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) February 7, 1997
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 February 10, 1997, American Filtrona Corporation issued the press
release attached hereto as Exhibit 99.1, announcing that it has entered into a
revised letter of intent with WBT Holdings LLC regarding the proposed sale of
American Filtrona. A copy of the revised letter of intent is attached hereto as
Exhibit 99.2.
Item 7. Exhibits.
EX-99.1 American Filtrona Corporation - Press Release (February 10, 1997)
EX-99.2 Letter of Intent between American Filtrona Corporation and WBT
Holdings LLC dated as of February 7, 1997
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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 thereunto duly authorized.
American Filtrona Corporation
(Registrant)
Date: February 13, 1997 By: /s/ John D. Barlow, Jr.
-----------------------------------
John D. Barlow, Jr.
Vice President - Finance
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EXHIBITS
Exhibit Number and Description
99.1 American Filtrona Corporation - Press Release (February 10, 1997)
99.2 Letter of Intent between American Filtrona Corporation and WBT
Holdings LLC dated as of February 7, 1997
AMERICAN FILTRONA CORPORATION
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3951 Westerre Parkway, Suite 300 . Richmond, VA 23233 .. Mailing Address:
P. O. Box 31640 . Richmond, VA 23294
FOR IMMEDIATE RELEASE
Date: February 10, 1997
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 revised 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 $46.52. 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. Such
execution is expected to occur before the end of February. Consummation of any
transaction would be subject to normal regulatory filings, shareholder approval
and certain other conditions.
WBT HOLDINGS LLC
999 PEACHTREE STREET, N.E.
SUITE 2100
ATLANTA, GEORGIA 30309
February 7, 1997
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, 12 and 13 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 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
February 7, 1997
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 $46.52 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 were earned in accordance with their terms with respect to
36,000 shares of AFC stock.
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 in the Fibers Sale Agreement (as defined in paragraph
8). AFC will be
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 3
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
or 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 adviser, 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. AFC shall not pay or become obligated to pay any fee to or
expenses of any competing bidder for AFC or any significant part of its
assets or business.
7. Exclusivity. From February 7, 1997 until the earlier of
execution of the Merger Agreement or termination of this letter of
intent pursuant to paragraph 8, AFC will not, and will not permit any
of its officers, directors, employees, financial advisors, agents or
other representatives or those of its subsidiaries to, solicit,
initiate or have any, or any further, discussions or negotiations with
any party other than WBT Holdings and Bunzl plc with respect to any
merger, acquisition, takeover proposal or offer for AFC or its shares
or any significant portion of its business or assets, however
structured or to be effected, or furnish any information concerning AFC
or its businesses or assets to any party other than WBT Holdings or
Bunzl plc with respect to any such acquisition or takeover proposal.
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
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 4
substance. The Merger Agreement shall be executed and delivered as soon
as possible, and in no event later than February 28, 1997. If the
parties have not executed a Merger Agreement by February 28, 1997, all
obligations of the parties under this letter of intent (except those
obligations provided in paragraph 12 and 13) shall terminate
automatically as of a termination time specified by either party in a
notice to the other party given not less than 48 hours prior to such
termination time. 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,
financial advisors or agents shall at any time solicit or
encourage (including by way of furnishing information) any
merger, acquisition, asset acquisition or takeover proposal or
offer or engage in any discussions or negotiations relating
thereto, unless the Board of Directors of AFC concludes in
good faith, after receiving the advice of its counsel, that
the failure to take such action would violate the fiduciary
obligations of the directors of AFC under applicable law.
(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.
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 5
(f) If the Board of Directors exercises its fiduciary
out, AFC shall be obligated as follows:
(i) 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, within three business days after receipt by AFC of a
statement specifying such expenses; and
(ii) if any proposal for a merger,
acquisition, takeover proposal or offer for AFC or its shares
of any significant portion of its assets or businesses,
however structured or to be effected, is consummated on or
before February 28, 1998, AFC shall pay to WBT Holdings a fee
equal to 2% of the product of the Merger Consideration
multiplied by the total number of shares of outstanding AFC
stock, within three business days after such consummation.
(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 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
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 6
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 Section 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 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).
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 7
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 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
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 8
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. Fee and Expenses. If a definitive Merger consistent with
the terms of this letter of intent is not executed on or before
termination of this letter of intent pursuant to paragraph 8 hereof:
(i) if AFC has received on or before that
date a higher competing proposal for a merger, acquisition, or
takeover proposal or offer for AFC or its shares or any
significant portion of its businesses or assets, however
structured or to be effected, AFC shall pay to WBT an amount
equal to the expenses incurred by WBT Holdings and Bunzl plc
in connection with the proposed transactions contemplated by
this letter of intent up to a maximum of 1% of the product of
the Merger Consideration multiplied by the total number of
outstanding shares of AFC stock, which amount shall be paid
promptly after receipt by AFC of a statement specifying such
expenses; and
(ii) if any proposal for a merger,
acquisition or takeover proposal or offer for AFC or its
shares or any significant portion of its assets or businesses,
however structured or to be effected, is consummated on or
before February 28, 1998, AFC shall pay to WBT Holdings,
within three business days after such consummation, a fee
equal to 2% of the product of the Merger Consideration
multiplied by the total number of outstanding shares of AFC
stock;
provided, however, that no fee or expense shall be payable pursuant to
this paragraph 13 if Goldman, Sachs & Co. is unable to provide a
fairness opinion to the Special Committee regarding the Merger
Consideration or if WBT terminates this letter of intent for any reason
other than refusal of AFC to execute a definitive Merger Agreement
consistent with the terms of this letter of intent.
<PAGE>
Mr. Gilbert M. Rosenthal
February 7, 1997
Page 9
14. 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, President
Accepted, this February 7, 1997
Special Committee
by: /s/
------------------------------------
Gilbert M. Rosenthal, Chairman
BLK/ph
Enclosure
cc: Mr. Anthony Habgood
Mr. Raymond C. Groth
C. Porter Vaughan, III, Esquire
Mr. David H. Coyle
