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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
AMENDMENT NO. 1
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
GUARANTY NATIONAL CORPORATION
(Name of Subject Company)
GUARANTY NATIONAL CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
401192109
(CUSIP Number of Class of Securities)
Michael L. Pautler
Senior Vice President - Finance
Guaranty National Corporation
9800 South Meridian Boulevard
Englewood, Colorado 80112
(303) 754-8400
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the
person(s) filing statement)
Copy to:
Hardin Holmes, Esq.
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, 26th Floor
Denver, Colorado 80202
(303) 623-2700
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This Statement amends the Schedule 14D-9 of Guaranty National
Corporation dated May 22, 1996 (the "Schedule 14D-9") by incorporating by
reference herein the information set forth in Exhibits 10, 11 and 12 hereto.
This Statement also amends Items 3, 4, 6 and 9 of the Schedule 14D-9 by adding
the information set forth below. Except as otherwise indicated herein, the
Schedule 14D-9 remains unchanged in all respects. Capitalized terms not
otherwise defined herein are defined as set forth in the Schedule 14D-9.
Item 3. Identity and Background
(b) The portion of Item 3(b) of the Schedule 14D-9 entitled
"Background of the Offer; Appointment of the Special Committee" is amended and
supplemented as follows:
On May 25, 1996, the Special Committee held a telephonic meeting to
get further advice from its financial and legal advisors and to discuss its
negotiating strategy with Orion.
On May 28, 1996, the Chairman of the Special Committee met with Mr.
Alan Gruber to further discuss and explain the Special Committee's concerns
about the Offer. Although no agreements were reached, Mr. Gruber indicated his
willingness to consider amending the Offer to include certain "back-end"
protections for the Company's shareholders following the consummation of the
tender offer.
On May 29, 1996, Orion's general counsel and special outside counsel
contacted the counsel to the Special Committee to inform him that Orion intended
to amend its Offer to include certain of the "back-end" protections that had
previously been suggested by the Special Committee and to extend the Offer for
an additional five business days, until June 12, 1996. Later the same day, the
Special Committee held a telephonic meeting to discuss the Offer and the
recommendation of the Special Committee.
On May 30, 1996, Mr. Gruber called the Chairman of the Special
Committee to reiterate Mr. Gruber's belief that the engagement and incentive fee
structure with the Special Committee's financial advisor raises serious
questions about the objectivity and fairness of the evaluation process.
Also on May 30, 1996, counsel for the Special Committee received a
draft of the Purchasers' proposed amendments to the Offer from counsel for the
Purchasers.
Later that day, the Special Committee held a telephonic meeting to
discuss the Offer and the recommendation of the Special Committee. The Special
Committee determined that the Offer is inadequate because of the Offer price and
the fact that the Offer is for less than 100% of the publicly-held Shares, but
nonetheless it is making no recommendation at this time
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to the Company's shareholders. The Special Committee's determination is based on
the following:
(i) The opinion issued by the Special Committee's financial
advisor, Salomon Brothers, that the Offer is inadequate, from a financial point
of view, to the non-Orion shareholders.
(ii) The fact that a shareholder who believes the Offer is
inadequate may nevertheless feel compelled to tender his or her Shares because
if the Offer is consummated, the public float represented by the remaining
Shares will be substantially reduced. The smaller public float may reduce
liquidity and lead to greater price volatility, which could result in a lower
price for such Shares.
(iii) The likelihood that, regardless of the recommendation of the
Special Committee, Orion's Offer will continue and a significant number of
Shares will be tendered.
(iv) The Special Committee's review and analysis of presentations
made to it by its financial advisor with respect to the valuation of the
Company's stock as described in the Company's Schedule 14D-9 dated May 22, 1996.
(v) The Special Committee's familiarity with the Company's
business, financial condition, results of operations, current business strategy
and prospects.
(vi) The repeated attempts by the Special Committee and its
financial advisor to induce Orion to increase its Offer price and change the
structure of the Offer. Although such attempts have resulted in the "back-end"
protections described below, the Special Committee believes it is doubtful that
further discussions will result in any further changes in the Offer Price or
number of Shares being purchased.
(vii) The Special Committee's belief that if the Offer is
consummated, Orion will not mismanage the Company or loot its assets, based upon
Orion's conduct as a major or controlling shareholder of the Company since 1984.
(viii) The fact that the Offer price of $17.50 per share represents a
premium over the price of $16 1/8 at which the Shares were trading immediately
prior to the Offer and over the average price during the last 12 months of
$15.84, but is below the percentage premium that has been paid in other
comparable transactions.
(ix) The fact that Orion currently owns approximately 49% of the
outstanding Shares, has stated that it has no interest in selling its Shares and
has refused to identify the parties with whom Orion has discussed the possible
acquisition of the Company. As a result, it is extremely difficult for the
Company to effect an alternative transaction for the Company or
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the Shares, and the non-Orion shareholders therefore could not reasonably expect
to receive a "control premium" for their Shares from a third party.
(x) The likelihood that the Shares will continue to be traded on the
New York Stock Exchange and that the Company will remain a reporting company
under the Securities Exchange Act of 1934, as amended.
(xi) The fact that shareholders who wish to retain a long-term
interest in the Company may do so by not tendering their Shares.
The Committee also discussed, but made no decision, as to whether it should
request its financial advisor to solicit interest from third parties in
acquiring the Company and whether it should recommend to the Board of Directors
that it amend the Company's Shareholder Rights Plan to eliminate the exemption
for acquisitions by Orion, which could have the effect of causing Orion to
withdraw the Offer if it did not have the approval of the Special Committee.
Finally, the Committee instructed its counsel to contact Orion's counsel to
inform him of the Special Committee's position with respect to the Offer and to
attempt to initiate further discussions of the Offer between Orion and the
Special Committee.
On May 31, 1996, counsel to the Special Committee was informed by
Counsel for Orion that the Purchasers would not further discuss with the Special
Committee the Offer Price or the maximum number of Shares subject to the Offer.
Also on that date, the financial advisor to the Special Committee issued its
opinion to the Special Committee. (A copy of the opinion is included as Exhibit
12 to this Statement and is incorporated herein by reference.)
On May 31, 1996, counsel for the Special Committee received the
following revised draft of Purchasers' proposed amendments to the Offer:
Following Mr. Gruber's meeting with the Chairman of the Special
Committee on May 28, the Purchasers confirmed to legal counsel for the
Company and the Special Committee on May 29 that, if at least 4,600,000
shares are validly tendered and accepted for payment and paid for, then:
1. The Purchasers will not purchase, prior to the third
anniversary of the Expiration Date, additional Shares (if after giving
effect to such purchase they would own more than 81% of the outstanding
shares) other than pursuant to an offer made to all holders of Shares which
is conditioned on the acceptance of such offer by holders owning at least a
majority of the Shares then outstanding which are not held by the
Purchasers and their affiliates.
2. If an offer is made to holders of Shares, as described in
paragraph 1 above, prior to the third anniversary of the Expiration Date,
the Purchasers will offer a purchase price involving consideration equal to
at least $17.50 per share.
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3. The Purchasers will support adoption of a policy by the Board
of Directors of the Company that any repurchase of Shares by the Company
prior to the third anniversary of the Expiration Date should be approved by
a majority of those members of the Board of Directors who are independent
of and not employed by any of the Purchasers.
4. If, at any time during the five years following the
Expiration Date, the Purchasers should wish to sell as a block the Shares
owned by them, or propose a merger or consolidation involving the Company,
they will not do so unless (a) in the case of a sale of all Purchasers'
Shares, the purchaser of such Shares undertakes to offer to purchase all
other Shares outstanding for consideration of equivalent value to that
offered to the Purchasers or (b) in the case of a merger or consolidation,
all Shares are exchanged for substantially equivalent value.
Counsel for the Purchasers has also stated to counsel for the Special
Committee that after reviewing a copy of this Amendment it will file an
amendment to the Purchasers' Schedule 14D-1.
On June 1, 1996, the Special Committee held a telephonic meeting to
discuss possible actions that could be taken with respect to the Offer and
decided to request its financial advisor to solicit any interest of third
parties in acquiring all or any part of the Company. Following the meeting, the
Chairman of the Special Committee contacted its financial advisor and made such
request.
Item 5. The Solicitation or Recommendation
(a) The Special Committee has unanimously determined, in light of all
the relevant circumstances, that the Offer is inadequate because of the Offer
price and the fact that the Offer is for less than 100% of the publicly-held
Shares, but nonetheless it is making no recommendation at this time to the
Company's shareholders. The Special Committee urges all shareholders to make
their own determination as to whether to tender some or all of their Shares
pursuant to the Offer based on the information set forth in the Offer to
Purchase, this Schedule 14D-9, publicly available information about the Company
and each shareholder's own personal circumstances. A letter to shareholders
communicating the Special Committee's current position as to the Offer is filed
herewith as Exhibit 10, and is incorporated by reference herein.
(b) In reaching its determination with respect to the Offer, the
Special Committee considered a number of factors, as described in Section 3(b),
above.
In view of the wide variety of factors considered in connection with
their review of the Offer, the Special Committee found it impractical to, and
therefore did not, quantify or otherwise assign relative weights to the specific
factors it considered in reaching its conclusion with respect to the Offer.
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Item 6. Recent Transactions and Intent With Respect to Securities
Item 6 of the Schedule 14D-9 is amended in its entirety to read as
follows:
(a) No transactions in Shares have been effected during the past 60
days by the Company, or, to the best of the Company's knowledge, by any
executive officer, director, affiliate, or subsidiary of the Company, except for
the exercise of options to purchase 1,349 Shares on May 30, 1996 by Fred T.
Roberts, President, Commercial Lines, in exchange for relinquishing options to
purchase 12,651 shares at a price of $14.50 per share, and except for the open
market purchases by Design Professionals Insurance Company, one of the
Purchasers, on the dates and at the prices set forth below:
<TABLE>
<CAPTION>
Price Per Share
Number of Shares (net of commission) Date
-------------------------- ------------------- --------
<S> <C> <C>
1,900 $ 13.50 03/11/96
10,000 $ 13.625 03/12/96
1,600 $ 13.50 03/12/96
</TABLE>
(b) To the best of the Company's knowledge, the following of the
Company's executive officers, directors, affiliates and subsidiaries who own
Shares, presently intend to tender such Shares to the Purchasers pursuant to the
Offer:
(i) William J. Shepherd, a director of the Company, intends to
tender 5,000 Shares;
(ii) Fred T. Roberts, President of the Commercial Lines Unit,
intends to tender 4,315 Shares;
(iii) Jacqueline L. Melton, the Company's Senior Vice President
-Human Resources, intends to tender 7,586 Shares;
(iv) James R. Pouliot, President of the Viking Division, intends
to tender 13,000 Shares;
(v) Michael L. Pautler, the Company's Senior Vice President-
Finance and Treasurer, intends to tender 18,586 shares; and
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(vi) Arthur J. Mastera, President of the Personal Lines
Division, intends to tender 19,232 shares.
Mr. Pouliot purchased 1,000 Shares and Mr. Pautler purchased 600
shares of the Company within six (6) months of the Offer expiration date, and
the tender by them of the above Shares will result in liability under Section 16
of the Securities Exchange Act of 1934, as amended. Messrs. Pautler and Pouliot
intend to pay to the Company, pursuant to the rules and regulations promulgated
under Section 16, the profits earned by them in connection with the earlier
purchase and the current tender of an equal number of such Shares.
The Company believes that Mr. Ware, the Company's Chief Executive
Officer and a member of the Board of Directors of both the Company and Orion,
Shelly J. Hengsteler, the Company's Controller, and the members of the Special
Committee, Dennis Lacey, Carroll Speckman, M. Ann Padilla, Tucker Hart Adams and
Richard R. Thomas, do not intend to tender any Shares in the Offer.
The above officers and directors may change the number of Shares
indicated, or change their determination as to whether or not they intend to
tender Shares in the Offer, at any time prior to the expiration date of the
Offer. None of the Company's directors or executive officers, in their
capacities as such, makes any recommendation to the shareholders of the Company
regarding the Offer. Messrs. Mastera, Pautler and Pouliot have stated that
their intention to tender is based in part on their need to meet income tax
obligations arising from the early termination of restrictions on certain shares
held by them, as discussed above in Item 3(b).
Item 9. Material to be Filed as Exhibits
Exhibit 10 - Letter to Shareholders, dated June 1, 1996
Exhibit 11 - Press release issued on June 1, 1996 (not included in copies
mailed to shareholders)
Exhibit 12 - Opinion of Salomon Brothers Inc dated May 31, 1996
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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.
Dated: June 1, 1996
GUARANTY NATIONAL CORPORATION
By:/s/ Michael L. Pautler
----------------------
Michael L. Pautler, Senior Vice President -
Finance and Treasurer
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EXHIBIT INDEX
Description
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Exhibit 10 - Letter to Shareholders, dated June 1, 1996
Exhibit 11 - Press release issued on June 1, 1996
Exhibit 12 - Opinion of Salomon Brothers Inc dated May 31, 1996
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EXHIBIT 10
Guaranty National Corporation
9800 South Meridian Boulevard
Englewood, Colorado 80112
June 1, 1996
Dear Shareholder:
On May 8, 1996, Orion Capital Corporation and certain of its subsidiaries
("Orion") commenced a cash tender offer (the "Offer") to purchase up to
4,600,000 shares of common stock of Guaranty National Corporation (the
"Company") at a price of $17.50 per share. Orion currently owns approximately
49.5 percent of the Company's outstanding common stock. If the Offer is
consummated and Orion acquires 4,600,000 shares pursuant to the Offer, Orion's
percentage ownership of the outstanding common stock would increase to
approximately 80.3 percent. Orion has stated that it will amend its Offer to
include certain "back-end" protections as described in paragraph 3(b) of the
attached Amendment No. 1 to the Company's Schedule 14D-9 (the "Amendment"), and
that it will extend the Expiration Date of the Offer to June 12, 1996.
The Special Committee has unanimously determined, in light of all the
relevant circumstances, that the Offer is inadequate because of the Offer price
and the fact that the Offer is for less than 100% of the publicly-held Shares,
but nonetheless it is making no recommendation at this time to the Company's
shareholders. The Special Committee urges all shareholders to make their own
determination as to whether to tender some or all of their Shares pursuant to
the Offer based on the information set forth in the Offer to Purchase, the
Amendment, publicly available information about the Company and each
shareholder's own personal circumstances.
Sincerely,
Dennis J. Lacey
Chairman of the Special Committee
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EXHIBIT 11
June 1, 1996
For Immediate Release
Contact: Michael Pautler
Senior Vice President of Finance
(303) 754-8701, or
Sharon McDougall
Director of Communications
(303) 754-8717
For: Guaranty National Corporation (NYSE: GNC)
Guaranty National Corporation
Special Committee
Considers Tender Offer Inadequate
But Makes No Recommendation
(Englewood, Colorado) - Guaranty National Corporation ("GNC") announced today
that its Special Committee of disinterested, outside directors has unanimously
determined that the Orion tender offer is inadequate because of the offer price
and the fact that the offer is for less than 100% of the publicly-held shares,
but nonetheless it is making no recommendation at this time to the Company's
shareholders. The Special Committee urges all shareholders to make their own
determination as to whether to tender some or all of their shares pursuant to
the offer.
In reaching its determination, the Special Committee considered a number of
factors which are discussed in Amendment No. 1 to the Company's Schedule 14D-9
Solicitation/Recommendation Statement, which is being filed with the Securities
and Exchange Commission and is being mailed to all GNC shareholders. The
principal factors considered by the Special Committee in reaching its decision
include (i) the opinion issued by the Special Committee's financial advisor,
Salomon Brothers Inc, that the offer is inadequate, from a financial point of
view, to the non-Orion shareholders, and (ii) that a shareholder who believes
the offer is inadequate may nevertheless feel compelled to tender his or her
shares because, if the offer is consummated, the public float represented by the
remaining shares will be substantially reduced. The smaller public float may
reduce liquidity and lead to greater price volatility, which could result in a
lower price for such shares.
The Amendment includes a description of certain changes to the offer which Orion
has stated it will make for the benefit of holders of those shares which are not
purchased in the tender. Orion has also stated that it plans to extend the
expiration date of the tender offer from June 5 to June 12, 1996.
<PAGE>
Through its subsidiaries, Guaranty National writes specialty commercial and
private passenger automobile insurance, as well as collateral protection and
other commercial coverages. The Company is a leading provider of nonstandard
personal automobile insurance written through independent agents. A.M. Best
Company rates Guaranty National Insurance Company and its subsidiaries "A
(Excellent)" and Viking Insurance Company of Wisconsin and its affiliate "A-
(Excellent)". The Company's common stock is traded on the New York Stock
Exchange under the symbol GNC.
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EXHIBIT 12
May 31, 1996
Special Committee of the Board of Directors
Guaranty National Corporation
9800 South Meridian Boulevard
Englewood, CO 80112
Ladies and Gentlemen:
Orion Capital Corporation and certain affiliates (collectively, "Orion") have
commenced a tender offer (the "Orion Offer") to purchase up to 4,600,000 shares
of common stock, par value $1.00 per share (the "Common Stock"), of Guaranty
National Corporation ("GNC" or the "Company") not owned by Orion at a price of
$17.50 per share net to the seller in cash. The terms of the Orion Offer are
more fully set forth in the Schedule 14D-1, dated May 8, 1996, as amended (the
"Schedule 14D-1"), filed by Orion with the Securities and Exchange Commission.
According to the Schedule 14D-1, Orion has no present intention to seek a merger
or other business combination with the Company to acquire the remaining shares
and anticipates, without providing any assurance, that the Common Stock will
continue to be registered and listed for trading. The Orion Offer, collectively
with the resulting minority ownership of Common Stock, is referred to herein as
the "Orion Proposal." You have asked for our opinion as investment bankers as
to the adequacy of the Orion Proposal, from a financial point of view, to the
holders of Common Stock other than Orion (the "Non-Orion Stockholders").
As you are aware, we have acted as financial advisor to the Special Committee of
the Board of Directors of the Company in connection with its review of the Orion
Proposal and will receive a fee for our services, including a substantial fee in
the event certain transactions are consummated. In addition, in the ordinary
course of our business, we may actively trade the debt and equity securities of
both the Company and Orion for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
In connection with rendering our opinion, we have reviewed and analyzed material
bearing upon the financial and operating conditions and prospects of the Company
including, among other things, the following: (i) the Schedule 14D-1; (ii)
certain publicly available information concerning GNC, including the Annual
Reports on Form 10-K of GNC for the years ended December 31, 1995 and December
31, 1994, and the Quarterly Report on Form 10-Q of GNC for the quarter ended
March 31, 1996; (iii) certain internal information of the Company, primarily
financial in nature (including projections, forecasts and analyses prepared by
or on behalf of the Company's management), concerning the business, assets,
liabilities, operations and prospects of the Company furnished to us by the
Company for purposes of our analysis,
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including the unaudited financial statements of GNC for the four-month period
ended April 30, 1996, prepared by the Company; (iv) statutory financial
information of GNC's insurance subsidiaries for the years ended December 31,
1995 and December 31, 1994, and for the three-month period ended March 31, 1996;
(v) certain publicly available information concerning the trading of, and the
trading market for, the Common Stock; (vi) certain publicly available
information with respect to certain publicly traded companies that we believe to
be comparable to the Company and the trading markets for certain of such other
companies' securities; (vii) certain publicly available information concerning
the nature and terms of certain other acquisition transactions and certain
transactions involving the acquisition of minority interests by controlling
stockholders that we consider relevant to our inquiry; and (viii) the financial
terms of the Orion Proposal. We have also met with certain officers and
employees of the Company to discuss matters we believe relevant to our inquiry
including the past and current business operations, financial condition and
prospects of the Company.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify nor assumed any responsibility for verifying any of such
information. With respect to financial projections and forecasts, we have
assumed that they were reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the future
financial performance of the Company and we express no view with respect to such
projections or forecasts or the assumptions on which they are based. We have
not made or obtained or assumed any responsibility for making or obtaining any
independent evaluations or appraisals of any of the Company's assets, properties
or facilities, nor have we been furnished with any such evaluations or
appraisals.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company; (ii) the business prospects of the Company; (iii) the historical and
current market for the Common Stock and for the equity securities of certain
other companies that we believe to be comparable to the Company; and (iv) the
nature and terms of certain other acquisition transactions and acquisitions of
minority interests by controlling shareholders that we believe to be relevant.
We have also taken into account our assessment of general economic, market and
financial conditions as well as our experience in connection with similar
transactions and securities valuation generally. We were not requested to
solicit, and accordingly did not solicit, interest from any third party with
respect to the acquisition of all or any part of the Company. Our opinion
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof and we assume no responsibility to update or revise our opinion
based upon circumstances or events occurring after the date hereof. Our opinion
is for the sole benefit of the Special Committee in its consideration of the
Orion Proposal and is, in any event, limited to the adequacy, from a financial
point of view, of the Orion Proposal to the
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Non-Orion Stockholder as to whether such holder should tender shares of Common
Stock in the Orion Offer.
Based upon and subject to the foregoing, it is our opinion as investment bankers
that as of the date hereof, the Orion Proposal is inadequate, from a financial
point of view, to the Non-Orion Stockholders.
Very truly yours,
/s/ Salomon Brothers Inc
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