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DAWSON PRODUCTION SERVICES, INC.
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(Name of Registrant as Specified in Its Charter)
KEY ENERGY GROUP, INC.
MIDLAND ACQUISITION CORP.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
- -------------------------------------------------------------------------------
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KEY ENERGY GROUP, INC.
NEWS RELEASE
FOR IMMEDIATE RELEASE
KEY ENERGY ANNOUNCES $14.00 PER SHARE CASH TENDER OFFER FOR
DAWSON PRODUCTION SERVICES
AND CONSENT SOLICITATION TO CALL SPECIAL MEETING OF DAWSON'S SHAREHOLDERS
EAST BRUNSWICK, N. J., August 5, 1998 - Key Energy Group, Inc. (NYSE: KEG)
announced today that its wholly-owned subsidiary, Midland Acquisition
Corp., will commence a tender offer for all of the outstanding shares of
Dawson Production Services, Inc. (NYSE: DPS) for $14.00 per share in cash
not later than August 11, 1998. The tender offer would be followed by a
second step merger at the same cash price paid in the tender offer.
Based on the latest publicly available information, Dawson has
approximately 11.5 million shares on a fully diluted basis, giving the
transaction a total equity value of approximately $161 million. In
addition, Dawson had total debt of approximately $149 million on March 31,
1998, making the total value of the transaction approximately $310 million.
The acquisition is anticipated to be accretive to Key's earnings and cash
flow per share in the first year after the close of the transaction.
Francis D. John, Chairman and Chief Executive Officer of Key, said, "We
would have preferred to pursue a negotiated transaction with Dawson,
however, because of recent developments, we are taking our offer directly
to Dawson shareholders - the owners of the company. On the evening of
August 3, 1998 our financial advisor, Bear, Stearns & Co. Inc. was
contacted by Morgan Stanley & Co. Inc., Dawson's financial advisor. In
their conversation, Morgan Stanley told Bear, Stearns that Dawson's Board
had reviewed Key's proposal and was not interested in discussing it further
with Key. It was quite disturbing that in its conference call to investors
on August 4, 1998, Dawson's management indicated Morgan Stanley was still
reviewing the Key proposal and could not comment on it. Dawson's statements
in this conference call served only to mislead its shareholders as to
Dawson's true intentions regarding the Key proposal and to discourage Key's
efforts to complete a negotiated transaction. Fortunately, as a result of
the actions Key is now undertaking, Dawson's shareholders will have the
opportunity to decide the future of the company for themselves," Mr. John
said.
"Other events in the past two days have also influenced our decision to
initiate a tender offer. After the close of the market on August 3, 1998,
Dawson disclosed its operating results for the quarter ended June 30, 1998,
which were significantly less than last year and substantially below street
estimates. At the same time, Dawson announced it had entered into a letter
of intent to acquire companies comprising the HSI Group, without regard to
its impact on Key's proposal to acquire Dawson. That Dawson would announce
its second largest acquisition ever, claim it will be immediately
accretive, and not disclose to its shareholders any of the terms of the
proposed transaction is inexplicable. Dawson's pattern of conduct in the
HSI matter, its refusal to respond to, and its ultimate rejection of, Key's
generous proposal, and its failure to come close to meeting its first
quarter earnings estimates leaves us no recourse but to go directly to
Dawson's shareholders," Mr. John said.
TWO TOWER CENTER, 20TH FLOOR, EAST BRUNSWICK, NJ 08816
TELEPHONE: (732) 247-4822 FAX: (732) 247-5148
<PAGE>
Key also announced today that Midland will file preliminary materials with
the Securities and Exchange Commission to solicit consents to call a
special meeting of Dawson's shareholders, as well as proxy materials for
the proposed special meeting. According to Dawson's bylaws and consistent
with the Texas Business Corporation Act, consents from holders of at least
20% of Dawson's common stock are required to call the special meeting. Key
and Midland's present investments of a total of 820,800 shares represent
approximately 7.3% of Dawson's outstanding shares.
At the special meeting, Midland would, among other things, seek to:
o Remove Dawson's board of directors and replace it with
Midland's slate of nominees. Midland's nominees, if elected, subject
to their fiduciary duties as Dawson directors, would take all action
needed to facilitate consummation of the tender offer; and
o Take certain other actions with respect to Dawson's bylaws
designed to facilitate the tender offer.
Removal of Dawson's directors requires the affirmative vote of a majority
of the outstanding shares of Dawson common stock.
Key also announced that Midland is filing suit in the United States
District Court for the Western District of Texas (Midland/Odessa Division)
against Dawson and its directors seeking, among other things, to have
certain provisions of Dawson's shareholder rights plan ("poison pill")
declared illegal under Texas law and injunctive relief prohibiting Dawson
and its directors from taking certain actions to thwart or interfere with
the tender offer and solicitation.
Mr. John added, "Subsequent to our proposal, oilfield service stocks have
declined by 30% to 50% as the outlook for oil and natural gas prices
remains uncertain. In today's environment, and in light of the poor
operating results announced Monday, we believe it is reasonable to conclude
that Dawson would be trading in the range of $6 to $7 if it were not for
Key. Therefore, we believe our $14.00 offer represents a premium of at
least 100% of Dawson's 'true current market value'. This price takes into
account both Dawson's surprisingly poor operating results for the quarter
ended June 30, 1998, and the costs associated with consummating a merger
transaction through a tender offer as opposed to a negotiated transaction."
"With continued uncertainty in the oil and gas industry, it is imperative
that service companies become more efficient and cost effective in
providing services. We continue to believe that Key and Dawson would be a
superb fit. The combined company would have substantial ability to reduce
costs, provide a wider range of services for customers and create a more
stable environment for employees. Together, Key and Dawson would be the
largest well service company in the world, positively staged for future
growth, with leading positions in nearly all major domestic producing
regions and expansion opportunities throughout the world," concluded Mr.
John.
The tender offer will be conditioned upon, among other things, there being
validly tendered and not withdrawn before the expiration date, a number of
shares, which when added to the number of shares beneficially owned by Key
and Midland, will represent a majority of the total number of outstanding
shares of Dawson on a fully diluted basis; termination, redemption or
inapplicability of Dawson's poison pill; receipt of financing;
inapplicability of Texas anti-takeover statutes; and expiration or
termination of
<PAGE>
any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Key has a financing commitment from PNC Bank,
N.A. to complete the acquisition of Dawson as well as the refinancing of
Key's existing debt. Key has also received a highly confident letter from
Dain Rauscher Wessels to arrange financing in the event the holders of
Dawson's 9 3/8% Senior Notes exercise certain put rights triggered upon a
change of control of Dawson. The complete terms and conditions of the
tender offer, including financing arrangements, will be set forth in the
offering documents to be filed with the Securities and Exchange Commission.
Bear, Stearns & Co. Inc. will act as Dealer Manager for the offer and
Innisfree M&A Incorporated will act as Information Agent.
Key Energy Group, Inc. is a holding company with diversified energy
operations, including well servicing, oilfield services, contract drilling
and oil and natural gas production. Key has operations in most major
domestic onshore producing regions and in Argentina.
INFORMATION REGARDING PARTICIPANTS AND CERTAIN OTHER PERSONS
Key Energy Group, Inc. and certain persons named below may be deemed to be
"participants" (within the meaning of Regulation 14A under the Securities
Exchange Act of 1934) in the solicitation of consents to call a special
meeting of Dawson Production Services, Inc.'s shareholders (the "Special
Meeting") and proxies for the Special Meeting. At the Special Meeting, if
called, Key presently intends to introduce proposals to (i) remove Dawson's
board of directors (the "Board"); (ii) elect Midland's nominees to the
Board; (iii) amend certain of Dawson's Bylaws to facilitate consummation of
Midland's tender offer. The participants in this solicitation may include
the persons named below, after the name of each of whom is indicated the
number of shares of Dawson common stock, par value $.01 per share,
beneficially owned by each as of August 4, 1998 (if any) (including shares
which each has the right to acquire within 60 days of such date): the
directors of Key - Francis D. John, Kevin P. Collins (9,354 shares),
William Manly, W. Phillip Marcum (6,054 shares), David J. Breazzano, and
Morton Wolkowitz; and the following executive officers of Key (other than
Mr. John, who is also a director) - Stephen E. McGregor, Kenneth V. Huseman
and Danny R. Evatt.
CONTACT: Key Energy Group, Inc Abernathy MacGregor Frank
Jim Dean Joele Frank / Dan Katcher
(732) 247-4822 (212) 371-5999
# # #
TWO TOWER CENTER, 20TH FLOOR, EAST BRUNSWICK, NJ 08816
TELEPHONE: (732) 247-4822 FAX: (732) 247-5148
