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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 1995
JG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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Illinois 1-258 36-1141010
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification Number)
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1615 West Chicago Avenue
Chicago, Illinois 60622
(Address of principal executive offices) (Zip Code)
(312) 850-8000
(Registrant's telephone number, including area code)
Exhibit Index appears on page 5.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Huffman Koos Inc., a Delaware corporation (the "Company"), HK
Acquisition Company, Inc., a Delaware corporation ("HK Acquisition"), and
Breuner's Home Furnishings Corporation, a Delaware corporation (the "Parent")
and holder of all of the issued and outstanding capital stock of HK
Acquisition, entered into an Agreement and Plan of Merger dated September 18,
1995 (the "Merger Agreement"). Pursuant to the Merger Agreement, HK
Acquisition commenced a tender offer (the "Tender Offer") on September 25, 1995
to acquire all of the issued and outstanding shares (the "Shares") of Common
Stock, par value $.01 per share, of the Company at a per Share purchase price
of $9.375 in cash.
In connection with the execution and delivery of the Merger
Agreement, Sussex Group, Ltd., a Delaware corporation and a majority-owned
subsidiary of JG Industries, Inc. ("Sussex"), Jupiter Industries, Inc., a
Tennessee corporation, HK Acquisition and the Parent entered into a
Stockholders Agreement dated September 18, 1995 (the "Stockholders Agreement").
As of the date of the Stockholders Agreement, Sussex was the owner of record of
1,250,000 Shares, representing 31.8% of the total issued and outstanding Shares
as of such date. Pursuant to the Stockholders Agreement, upon consummation of
the Tender Offer on October 27, 1995, Sussex sold its 1,250,000 Shares to HK
Acquisition for $9.375 per Share in cash, representing aggregate cash
consideration for the Shares of $11,718,750. Sussex determined the
acceptability to it of the per Share price paid in the Tender Offer based upon
consideration of (i) recent trading prices of Shares prior to the Tender Offer,
(ii) certain information and factors also considered by the Company's board of
directors in connection with its approval of the Merger Agreement, as such
information and factors are described in Item 4 of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 relating to the Tender
Offer (a copy of the text of which Item 4 has been filed as Exhibit 99.1 to
this Form 8-K and which is incorporated herein by reference), and (iii) the
opinion of The Chicago Corporation, financial advisor to the Company, to the
effect that, as of September 18, 1995 (the date of such opinion) and based upon
and subject to certain matters stated in such opinion, the $9.375 per Share
price to be paid in the Tender Offer was fair to stockholders of the Company
from a financial point of view.
The foregoing descriptions of the Merger Agreement and the
Stockholders Agreement are qualified in their entirety by reference to such
agreements which are incorporated herein by reference as Exhibits 2.1 and 2.2,
respectively, and made a part of this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: None
(b) Pro Forma Financial Information: It is impracticable to provide the
required pro forma financial information for the reported transaction
as of the date of this filing, but all required pro forma financial
information will be filed under cover of Form 8 as soon as
practicable, but not later than January 5, 1996.
(c) Exhibits:
EXHIBIT NO. DOCUMENT PAGE
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2.1 Agreement and Plan of Merger, dated September
18, 1995, among Huffman Koos Inc., HK
Acquisition Company, Inc. and Breuner's Home
Furnishings Corporation (Exhibit 2.1 of the
Registrant's Current Report on Form 8-K
(Commission File No. 1-258) dated October 2,
1995 is hereby incorporated by reference). . . . . .
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2.2 Stockholders Agreement, dated September 18, 1995,
among HK Acquisition Company, Inc., Breuner's Home
Furnishings Corporation, Jupiter Industries, Inc.
and Sussex Group, Ltd. (Exhibit 2.2 of the
Registrant's Current Report on Form 8-K (Commission
File No. 1-258) dated October 2, 1995 is hereby
incorporated by reference). . . . . . .
99.1 Text of Item 4 of Solicitation/Recommendation Statement
on Schedule 14D-9 of Huffman Koos Inc. dated September
25, 1995 . . . . . . . . . . . . . . . . . . . . . .
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SIGNATURE
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.
JG INDUSTRIES, INC.
By: /s/ Clarence Farrar
-----------------------------------
Clarence Farrar
President
Date: November 9, 1995
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EXHIBIT INDEX
EXHIBIT NO. DOCUMENT PAGE
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2.1 Agreement and Plan of Merger, dated September 18,
1995, among Huffman Koos Inc., HK Acquisition
Company, Inc. and Breuner's Home Furnishings
Corporation (Exhibit 2.1 of the Registrant's Current
Report on Form 8-K (Commission File No. 1-258)
dated October 2, 1995 is hereby incorporated by
reference) . . . . . . . . . . . . . . . . . . . . .
2.2 Stockholders Agreement, dated September 18, 1995,
among HK Acquisition Company, Inc., Breuner's Home
Furnishings Corporation, Jupiter Industries, Inc.
and Sussex Group, Ltd. (Exhibit 2.2 of the
Registrant's Current Report on Form 8-K (Commission
File No. 1-258) dated October 2, 1995
is hereby incorporated by reference) . . . . . . . .
99.1 Text of Item 4 of Solicitation/Recommendation Statement
on Schedule 14D-9 of Huffman Koos Inc. dated September
25, 1995 . . . . . . . . . . . . . . . . . . . . . .
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EXHIBIT 99.1
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors has
unanimously approved the Merger Agreement and the transactions contemplated
thereby and recommends that the stockholders of the Company accept the Offer and
tender all of their Shares pursuant to the Offer.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION. For the past several years,
the Company devoted substantial energy and resources towards the implementation
of significant expansion and remodeling plans, developed a new merchandising
strategy to target a broader group of customers and pursued an aggressive
marketing and advertising program. At the same time, the Company also focused on
improving a number of aspects of its operations including making changes in
merchandise delivery, computer operations and customer service. During this
period of expansion, renovation and other improvements, and in conjunction with
the improved local economy, the Company experienced increases in net sales,
operating profits and net income.
Notwithstanding the success of the Company's growth and improvement
strategy, the Board of Directors was cognizant that there may exist other
opportunities to maximize shareholder value of the Company. In October 1994, the
Board began to discuss possible strategic alternatives for the Company that
might further enhance shareholder value. In connection with its discussions, the
Board established the Special Committee,
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consisting of Peter C.B. Bynoe, the chairman of the Special Committee, Michael
Kurzman and Philip Rootberg. The Special Committee explored the possibility of
retaining a financial advisor to assist the Company in its evaluation of whether
or not to pursue strategic alternatives for the Company, and the Board, with the
recommendation of the Special Committee, authorized management to retain Chicago
Corporation to advise the Company. On January 17, 1995, Chicago Corporation was
engaged to serve as the Company's exclusive financial advisor.
On February 28, 1995, the Board of Directors convened a special meeting at
which representatives of Chicago Corporation gave a presentation with respect to
their review of the Company's strategic and financial alternatives.
Representatives of Chicago Corporation first presented their views on recent
trends in the furniture retailing industry and discussed their analysis of the
financial performance and market valuation of the Company and of comparable
firms. Representatives of Chicago Corporation then presented an analysis of the
Company's growth strategy as well as a "same store" strategy, including an
analysis of the implied valuation of each strategy. Representatives of Chicago
Corporation concluded their presentation by stating that, as result of current
conditions with respect to the market price for furniture retailing equities,
their views as to the interest level of potential acquirors of the Company and
the availability of financing, it was, in their view, a favorable time to
explore a sale of the Company.
In further discussions at the Board's February 28, 1995 special meeting,
representatives of Chicago Corporation explained that the Company could analyze
its strategic alternatives as follows: (i) continue with its present strategic
plan, (ii) effect a stock repurchase/recapitalization transaction, (iii) sell a
portion of the equity of the Company or (iv) sell or merge all of the Company.
Representatives of Chicago Corporation stated that the alternative that would
best maximize value for all shareholders would be most likely a total sale or
merger of the Company. Representatives of Chicago Corporation then recommended
that the Company consider pursuing the possibility of a total sale of the
Company. Although the Board made no decision at such time to sell the Company,
it authorized Chicago Corporation to prepare evaluation materials appropriate
for exploring a potential sale of the Company so that the Board could continue
to evaluate the Company's options. During March and April 1995, representatives
of Chicago Corporation conducted due diligence and other analyses with respect
to the Company's business and prospects.
On April 18, 1995, the Board of Directors again met with representatives of
Chicago Corporation at which time there was further discussion of each of the
Company's strategic alternatives to enhance shareholder value. The Board
concluded that, pending its and Chicago Corporation's continuing investigation
and review, the most likely alternative for enhancing shareholder value would be
the pursuit of a total sale of the Company. The Board then unanimously voted to
authorize Chicago Corporation to continue (x) preparing evaluation materials
regarding the Company and (y) its review of the Company's strategic
alternatives, and to begin to solicit expressions of interest from potential
acquirors of the Company. On April 19, 1995, the Company publicly announced the
engagement of Chicago Corporation to assist the Company in considering the
possible sale of the Company and to review its other possible strategic
alternatives.
Following the Company's public announcement, representatives of Chicago
Corporation approached potentially interested strategic and financial acquirors,
including KKC. KKC is a financial advisor to the Parent and an affiliate of
Kidd, Kamm Equity Partners, L.P. ("KKEP"), the majority shareholder of the
Parent. Of the potential acquirors approached by Chicago Corporation,
approximately fifty entered into confidentiality agreements and all such persons
were provided with evaluation materials describing the Company.
On April 19, 1995, a potential acquiror (the "Financial Party") informed
Chicago Corporation of its interest in considering an acquisition of the
Company. On April 25, 1995 the Financial Party entered into a confidentiality
agreement and subsequently Chicago Corporation provided the Financial Party with
evaluation materials describing the Company. Also on April 25, 1995, KKC entered
into the Confidentiality Agreement and thereafter Chicago Corporation provided
KKC with evaluation materials.
On May 10, 1995, a furniture retailer (the "Strategic Party"), through its
financial advisor, contacted Chicago Corporation and indicated an interest in
acquiring the Company. On May 11, 1995, the Strategic Party executed a
confidentiality agreement and received evaluation materials from Chicago
Corporation. On
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May 19, 1995, the Strategic Party informed Chicago Corporation of its strong
interest in an acquisition of the Company at $9.00 or possibly more per Share in
cash on the condition that it be permitted to proceed immediately with a due
diligence investigation of the Company. In addition, the Strategic Party
indicated that it intended to complete its decision process by mid-June 1995 and
expected to submit at that time an acquisition proposal that would not be
subject to a financing condition.
On May 22, 1995, KKC informed Chicago Corporation that KKEP had decided not
to proceed with a further evaluation of a possible acquisition of the Company
and KKC returned the evaluation materials provided to it by Chicago Corporation.
On May 24, 1995, the Strategic Party met with senior officers of the Company and
commenced its due diligence investigation. On June 19, 1995, the Strategic Party
submitted a non-binding, preliminary proposal for the acquisition of the Company
for a price below $9.00 per Share in cash, subject to certain conditions.
Chicago Corporation advised the Strategic Party that the Company was not likely
to accept the Strategic Party's proposal.
On July 7, 1995, the Financial Party met with senior officers of the
Company and began its due diligence review of the Company. On July 11, 1995, KKC
reinitiated contact with Chicago Corporation on behalf of KKEP and informed
Chicago Corporation that KKEP had an interest in revisiting the possible
acquisition of the Company by Arnold's. Evaluation materials were again sent to
KKC.
On July 13, 1995 the Financial Party submitted an acquisition proposal,
subject to certain conditions including a financing condition, for $7.50 per
Share in cash and $1.50 per Share principal amount of subordinated debt
securities of the Financial Party. On July 19, 1995, the Financial Party
informed Chicago Corporation that it would be willing to revise its acquisition
proposal to provide that stockholders other than the Majority Stockholders would
receive $9.00 per Share in cash and the Majority Stockholders would receive a $6
million principal amount debenture of the Financial Party plus cash in amount
that would provide the Majority Stockholders with total consideration of $9.00
per Share. Chicago Corporation advised the Financial Party that the Company was
not likely to accept the Financial Party's proposal.
On July 21, 1995, Arnold's submitted to Chicago Corporation a non-binding,
preliminary indication of interest to explore further the possible acquisition
of the Company at a price of $9.00 per Share in cash. On July 24, 1995, the
Strategic Party informed Chicago Corporation that it was unwilling to revise its
June 19, 1995 proposal. On July 25, 1995, the Company's senior management met
with Arnold's for an on-site, preliminary due diligence meeting.
On July 27, 1995, the Financial Party orally indicated to Chicago
Corporation that it would be willing to purchase the Company at a price of $9.00
per Share in cash, subject to certain conditions including a financing
condition. Also on July 27, 1995, Arnold's orally submitted to Chicago
Corporation an acquisition proposal for the Company at a price of $9.50 per
Share in cash, subject to certain conditions including a financing condition. On
July 28, 1995, the Company and Arnold's entered into the Non-Solicitation
Agreement which granted Arnold's the exclusive right, subject to certain
conditions, until September 5, 1995, to conduct the final phase of its due
diligence investigation and to negotiate a definitive agreement providing for
the acquisition of the Company. On August 1, 1995, Arnold's began its final due
diligence investigation of the Company and representatives of the Company, KKEP
and the Parent proceeded to negotiate the Merger Agreement and the Stockholders
Agreement. On August 31, 1995, the Exclusivity Period under the Non-Solicitation
Agreement was extended to September 11, 1995.
On or about August 31, 1995, KKEP informed the Company's outside legal
counsel that as a result of KKEP's review and analysis of the current fiscal
year's financial performance of the Company's operations through August 1995,
which indicated less favorable results than previously projected, the Parent was
prepared to acquire the Company at $9.25 per Share in cash rather than at the
$9.50 per Share price that had been communicated in Arnold's July 27, 1995
submission. Subsequent to the Parent's indication of the revised bid,
representatives of Chicago Corporation held discussions with KKEP regarding this
development. A meeting of the Special Committee was convened on September 6,
1995 at which representatives of Chicago Corporation reviewed their discussions
with KKEP and the Parent regarding the Parent's lower offer of $9.25 per Share
in cash. Representatives of Chicago Corporation expressed their views regarding
the basis of the Parent's $9.25 per Share bid and recommended that the Company
continue discussions with the Parent as to
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the Share price. The Special Committee discussed the Parent's new offer and
various strategies with which to respond to the Parent. The Special Committee
resolved to recommend to the Board that the Board not accept the Parent's $9.25
per Share offer and to seek authority from the Board to negotiate the price to
be accepted for the Company, subject to the approval of the Board, in the range
between $9.25 and $9.50 per Share in cash.
On September 7, 1995, a special meeting of the Board was convened to
discuss the status of the proposed acquisition by the Purchaser. The Board also
reviewed KKEP's financing arrangements regarding the proposed acquisition. Mr.
Bynoe, Chairman of the Special Committee, reported the results of the Special
Committee's September 6, 1995 meeting and requested that the Special Committee
be granted authority to negotiate the sale price with the Parent, subject to the
approval of the Board. The Board then discussed the Parent's bid at $9.25 per
Share and the views of Chicago Corporation and members of the Special Committee
regarding the bid. The Board resolved to grant to the Special Committee the
authority to negotiate the price for the sale of the Company, in the range
between $9.25 and $9.50 per Share in cash, subject to approval by the Board, and
directed Chicago Corporation to inform the Parent that the Board would not
accept the $9.25 per Share bid.
Chicago Corporation immediately informed the Parent that the Board would
not accept the $9.25 per Share bid and presented to the Parent the views of the
Board and the Special Committee. On September 8, 1995, a representative of the
Parent contacted Mr. Bynoe and indicated that the Parent was prepared to acquire
the Company at a price of $9.375 per Share in cash. On September 11, 1995, the
Exclusivity Period under the Non-Solicitation Agreement was extended to
September 14, 1995.
On September 13, 1995, the Board discussed the proposed acquisition,
received an update from its advisors on the status of negotiations with the
Parent and reviewed KKEP's financing arrangements. On September 14, the
Exclusivity Period under the Non-Solicitation Agreement was extended to
September 19, 1995.
The Board convened a meeting on September 18, 1995 at which it further
discussed the proposed Merger and the Parent's revised bid of $9.375 per Share
in cash. The Board reviewed the transaction with the Company's legal and
financial advisors and received a presentation by representatives of Chicago
Corporation summarizing the transaction process. Representatives of Chicago
Corporation then delivered Chicago Corporation's opinion as to the fairness,
from a financial point of view, of the $9.375 per Share cash consideration in
the Offer and the Merger. The Board discussed and then unanimously approved the
proposed Merger Agreement and all transactions contemplated thereby. With
respect to the Offer, the Board of Directors unanimously recommended that the
stockholders of the Company accept the Offer and tender all of their Shares
pursuant to the Offer.
A copy of the joint press release of the Parent and the Company announcing
the execution of the Merger Agreement has been filed as Exhibit 7 to this
Schedule 14D-9 and is incorporated herein by reference. A copy of a letter to
stockholders of the Company, which accompanies this Schedule 14D-9, has been
filed as Exhibit 8 to this Schedule 14D-9 and is incorporated herein by
reference.
In reaching its conclusion and recommendation described above, the Board of
Directors of the Company considered the following factors:
(i) the premium which $9.375 per Share represents over the historical
and then current market prices for the Shares, including the fact that
$9.375 per Share represents a 50% premium based on the April 18, 1995
trading price, the day immediately preceding the Company's announcement of
its engagement of Chicago Corporation to assist the Company in considering
the possible sale of the Company, and a 17% premium based on the September
18, 1995 trading price, the last full day of trading before execution and
public announcement of the Merger Agreement;
(ii) the opinion of Chicago Corporation to the effect that, as of the
date of its opinion and based upon and subject to certain matters stated
therein, the consideration to be received by the holders of Shares pursuant
to the Offer and the Merger was fair to such holders from a financial point
of view. The full text of Chicago Corporation's written opinion, which sets
forth the assumptions made, matters considered and limitations on the
review undertaken by Chicago Corporation, is attached hereto as
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Annex II (which has been filed as Exhibit 9 to this Schedule 14D-9 and
which is incorporated herein by reference). STOCKHOLDERS ARE URGED TO READ
THE OPINION OF CHICAGO CORPORATION CAREFULLY IN ITS ENTIRETY;
(iii) the results of the process undertaken to identify and solicit
proposals from third parties to enter into a strategic transaction with the
Company which results indicated a low likelihood that any third party would
propose to acquire the Company at a price higher than $9.375 per share;
(iv) the likelihood that the Company will be able to complete the
Merger, including the fact that the Majority Stockholders were willing to
enter into the Stockholders Agreement pursuant to which the Majority
Stockholders agreed, among other things, to tender their respective Shares
in the Offer;
(v) the business, results of operations, financial condition and
future prospects of the Company;
(vi) the terms of the Offer and the Merger Agreement, including the
structural feature of the Offer and the Merger providing for a prompt cash
tender offer for all outstanding Shares to be followed by a merger for the
same consideration, thereby enabling stockholders to obtain cash for their
Shares at the earliest possible time;
(vii) the provisions of the Merger Agreement that require the Company
to pay the Parent a termination fee of $1,500,000 and reimburse the Parent
and the Purchaser for up to $1,850,000 of their out-of-pocket expenses
under certain circumstances as described above under "The Merger Agreement
-- Termination" and "-- Fees and Expenses";
(viii) the potential that the Company's growth strategy and financial
prospects may be in part dependent upon continued access to equity capital
markets and that the current trading behavior and concentrated ownership
profile of the Shares, combined with the potential desire on behalf of the
Majority Stockholders to achieve liquidity, may negatively influence such
access and prospects;
(ix) discussions with the Parent leading to the Board's belief that
$9.375 per Share represented the highest price per Share that could be
negotiated with the Parent; and
(x) the regulatory approvals required to consummate the Offer and the
Merger, and the prospects for receiving all such approvals.
The Board of Directors did not assign relative weights to the foregoing factors
or determine that any factor was of particular importance. Rather, the Board
viewed its position and recommendations as being based on the totality of the
information presented to and considered by it.
Having considered all of the foregoing, the structural provisions of the
Merger Agreement, and other relevant factors, the Board concluded that the Offer
and the Merger, taken together, was the best available alternative for the
Company and its stockholders.
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