SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
September 27, 1996
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(Date of Report, date of earliest event reported)
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 1-3919 37-0364250
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation or Identification No.)
organization)
5430 LBJ Freeway, Suite 1740, Three Lincoln Centre, Dallas, TX 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 458-0028
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Not applicable
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(Former name or address, if changed since last report)
Item 2: Acquisition or Disposition of Assets
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On September 27, 1996, the stockholders of Keystone Consolidated
Industries, Inc. ("Keystone") and DeSoto, Inc. ("DeSoto") approved the merger of
the two companies (the "Merger") and upon completion of the Merger, DeSoto
became a wholly-owned subsidiary of Keystone. Keystone will exchange
approximately 3.5 million shares of its common stock (approximately $29.3
million at the $8.38 per share market price on September 27, 1996) and 435,458
shares of Keystone preferred stock ($3.5 million) for all of the outstanding
common stock and preferred stock, respectively, of DeSoto. Each DeSoto
stockholder will receive .7465 of a share of Keystone stock for each share of
DeSoto stock (the "Exchange Ratio").
In connection with the Merger, Keystone also assumed each of the
approximately 184,000 outstanding options to purchase DeSoto common stock and
converted each DeSoto option to an option to acquire that number of shares of
Keystone common stock equal to the number of shares of DeSoto common stock
subject to such DeSoto option multiplied by the Exchange Ratio. The exercise
prices of such DeSoto options were adjusted by dividing the DeSoto option
exercise prices by the Exchange Ratio. The other terms of the DeSoto options
were unchanged.
Keystone also assumed 600,000 warrants to acquire DeSoto common stock and
converted the DeSoto warrants to Keystone warrants with the number and exercise
price of the DeSoto warrants multiplied and divided, respectively, by the
Exchange Ratio.
Simultaneous with the Merger, Keystone's three underfunded defined benefit
pension plans were merged with and into DeSoto's overfunded defined benefit
pension plan which results in an overfunded plan for financial reporting
purposes and therefore should result in reduced future pension expense and
contributions by Keystone.
In addition, Keystone's current seven-member Board of Directors was
expanded to nine members, adding former DeSoto directors William Spier and
William P. Lyons.
Pursuant to the Merger Agreement, Keystone is obligated to cause DeSoto, as
soon as possible after consummation of the Merger, to pay approximately $6.5
million to certain of DeSoto's trade creditors who are parties to a trade
composition agreement with DeSoto and an additional approximately $1.5 million
to such trade creditors within one year of the Merger. Additionally, Keystone
is obligated to pay immediately to the holders of DeSoto preferred stock all
unpaid dividend arrearages, which amounts to approximately $1.6 million.
As a result of these and other transactions related to the Merger, Keystone
required additional funding from its primary lender. In order to obtain such
additional funds, Keystone received the consent of the Pension Benefit Guaranty
Corporation (the "PBGC") to increase Keystone's allowable borrowings by $20
million upon consummation of the Merger and the merger of the Keystone defined
benefit pension plans with and into the DeSoto defined benefit pension plan.
The PBGC's consent was necessary due to Keystone's prior agreements with the
PBGC whereby the PBGC and Keystone agreed to certain borrowing restrictions.
For financial reporting purposes, Keystone will account for the Merger as a
purchase.
DeSoto manufactures household cleaning products including powdered and
liquid laundry detergents and performs contract manufacturing and packaging of
household cleaning products. Incorporated in Delaware in 1927, DeSoto's
principal executive offices and its operating facility are located at 900 East
Washington Street, Joliet, Illinois 60433. DeSoto's telephone number is (815)
727-4931. Keystone will continue to operate the Joliet facility following the
Merger.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Consolidated Financial Statements of DeSoto, Inc. (Incorporated by
reference to Pages F-1 to F-26 of Registrant's Amendment No. 1 to
Form S-4 dated August 23, 1996):
Audited Consolidated Financial Statements:
Balance Sheets - December 31, 1995 and 1994
Statements of Operations - years ended December 31, 1995, 1994
and 1993
Statements of Cash Flows - years ended December 31, 1995, 1994,
and 1993
Unaudited Consolidated Condensed Financial Statements:
Balance Sheet - June 30, 1996
Statements of Operations - six months ended June 30, 1996 and
1995
Statements of Cash Flows - six months ended June 30, 1996 and
1995
(b) Pro forma financial information (Incorporated by reference to Pages
P-1 to P-11 of Registrant's Amendment No. 1 to Form S-4 dated
August 23, 1996):
Unaudited Pro Forma Condensed Financial Statements:
Keystone Consolidated Industries, Inc.:
Balance Sheet - June 30, 1996
Statement of Operations - year ended December 31, 1995
Statement of Operations - six months ended June 30, 1996
DeSoto, Inc.:
Statement of Operations - year ended December 31, 1995
Statement of Operations - six months ended June 30, 1996
(c) Exhibit
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Exhibit No. Description of Exhibit
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2.1 Agreement and Plan of Reorganization, dated as of
June 26, 1996, between Registrant and DeSoto, Inc.
(Incorporated by Reference to Exhibit 2.1 of
Registrant's Amendment No. 1 to Form S-4 dated
August 23, 1996).
23.1 Consent of Arthur Andersen, LLP
99.1 Press Release dated September 27, 1996 issued by
Registrant
SIGNATURES
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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.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
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(Registrant)
By /s/ Harold M. Curdy
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Harold M. Curdy
Vice President - Finance/Treasurer
(Principal Financial Officer)
By /s/ Bert E. Downing, Jr.
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Bert E. Downing, Jr.
Corporate Controller
(Principal Accounting Officer)
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
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As independent public accountants, we hereby consent to the use of our report
dated March 25, 1996, incorporated by reference into this Form 8-K filed by
Keystone Consolidated Industries, Inc.
ARTHUR ANDERSEN, LLP
Chicago, Illinois
September 30, 1996
EXHIBIT 99.1
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For Immediate Release For Confirmation Contact:
September 27, 1996 Harold M. Curdy
Vice President - Finance
(972) 458-0028
KEYSTONE AND DeSOTO STOCKHOLDERS APPROVE MERGER
Keystone Consolidated Industries, Inc. (NYSE: KES) and DeSoto, Inc. (NYSE: DSO),
today announced their respective stockholders approved the merger of the two
companies and, upon completion of the merger, DeSoto became a wholly-owned
subsidiary of Keystone. Pursuant to the merger, Keystone's current seven-member
Board of Directors was expanded to nine members, adding former DeSoto directors,
William Spier and William P. Lyons.
Concurrent with the merger, Keystone's underfunded pension plans were merged
into DeSoto's overfunded pension plan. Glenn Simmons, Chairman of Keystone and
Vice-Chairman of Contran Corporation, Keystone's largest stockholder, said "When
Contran Corporation acquired its initial interest in Keystone in 1982, Keystone
had a significantly underfunded pension plan. Over the last 14 years, Keystone
has made significant strides in reducing its pension liability through
accelerated pension contributions and investment performance. This merger with
DeSoto, and subsequent merger of the Keystone and DeSoto pension plans, is the
final chapter in our efforts to eliminate the underfunding of Keystone's pension
plan. I am pleased to say these transactions will result in an overfunded plan
for financial reporting purposes and should significantly reduce future pension
expense and contributions by Keystone."
DeSoto common shares are tradeable on the NYSE until the close of the market
today. Upon opening of the NYSE on Monday, September 30, 1996, each share of
DeSoto common stock held in street name will represent, and be freely tradeable
as, .7465 of a share of Keystone common stock (less cash to be paid for
fractional shares). DeSoto stockholders of record will receive specific
instructions as to how to exchange DeSoto common stock for Keystone common
stock. All exchanges of stock will be executed through ChaseMellon Shareholder
Services, L.L.C., Keystone's Exchange Agent.
Keystone, headquartered in Dallas, Texas, is engaged in the manufacture and
distribution of fencing and wire products, carbon steel rod, industrial wire,
nails and construction products and, through DeSoto, the production and
packaging of household cleaning products.
