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) December 12, 1996
American Filtrona Corporation
(Exact name of registrant as specified in its charter)
Virginia 0-7163 54-0574583
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3951 Westerre Parkway, Suite 300, Richmond, Virginia 23233
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 346-2400
<PAGE>
Item 5. Other Events.
On December 12, 1996, American Filtrona Corporation issued the
press release attached hereto as Exhibit 99.1, announcing that it has entered
into a letter of intent with WBT Holdings, LLC regarding the proposed sale of
American Filtrona. A copy of the letter of intent is attached hereto as
Exhibit 99.2.
Item 7. Exhibits.
EX-99.1 American Filtrona Corporation - Press Release (December 12, 1996)
EX-99.2 Letter of Intent between American Filtrona Corporation and WBT
Holdings, LLC dated as of December 12, 1996
<PAGE>
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 thereunto duly authorized.
American Filtrona Corporation
(Registrant)
Date: December 18, 1996 By: /s/ John D. Barlow, Jr.
John D. Barlow, Jr.
Vice President - Finance
<PAGE>
EXHIBITS
Exhibit Number and Description
99.1 American Filtrona Corporation - Press Release (December 12, 1996)
99.2 Letter of Intent between American Filtrona Corporation and WBT
Holdings, LLC dated as of December 12, 1996
Exhibit 99.1
FOR IMMEDIATE RELEASE
Date: December 12, 1996
Contact: John L. Morgan or John D. Barlow, Jr.
Phone: 804/346-2400 -- Fax: 804/346-0164
Richmond, VA -- American Filtrona Corporation (NASDAQ-NM Symbol AFIL)
announced today that it has entered into a letter of intent with WBT Holdings,
LLC, a limited liability company owned by several trusts for the benefit of
members of the family of the late Walter Bunzl, of which Bennett Kight, a
director of the Company, is a co-trustee, regarding a sale of American
Filtrona for a per share cash price of $43.00. Execution of a definitive
acquisition agreement is subject to final negotiation of terms and conditions,
execution of a definitive agreement between WBT Holdings, LLC, and Bunzl plc,
an international paper and plastics group quoted on the London Stock Exchange,
regarding the sale to Bunzl plc of the bonded fibers business of American
Filtrona Corporation and completion of business and financial reviews.
Consummation of any transaction would be subject to normal regulatory filings,
shareholder approvals and certain other conditions. American Filtrona has
retained Goldman Sachs & Co. to advise it on this matter.
Exhibit 99.2
WBT Holdings, LLC
999 Peachtree Street, N.E.
Suite 2100
Atlanta, Georgia 30309
December 12, 1996
Mr. Gilbert M. Rosenthal, Chairman
Special Committee of the Board of Directors
of American Filtrona Corporation
c/o MedOutcomes, Inc.
3301 Rosedale Avenue
Richmond, VA 23230
Dear Gilbert:
WBT Holdings LLC ("WBT Holdings") is pleased to make the proposal
to acquire American Filtrona Corporation ("AFC") set forth in this letter of
intent. Upon its acceptance by AFC, this letter of intent will signify the
intentions of the parties to negotiate in good faith to attempt to agree upon
and execute a definitive Agreement and Plan of Merger (the "Merger Agreement")
consistent with the terms and conditions contained herein and to obtain
approval of the shareholders of AFC to the Merger Agreement. Except for the
provisions of paragraphs 7 and 12 hereof (which are intended to be binding and
enforceable), this letter is not intended to constitute a contract or an offer
to enter into a contract, nor to be binding upon either of the parties, nor to
create any legal obligations or rights in any party with respect to any of the
matters set forth herein.
1. Form of Transaction. The Walter Bunzl family trusts (the
"WB Trusts") would transfer all of their AFC shares to WBT Holdings, all
of whose stock is owned by the WB Trusts. AFC would enter into an
agreement and plan of merger (the "Merger Agreement") with WBT Holdings
and WB Acquisition Corp., a new wholly-owned subsidiary of WBT Holdings
("Newco"), pursuant to which at the closing Newco would merge with and
into AFC (the "Merger"). In the Merger, the outstanding shares of Newco
capital stock would be canceled or converted into shares of AFC common
stock, and the outstanding shares of AFC capital stock, other than
the shares held by WBT Holdings, would be converted into the right to
receive the consideration described in paragraph 2 below.
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 2
2. Consideration. On the terms and conditions set forth in
the Merger Agreement, each outstanding share of AFC capital stock (other
than AFC shares held by WBT Holdings) automatically would be converted
into a right to receive $43 in cash (the "Merger Consideration"). The
Merger Agreement will specify that (i) each stock option outstanding
immediately before the Merger shall be converted into the right to
receive a cash amount equal to the difference between the Merger
Consideration and the exercise price of such option and (ii) currently
outstanding performance share awards for periods ending Dec. 31, 1996
may be settled in accordance with their terms by issuance of shares of
AFC stock after that date and prior to the closing of the Merger, it
being understood that 25% of the awards will not be earned under the
applicable formula.
3. Payment of Merger Consideration. On or after the effective
date of the Merger, the Merger Consideration and the option payments
would be payable by a bank acting as exchange agent upon surrender to
the exchange agent by each such shareholder of his or her certificates
representing shares of AFC capital stock and by each option holder of
his or her option agreements.
4. Interim Operations. Until the closing of the Merger
Agreement, AFC shall be operated solely in the ordinary course with no
dividends or distributions in respect of AFC's capital stock (other than
regular quarterly dividends payable on or before the closing date), and,
except as contemplated by and scheduled in the Merger Agreement, no
major capital expenditures, bonuses, severance agreements or other
adjustments to compensation, except normally scheduled changes, and no
changes in capital structure, shall be paid or made without approval of
Newco.
5. Due Diligence. From and after the date hereof, Newco and
its lenders or their representatives will be provided with full access
to AFC's books, records and premises upon reasonable notice to AFC and
during regular business hours and also will be provided with copies of
financial statements, tax returns, agreements and other materials as
requested, which shall be kept confidential pursuant to the
confidentiality agreement referred to in paragraph 12 below. Bunzl plc
shall have the opportunity to review the financial condition, results of
operations, business and prospects of the bonded fibers business of AFC
(which will be purchased by Bunzl plc as described in and subject to
paragraph 8) to the extent reasonably necessary in the circumstances
with such limits as appropriate in light of the competitive relationship
between AFC and Bunzl plc. All information received by Bunzl plc shall
be subject to the confidentiality agreement referred to in paragraph 12
below. The parties' obligation to execute the Merger Agreement is
subject to the satisfactory completion of such due diligence and to
AFC's review of the provisions (including the purchase price) contained
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 3
in the Fibers Sale Agreement (as defined in paragraph 8). AFC will be
provided a complete final draft of the Fibers Sale Agreement, including
the pricing provisions, at least 48 hours prior to the scheduled
execution of the Merger Agreement, during which period there will be a
scheduled meeting of the AFC Special Committee and Board of Directors to
act upon the Merger Agreement; provided, however, that AFC will enter
into an agreement, as to which Bunzl plc will be a third party
beneficiary, providing that, until the Merger Agreement is executed, (i)
it will hold the terms and provisions of the Fibers Sale Agreement
secret and confidential and neither it nor any of its representatives of
advisors will disclose any of the terms or provisions of the Fibers Sale
Agreement to any party other than AFC and its representatives and
advisors, and (ii) neither it nor any of its advisors or representatives
will use the Fiber Sales Agreement or any terms or provisions thereof
for any purpose except the evaluation of the Merger Agreement from the
standpoint of AFC and its shareholders.
6. Certain Fees. Newco and AFC each shall pay its own fees
and expenses and those of its attorneys, agents and advisers. AFC shall
not be obligated to any investment advisor, investment broker, finder or
broker in connection with the proposed acquisition except for AFC's
obligations to Goldman, Sachs & Co. pursuant to a letter dated June 28,
1996.
7. Exclusivity. From the date of acceptance of this letter of
intent and until either the Merger Agreement is executed or Newco and
Bunzl plc terminate their negotiations with AFC pursuant to this letter
of intent, AFC will not, and will not permit any of its officers,
directors, employees, financial advisors, agents or other
representatives or those of any of its subsidiaries to, solicit or
initiate any acquisition or takeover proposal or offer for AFC or any
significant portion of its business or assets, however structured or to
be effected, except (i) they may solicit proposals from not more than
ten prospective competing bidders, and (ii) they may furnish information
about AFC only in response to unsolicited bona fide requests therefor,
and may enter into negotiations with competing bidders, provided,
however, that Newco and Bunzl plc shall be notified promptly of the
principal terms of all bona fide competing offers (whether solicited or
unsolicited) made to AFC which AFC is pursuing.
8. Merger Agreement. AFC, WBT Holdings and Newco will
negotiate in good faith to agree upon the provisions of the Merger
Agreement on the basis set forth in this proposal. The Merger Agreement
shall contain usual and customary representations and warranties (and
supporting disclosures), agreements and conditions pending closing and
other matters typically found in agreements relating to transactions of
this type, size and complexity and otherwise satisfactory to the parties
in form and substance. The Merger Agreement shall be executed and
delivered as soon as possible,
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 4
and in no event later than January 17, 1997. If the parties have not
executed a Merger Agreement by January 17, 1997, all obligations of the
parties under this letter of intent (except those obligations provided
in paragraph 12) shall terminate automatically. The Merger Agreement
will be conditioned upon execution of a definitive agreement between
Newco and Bunzl plc for sale of the assets of the bonded fibers business
of AFC to Bunzl plc for cash (the "Fibers Sale Agreement"), which
Agreement shall be attached as an Exhibit to the Merger Agreement.
Without limiting the foregoing, the Merger Agreement shall provide for
the following:
(a) Receipt by AFC of an opinion from Goldman, Sachs &
Co. at the time of execution of the Merger Agreement, and not
withdrawn before the closing thereunder, that the Merger
Consideration is fair to AFC shareholders.
(b) Approval by the Board of Directors of AFC of the
Merger and, subject to subparagraph (e) below, recommendation by
the Board that the AFC shareholders approve the Merger.
(c) Approval of the Merger by holders of more than
two-thirds of the outstanding stock of AFC at a shareholders
meeting to be duly called and held.
(d) After execution and prior to termination of the
Merger Agreement, neither AFC nor its officers, directors or
agents shall at any time after execution of the Merger Agreement
solicit or initiate any competing bids for AFC, but they may
furnish information about AFC and enter into negotiations with
competing bidders in each case who either were solicited in
accordance with paragraph 7 above or after execution of the
Merger Agreement make unsolicited bona fide requests therefore;
provided, however, that Newco and Bunzl plc shall be notified
promptly of the principal terms of all bona fide competing offers
(whether solicited or unsolicited) made to AFC which AFC is
pursuing.
(e) The Board of Directors of AFC shall have a "fiduciary
out," permitting it to terminate the Merger Agreement because of
its receipt of a higher competing proposal at any time that the
Board concludes, in good faith, after receiving the advice of its
counsel, that such action is in the best interests of AFC and its
shareholders.
(f) If the Board of Directors exercises its fiduciary
out, AFC shall be obligated as follows:
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 5
(i) if the competing proposal is consummated on or
before December 31, 1997 and the AFC shares held by WBT
Holdings and its affiliates are voted in favor of or
tendered pursuant to the proposal, AFC shall pay to WBT
Holdings (x) the expenses incurred by WBT Holdings and Bunzl
plc in connection with the Merger Agreement and the Fibers
Sale Agreement, up to a maximum of 1% of the product of the
Merger Consideration multiplied by the total number of
shares of outstanding AFC stock and (y) a fee equal to 2% of
the product of the Merger Consideration multiplied by the
total number of shares of outstanding AFC stock;
(ii) if the competing proposal is consummated or is
not consummated and WBT Holdings and its affiliates do not
vote their AFC shares in favor of, or tender their shares
pursuant to the proposal (or if the proposal is not
submitted to AFC's shareholders at a special meeting or
through a tender offer and WBT Holdings and its affiliates
do not provide written confirmation of their agreement to
so vote or tender their shares following a request from AFC
for such confirmation), WBT will not be entitled to any
break-up fee or expense reimbursement;
(iii) in any situation not described in (i) or (ii)
above, AFC shall pay to WBT Holdings the expenses incurred
by WBT Holdings and Bunzl plc in connection with the Merger
Agreement and the Fibers Sale Agreement, up to a maximum of
1% of the product of the Merger Consideration multiplied by
the total number of shares of outstanding AFC stock.
(g) The Merger Agreement shall contain customary
conditions to the obligations of Newco to proceed, including
without limitation the following, and the other special
conditions set forth below:
(i) Stay bonuses and severance agreements for
employees will be limited to those approved by the
Compensation Committee and Special Committee, as reported
to WBT Holdings on July 26, 1996.
(ii) The employment termination arrangement with
John Morgan will provide for a severance payment (in lieu
of all salary and bonuses payable after the closing and all
additional accruals or contributions that would be payable
after the closing with respect to his interests under the
Pension Plan, SERP and 401(k) Plan and, except as provided
herein, in lieu of continued participation in welfare
plans) of $800,000, and (y) AFC's continuing until December
31, 1999 to
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 6
provide Mr. Morgan participation, as a retiree, in AFC's
medical insurance plan (if available thereunder) on the
same contributory basis as now in effect; provided,
however, that Mr. Morgan will pay any premiums in excess of
$9,000 for such coverage during 1997 through 1999. Mr.
Morgan will enter into a non-competition agreement for a
period of three (3) years with respect to the bonded fibers
business providing for a payment of $400,000 to be made at
closing and a noncancelable agreement to consult with Bunzl
plc with respect to the bonded fiber business for a period
of two (2) years providing for payments of $200,000 per
year, both containing terms satisfactory to Bunzl plc and
Mr. Morgan. AFC will hold Mr. Morgan harmless from the
application of the golden parachute and excise tax
provisions of Sections 280G and 4999 of the Internal
Revenue Code of 1986, as amended, respectively. This will
include indemnification of Mr. Morgan for any excise tax
obligations and any federal, state or local income,
employment-related and excise tax obligations related to
indemnification payments.
(iii) The accuracy of warranties and representations
of AFC regarding AFC, its financial condition, operations,
business, assets, liabilities and prospects.
(iv) The absence of any material adverse change in
the financial condition, results of operations, business or
prospects of AFC from that reflected in its June 30, 1996
financial statements.
(v) The receipt of any necessary governmental or
contractual consents to the consummation of the Merger and
the Fibers Sale Agreement so that the surviving corporation
in the Merger or Bunzl plc, as applicable, can continue to
use all of AFC's significant assets, including software and
other contract rights, following the Merger.
(vi) Satisfaction of all conditions in Newco's
financing commitments (which conditions shall be
satisfactory to AFC) in the form attached as an Exhibit to
the Merger Agreement that are not within the control of
Newco and affiliates, all of which Newco agrees to use its
best commercial efforts to have satisfied.
(vii) Satisfaction of all conditions in the Fibers
Sale Agreement (which conditions shall be satisfactory to
AFC) in the form attached as
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 7
an Exhibit to the Merger Agreement that are not within the
control of Newco and its affiliates, all of which Newco
agrees to use its best commercial efforts to have
satisfied.
(viii) Relevant filings being made and waiting
periods expiring under the Hart-Scott-Rodino Act (as
defined below).
9. Shareholder Approval. Following execution of the Merger
Agreement, subject to paragraph 8(e), the Board of Directors of AFC
shall:
(a) proceed promptly to call a special meeting of its
shareholders, to be held as soon as practicable, for the purpose
of voting on the transactions contemplated herein;
(b) recommend approval by AFC's shareholders of the
transactions contemplated herein; and
(c) use its best commercial efforts to solicit sufficient
proxies to obtain such approval.
In connection therewith, AFC shall prepare a proxy statement and
other related proxy materials containing all information required by
Rule 13e-3 under the Securities Exchange Act of 1934, all of which will
be distributed to AFC's shareholders, and Newco and WBT Holdings shall
prepare and file with the SEC all required documents, including
documents complying with rules applicable to "going private
transactions" as defined in Rule 13e-3.
10. Hart-Scott Filings. Promptly after the execution of the
Merger Agreement, AFC, Newco and Bunzl plc will cooperate with each
other in the preparation of all filings with respect to the transactions
contemplated herein required to be made with the Federal Trade
Commission (the "FTC") and the Department of Justice under the Antitrust
Improvements Act of 1976 (the "Hart-Scott-Rodino Act"). In the event
that the FTC or the Department of Justice requires any additional
information with respect to the transactions, AFC, Newco and Bunzl plc
will cooperate with each other in promptly obtaining and preparing such
information and delivering it to the FTC and the Department of Justice.
11. Closing Date. The closing of the transactions contemplated
hereby will take place at the offices of Hunton & Williams, Riverfront
Plaza, Richmond, VA at 10:00 a.m. (local time) on the next business day
following approval of the Merger
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 8
Agreement by AFC's shareholders and satisfaction of all other conditions
to the Merger, or at such other place, on such other date and at such
other time as the parties may mutually agree.
12. Confidentiality. The WB Trusts, their affiliates, agents
and advisors have entered into a Confidentiality Agreement agreeing that
all of the information that AFC or its agents and advisors shall provide
to the WB Trusts, their affiliates, agents and advisors concerning AFC
or that is obtained by Newco or its agents or advisors from its
examination of the facilities, records and personnel of AFC will be used
solely for the purpose of the evaluation of the proposed acquisition of
AFC. WBT Holdings and Newco will be bound by that Confidentiality
Agreement. Also, Bunzl plc will execute a confidentiality agreement
containing terms and provisions satisfactory to AFC and Bunzl plc. AFC,
WBT Holdings and Bunzl plc agree that there be no public statement about
this proposal or disclosure of it to customers of AFC or Bunzl plc save
as mutually agreed or as required by applicable law or by any
governmental or regulatory authority or securities exchange.
13. Approval of Merger Agreement. The Merger Agreement
effectuating this letter of intent is subject to approval by the Board
of Directors of AFC.
Yours truly,
WBT Holdings, LLC
by: /s/ Bennett L. Kight
Bennett L. Kight, President
Accepted, this December 12, 1996.
Special Committee
by: /s/ Gilbert M. Rosenthal
Gilbert M. Rosenthal, Chairman
BLK/ph
Enclosure
<PAGE>
Mr. Gilbert M. Rosenthal
December 12, 1996
Page 9
cc: Mr. Raymond C. Groth
C. Porter Vaughan, III, Esquire
Mr. David H. Coyle
