Echlin Today
SPX Corporation Stock Price
---------------------------
The Value of $100 Invested
on January 1, 1992
[CHART SHOWING VALUE OF $100 INVESTED IN SPX STOCK
AFTER ARRIVAL OF NEW LEADERSHIP TEAM]
The New SPX
Over 400% Increase Since January, 1996
Turnaround Process
------------------
Fix/Sell Grow
Revenue Growth
Operational Results
Global Leadership Standards
Growth Strategy Development
Financial Strategy
Strategic Review
EVA(R) Implementation
Right-sizing/Consolidation
Speed and Execution are Key Elements
SPX 1997 Performance Scorecard
------------------------------
. E.P.S. $3.01 per share 71% improvement over '96
. EVA(R)Improvement $18.8 million $45 million over two years
. MVA Increased $428 million $744 million over two years
. Headcount 36% fewer people Sales per employee up 30%
over '96
. Operating Margin 8% 25% improvement over '96
. Revenue +7% (Pro Forma) Past several years flat
. Shareholder Actions Dutch Auction Repurchased 17% in '97
Exceeding Financial Commitments
E.P.S. $3.01 Per Share
71% Improvement Over '96
------------------------
[CHART SHOWING EPS IMPROVEMENT]
EPS Improvement for Eight Straight Quarters
EVA(R) Improvement $18.8 million
$45 Million Over Two Years
------------------------------
EVA Improvement EVA Participation
[CHART SHOWING EVA IMPROVEMENT] [CHART SHOWING INCREASE IN EVA
PARTICIPATION]
Rapid Implementation of EVA to all Levels of Organization
Drove Outstanding EVA Improvement Performance
MVA Increased $428 Million in 1997
$744 Million Over Two Years
----------------------------------
[CHART SHOWING INCREASE IN MVA]
32% Reduction in Capital Employed Over 2 Years
74% Increase in Market Value Over Same Period
Headcount 36% Fewer People
Sales per Employee up 30% Over 1996
-----------------------------------
Headcount Sales/Employee
($000's)
[CHART SHOWING DROP IN HEADCOUNT] [CHART SHOWING INCREASE IN
SALES/EMPLOYEE]
45% Fewer People Over Two Years . . .
Over 50% Increase in Sales per Employee in Same Period
Operating Margin 8%
25% Improvement Over 1996
-------------------------
[CHART SHOWING INCREASE IN OPERATING MARGIN]
Significant Improvement in Operating Margins
Still Have Opportunity for Further Improvement
1997 Revenue Growth = 7% (Pro Forma)
Past Several Years Flat
-----------------------------------------
[CHART SHOWING SOURCES OF REVENUE AND REVENUE GROWTH]
Growth Achieved in Both Segments of the Business
Shareholder Actions - Dutch Auction
Repurchased 17% of Equity in 1997
-----------------------------------
. Purchased 17% of stock in 1997
- Dutch Auction
- Open market repurchases
. Eliminated dividend in favor of share repurchases
. Relaxed shareholder rights plan
. Aligned compensation with shareholder wealth
- Shifted Board compensation to EVA(R) based system
- Eliminated board pension benefits
- Out-of-the-money options for Key Leaders
- Mandatory stock ownership for key executives
Implemented a Series of Shareholder Friendly Actions
SPX 1997 Performance Scorecard
------------------------------
E.P.S. $3.01 per share 71% improvement over '96
EVA(R)Improvement $18.8 million $45 million over two years
MVA Increased $428 million $744 million over two years
Headcount 36% fewer people Sales per employee up 30%
over '96
Operating Margin 8% 25% improvement over '96
Revenue +7% (Pro Forma) Past several years flat
Shareholder Actions Dutch Auction Repurchased 17% in '97
Exceeding Financial Commitments
SPX Guidance - 1998
-------------------
. 1998 Revenue Growth guidance -- 10%
(over 1997 Pro Forma)
. 1998 Q1 EPS Guidance -- $0.80
- Up 50% from 1997 Q1
. 1998 FY EPS Guidance -- $3.85 to $4.00
- Up 30% over 1997 before unusual items
Double-Digit Revenue Growth and
30% EPS Improvement
Foundation for Continuing Success
---------------------------------
[CHART SHOWING ELEMENTS NEEDED FOR GROWTH]
Speed & Execution
Are Key Drivers of Shareholder Wealth
SPX Leadership Standards
------------------------
. An Obsession with Winning
. Doing Everything Simpler and Faster
. A Commitment to Diversity
. A Commitment to Aggressive Growth
. Exceeding Commitments with Ethics and Integrity
Leadership Standards for the Entire Organization
Published Sell Side Earnings Estimates
--------------------------------------
Recommendation 12-Month
Broker Analyst 3/7/98 1998 Target
------ ------- ------ ---- ------
Barrington A. Paris Buy 3.95 --
Research
Bear Stearns E. Goldstein Buy 4.15 82-90
DLJ W. Needham Mkt. Perform 3.90 68
Goldman Sachs J. Irwin Buy 4.05 85
Lehman Brothers J. Phillippi Neutral 4.05 70
Merrill Lynch D. Kimball Accumulate 3.90 76
Schroders E. Rasmussen Outperform 3.95 76
Value Line N. Primavera Buy 3.85 --
First Call Consensus: Q1 = $0.84; 1998 = $3.99
Predominant Buy Recommendation
-----------------------------------------------------------------
SPX AND ECHLIN
-----------------------------------------------------------------
SPX Total Return
----------------
[CHART COMPARING SPX STOCK TOTAL RETURN TO S&P]
SPX's Stock Has Increased Over 400%
SPX and Echlin Total Return
---------------------------
[CHART COMPARING ECHLIN STOCK TOTAL RETURN TO SPX AND S&P]
Echlin Stock Underperforming Even After
Nearly One Year Under New Leadership
Rationale for SPX and Echlin Merger
-----------------------------------
. Vehicle service industry is rapidly evolving
. Combination benefits shareholders, customers and employees of
SPX and Echlin
. SPX's leadership experience and management techniques will be
applied to Echlin
. SPX will cut costs, improve profitability and position combined
company for growth
"Win-Win" Combination for all Constituencies
Summary of SPX's Offer
----------------------
. Structure: Exchange offer for all Echlin shares
. Value: $48 per Echlin share or approximately
$3 billion (on February 17, 1998)
. Terms: $12 in cash, 0.4796 SPX shares per Echlin share;
1/4 cash, 3/4 stock; fixed exchange ratio
. Premium: 23% over Echlin's close on 2/17/98; 32% above prior
30-day average
. Earnings: Expect substantial accretion in first full year
Compelling Combination for Shareholders
of Echlin & SPX
Why This Offer Now?
-------------------
. SPX had been pursuing a strategic business combination with
Echlin for a year
. SPX had initiated three meetings with Echlin and had sent
several letters regarding proposed deal
. Echlin had repeatedly rebuffed our offer to negotiate a
transaction -- Echlin Board still refuses to meet with us
. Rapid industry consolidation and strategic rationale for
transaction make it necessary to take our offer directly to
Echlin's shareholders
Outstanding Value Creation Opportunity...
Attempted Negotiated Deal for Over a Year
Status of our Offer
-------------------
. SPX owns 1.15 million Echlin shares, 1.8% of Echlin, and more
than combined ownership of Echlin's officers and directors
. SPX has received antitrust clearance for the transaction
. SPX has received "highly confident" letter for $2.4 billion of
financing from CIBC
. SPX has sent a merger agreement to Echlin and filed related
exchange offer materials with SEC
. SPX's demand solicitation materials to call special meeting of
Echlin's shareholders cleared SEC review on March 6
. SPX now seeking 35% vote to call special meeting
. Echlin seeking legislative protection in Connecticut
SPX has Made an Attractive Offer
No Response from Echlin
Anticipated Timetable
---------------------
February 17, 1998 March 1998 June 1998
Collect Demands Special Meeting
Announcement of from 35% of Echlin to Remove Echlin
SPX Offer for [arrow] Shareholders for a [arrow] Board and Replace
Echlin Special Meeting with SPX Slate
Governance
Requirement:
Governance Removal: More
Requirement: Votes For Than
35% of Outstanding Against
Shares Election:
Plurality of
Votes Cast
Process Could be Accelerated
with a Negotiated Transaction
Rapidly Changing Industry
-------------------------
. Consolidation in $350 billion vehicle service industry
. Blurring lines between OE and aftermarket
. Expansion of mega-dealerships and national parts retailers
. Growing importance of repair shop chains
. Increasing technological complexity of vehicles
. Integration of the vehicle service process necessary to compete
and better serve customers in the future
SPX and Echlin will have Scale and
Capabilities to Excel in Rapidly Changing Industry
Trends Transforming Vehicle Service Industry
--------------------------------------------
Trends Impact
. Aftermarket demand model .Restructuring within
predicts slowing growth industry required
- Plant rationalization
. Weak demand creates [arrow] - Downsize distribution
operational problems networks
- Write-off inventories
. DIY demand will continue to .Consolidation of players
weaken required
- OE/Aftermarket lines
blurring
- Economies of scale in
distribution and
manufacturing
- Integration of vehicle
service lifecycle
Industry Restructuring and Consolidation Are Required
Three Critical Elements of Vehicle Service
------------------------------------------
Worldwide Vehicle Service Vehicle Components
$350 Billion - OE
- Aftermarket
Technical Know-how
- Dealer Equipment programs
[arrow] - Service & owner's manual
development
"SPX receives only $1 of every $500 Tools & Equipment
per vehicle spent annually worldwide - Special warranty tools
for service." - Diagnostic equipment
SPX has Broad Experience in all
Elements of Vehicle Service
Vehicle Service Lifecycle
-------------------------
[CHART DESCRIBING BUSINESS SEGMENTS AT
DIFFERENT POINTS IN VEHICLE LIFECYCLE]
Integration of Vehicle Service Elements is
Critical for Long-Term Success
Integrated Vehicle Service Process
----------------------------------
[CHART DESCRIBING VEHICLE SERVICE LIFECYCLE]
Feedback of Data Drives Improved Service and Quality
for Customers/Distributors, OEM's, and End-Users
Shareholder Benefits
---------------------
. Echlin shareholders will receive an immediate 23% premium over
2/13/98 closing price and 32% premium over prior 30-day trading
average
. Proposed Merger Agreement gives shareholders choice of all
cash, all stock, or combination (subject to proration)
. Echlin shareholders will own 70% of a combined company with
upside potential
. SPX shareholders will own part of larger company with increased
value-creation opportunities
. Combined company will be a global leader across entire vehicle
service lifecycle
"Win-Win" for Echlin & SPX Shareholders
SPX Has "Been There, Done That"
-------------------------------
. SPX had been a long time underperformer
. Current leadership team successfully turned around SPX in just
two years
- Quickly implemented EVA as financial tool and driver of cultural
change
- Took many shareholder-friendly actions
. Operating margins doubled
. Sales per employee up more than 50%
. Stock price increased more than 400%
SPX Team has the Tools, Talent, and
Track Record to Turnaround Echlin
SPX's Program for Echlin
------------------------
. Achieve annual cost savings of at least $125 million in first
full year, increasing to $175 million thereafter
. Reduce headcount by approximately 3,000 positions or nearly 10%
of Echlin's global workforce
. Restructure or divest underperforming Echlin assets
. Accelerate EVA-based compensation programs
. Pursue targeted share repurchases
SPX has the Road Map for Success at Echlin . . .
Speed and Execution are Key
Estimated Cost Savings
----------------------
(In $ Millions)
Year 2 Total Annual
Additional Savings, Yr.
Year 1 Savings 2 and Beyond
----------- ------------ ------------
Headcount Reduction $100 $20 $120
(3,000 x $40K)
Duplicate Corporate Costs 10 10 20
Manufacturing/Distribution
Rationalization, Sourcing 15 20 35
----- ----- -----
Total $125 $50 $175
======= ======= =======
Estimated Cost Savings Will Make
Transaction EPS Accretive
Value/EVA Opportunity
---------------------
Sales Per Employee
(In $ Thousands)
[CHART COMPARING SPX AND ECHLIN SALES PER
EMPLOYEE TO PEER GROUP]
Echlin has Lowest Sales per Employee in Peer Group
Significant Opportunity for Productivity Improvement
Value/EVA Opportunity
------------------------------------------
Capital Expenditures as a Percent of Sales
[CHART COMPARING CAPITAL EXPENDITURES AT SPX,
ECHLIN AND PEER GROUP]
Echlin has Highest CapEx in Peer Group
Significant Opportunity for More Efficient Use of Capital
Value/EVA Opportunity
----------------------------
Dividend Yield Since 4/1/97
[CHART COMPARING DIVIDEND YIELD AT ECHLIN, SPX AND PEER GROUP]
Echlin has Highest Dividend Yield in Peer Group
Opportunity for More Efficient Use of Capital
Strategic Rationale
-------------------
SPX Echlin
[CHART DESCRIBING BUSINESS [CHART DESCRIBING BUSINESS
SEGMENTS AT SPX] SEGMENTS AT ECHLIN]
Combination Integrates Service Process with Components
Good Fit of Business -- Negligible Overlap
Profile of Combined Company
---------------------------
Sales Profile
Combined Company
[CHART DESCRIBING PROFILE OF COMBINED COMPANY]
Combined Company will be Global Market Leader
in Service Solutions and Vehicle Components
Pro Forma 1998
---------------------------------------
(in $ millions, except per share items)
Shares
Net Income Outstanding EPS
SPX - 1998 analysts' expectation (FN1) $51.0 12.900 $3.95
Echlin - 1998 analysts' expectation (FN1) 143.9 -- --
Transaction:
$83 of incremental interest, goodwill
amortization of $22 and other expense
of $7 (78.0) -- --
Shares issued:
64.1 million Echlin shares @ exchange
ratio of 0.4796 -- 30.700 --
-------- --------- ------
Before savings 116.9 43.600 $2.68
$90 million savings (pretax) required
to be EPS neutral 55.3 -- --
------ ------ ------
Adjusted $172.2 43.600 $3.95
========= ======== =======
- ----------------------
[FN]
(1) Numbers derived from First Call consensus of $3.95 per share for
SPX and $2.28 per share for Echlin.
</FN>
$90 Million of Savings Required to be
EPS Neutral in 1998
Analyst Reaction to SPX/Echlin Transaction
------------------------------------------
. "We believe that the leadership experience and management
techniques that SPX brings to the table can have a substantial
positive impact on Echlin's performance." James M. Irwin, Goldman,
Sachs & Co., February 17, 1998
. "SPX has proven it can successfully turn around businesses
quickly." Joseph S. Phillippi, Lehman Brothers, February 18, 1998
. "Based on management's track record, we are confident that SPX
can achieve the significant cost savings targets it has set and
improve the combined company's returns." Eric S. Rasmussen, John A.
Casesa, Schroders, February 18, 1998
. "There is considerable evidence that Echlin has been
underperforming its peers in a number of important categories that SPX
should be able to improve." Alexander P. Paris, Barrington Research
Associates, February 24, 1998
. "We have long maintained that Echlin's proposed restructuring
could take longer and cost more than [Echlin] management had
indicated." John G. Inch, Stephen J. Girsky, Morgan Stanley, February
17, 1998
Positive Reaction to Proposed Combination of
SPX and Echlin
SPX & Echlin - A Winning Combination
----------------------------------
Shareholder Wealth Creation Engine
[CHART SHOWING ELEMENTS IN SHAREHOLDER WEALTH CREATION]
Leverage EVA Culture & Leadership Values
to Create Wealth for Shareholders
