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
July 14, 1995 (July 11, 1995)
________________________________________________
Date of report (Date of earliest event reported)
Hexcel Corporation
______________________________________________________
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8472 94-1109521
______________ _____________________ __________________
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
5794 West Las Positas Boulevard
Pleasanton, California 94588-8781
____________________________________________________________
(Address of Principal Executive Offices and Zip Code)
(510) 847-9500
____________________________________________________
(Registrant's telephone number, including area code)
N/A
_____________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On July 11, 1995, Hexcel Corporation, a Dela-
ware corporation ("Hexcel"), entered into a non-binding
Letter of Intent (the "Letter of Intent") with Ciba-Geigy
Limited, a corporation organized under the laws of Swit-
zerland ("Ciba"). Pursuant to the terms of the Letter of
Intent, Hexcel proposes to acquire Ciba's global compos-
ites, honeycomb, structures and interiors businesses (including
Ciba's Heath Tecna business unit)(collectively, the "Business")
in exchange for (i) a number of newly issued shares of
the common stock, par value $.01 per share, of Hexcel
("Hexcel Common Stock"), such that Ciba's percentage
ownership of the outstanding Hexcel Common Stock will be
approximately 49.9% after giving effect to the transac-
tion and (ii) additional consideration consisting of cash
and other Hexcel securities to compensate for debt and
certain non-operating accrued liabilities reflected on
Hexcel's balance sheet in excess of such amounts on the
balance sheet of the Business. The total value of such
additional consideration is presently estimated to be
approximately $80 million, but is subject to adjustment
based on due diligence, pre-closing changes in funded
debt and/or certain accrued liabilities and certain
other matters set forth in the Letter of Intent. In
addition, the Letter of Intent contemplates certain
standstill and governance provisions relating to Ciba's
ownership of Hexcel Common Stock.
The transaction with Ciba is subject to signif-
icant conditions, including, among others, (i) the nego-
tiation and execution of definitive agreements; (ii)
Hart-Scott-Rodino, European antitrust, security clearance
and other material governmental, regulatory and/or third
party approvals; (iii) approval by Hexcel's stockholders;
and (iv) Hexcel's receipt of adequate high yield debt
and/or bank financing on commercially reasonable terms.
There can be no assurance that Hexcel and Ciba
will enter into definitive agreements with respect to the
proposed acquisition or, if definitive agreements are
entered into, that the transactions contemplated thereby
will be consummated.
Hexcel and Ciba have agreed that, until August
14, 1995, neither party will, directly or indirectly,
solicit, initiate or encourage (including by way of
furnishing non-public information) the submission of, or
discuss, negotiate or accept any proposal or offer from
or enter into any agreement with any person other than
Hexcel or Ciba, as the case may be, relating to any
merger, consolidation, business combination, acquisition
or disposition of material assets/securities or other
transaction inconsistent with the proposed acquisition
(including the acquisition of any company in a similar
business), involving Hexcel or the Business, as the case
may be.
A copy of the Letter of Intent is filed as
Exhibit 99.1 to this Current Report on Form 8-K and is
incorporated herein by reference. A copy of a press
release announcing the execution of the Letter of Intent
is filed as Exhibit 99.2 to this Current Report on Form
8-K.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(c) Exhibits
Exhibit No. Description
99.1 Letter of Intent, dated
July 11, 1995, between
Hexcel and Ciba
99.2 Press Release
SIGNATURES
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.
Dated: July 14, 1995
HEXCEL CORPORATION
By: /s/ JOHN J. LEE
Name: John J. Lee
Title: Chief Executive Officer
HEXCEL CORPORATION
5794 West Las Positas Boulevard
Pleasanton, CA 94588
July 11, 1995
Ciba-Geigy Limited
CH 4002
Basle, Switzerland
Attn: John M.D. Cheesmond
Re: Proposed Combination
Gentlemen:
We are writing to confirm our understanding of the
terms and conditions upon which Hexcel Corporation
("Hexcel") and Ciba-Geigy Limited ("Ciba") presently intend
to combine (the "Proposed Combination") Hexcel with Ciba's
global composites and honeycomb businesses and its Heath
Tecna division (the "Business"). It is understood that this
letter and Annex A hereto merely constitute a statement of
Hexcel's and Ciba's mutual intentions, do not reflect all
matters upon which agreement must be reached in order for
the Proposed Combination to be consummated, do not obligate
Hexcel or Ciba to negotiate a definitive agreement
concerning the Proposed Combination and do not foreclose
Hexcel or Ciba from seeking to renegotiate the matters
covered in Annex A hereto. A binding commitment with
respect to the Proposed Combination will result only from
the execution of one or more definitive agreements with
respect thereto, subject to any conditions expressed
therein. Notwithstanding the preceding two sentences, upon
acceptance hereof, the provisions of paragraphs 2, 3 and 4
of this letter (but only these paragraphs) shall be legally
binding upon Hexcel and Ciba and shall be governed in all
respects by New York law (without regard to conflicts of law
principles).
1. Annex A to this letter reflects the
principal terms and conditions upon which Hexcel
and Ciba presently intend to consummate the
Proposed Combination.
2. Until August 14, 1995, neither Hexcel,
nor Ciba, nor any of their respective affiliates,
officers, directors, employees, agents or
representatives will, directly or indirectly,
solicit, initiate or encourage (including by way
of furnishing non-public information) the
submission of, or discuss, negotiate or accept any
proposal or offer from or enter into any agreement
with any person other than Hexcel or Ciba, as the
case may be, relating to any merger,
consolidation, business combination, acquisition
or disposition of material assets/securities or
other transaction inconsistent with the Proposed
Combination (including the acquisition of any
company in a similar business), involving Hexcel
or the Business, as the case may be.
3. Any and all discussions, negotiations or
communications with any party other than the
parties hereto relating to any of the matters
contemplated in paragraph 2 shall be suspended
until August 14, 1995.
4. Except as required by applicable law,
rule, regulation or legal process, neither Hexcel,
nor Ciba, nor any of their respective affiliates,
officers, directors, employees, agents or
representatives, will, without the prior consent
of the other, make any public announcement or
statement regarding the matters contemplated by
this letter and Annex A hereto. If any such
announcement or statement is so required, the
announcing party shall consult in advance with the
other party concerning the reasons for and content
of such announcement or statement.
Please confirm that the foregoing and Annex A
hereto are acceptable to Ciba by signing the enclosed copy
of this letter in the space provided below and returning the
same to me at your earliest convenience.
Very truly yours,
HEXCEL CORPORATION
By: /s/ JOHN J. LEE
John J. Lee
Chief Executive Officer
CONFIRMED AND AGREED AS OF
THE DATE FIRST WRITTEN ABOVE:
CIBA GEIGY LIMITED
By: /s/ JOHN M.D. CHEESMOND
John M.D. Cheesmond
Head / Regional and Financial Control
ANNEX A
SUMMARY TERM SHEET
Acquisition of the Business
* Hexcel Corporation ("Hexcel") will acquire Ciba Geigy
Limited's ("Ciba's") global composites and honeycomb
businesses and its Heath Tecna division (the "Business")
for a number of newly issued shares of Hexcel common
stock such that Ciba's percentage ownership of Hexcel's
outstanding common stock will be approximately 49.9%
after giving effect to the transaction.
* Hexcel will remain a NYSE listed company.
* Hexcel will deliver a package of additional consideration
to Ciba to compensate for debt and certain non-operating
accrued liabilities reflected on Hexcel's balance sheet
in excess of such amounts on the balance sheet of the
Business. The total value of such consideration is
presently estimated to be approximately $80 million, but
is subject to adjustment based on due diligence,
pre-closing changes in funded debt and/or certain accrued
liabilities and any pre-closing buyout of the minority
interest in Danutec. $80 million in consideration would
be funded as follows:
* $25 million of cash ($40 million depending on sources
of financing).
* $55 million of subordinated debt and/or preferred stock
with market terms ($40 million depending on sources of
financing).
Standstill Agreement
Duration of Standstill Agreement
* The provisions of the Standstill Agreement outlined
below will apply for ten years, subject to extension by
Ciba as contemplated under "Expiration Date Election"
below.
* As described under "Ciba Purchase of Other Shares",
Ciba will, subject to the satisfaction of certain
conditions, have the right to offer to acquire the
shares of Hexcel common stock that it does not already
own (the "Other Shares") after five years.
Board of Directors and Principal Officers
* Hexcel's board of directors will consist of 11
directors, with five directors designated by Ciba and
six directors designated by Hexcel (such Hexcel
designees to include the CEO and COO of Hexcel, who
will be mutually selected by Hexcel and Ciba). The
initial Chairman and CEO is expected to be John J. Lee
and the initial President and COO is expected to be Dr.
Juergen Habermeier. The other four Hexcel designees are
expected to be Marshall Geller, Peter Langerman, George
Springer and Fred Stanske. The five Ciba designees are
expected to be John Cheesmond, John McGraw, Stanley
Sherman, Dr. Joseph T. Sullivan and Dr. Hermann
Vodicka.
* So long as Ciba's percentage ownership interest is
at least 40%, Board action shall require the vote of
at least one Ciba designee and at least one other
director who is not a Ciba designee and who has
never been employed by Ciba (an "Independent
Director").
* The number of Ciba designees shall be reduced as
Ciba's percentage ownership decreases below the
following levels: (i) 4 designees if percentage
ownership falls below 40%, (ii) 3 designees if
percentage ownership falls below 30%, (iii) 2
designees if percentage ownership falls below 20%,
(iv) 1 designee if percentage ownership falls below
15% and (v) no designees if percentage ownership
falls below 10%. In each such instance, the number
of Independent Directors shall be correspondingly
increased.
* For so long as Ciba's percentage ownership is at least
33%, significant acquisitions, stock issuances and
capital expenditure programs will require the approval
of a majority of the Ciba designees.
* Ciba will have proportionate representation on the
finance, audit, nominating and compensation committees
of Hexcel's board of directors.
Third Party Offers
* In the event of a bona fide third party offer to
acquire Hexcel that is made after the third anniversary
of the closing and is approved by two-thirds of the
Independent Directors, Ciba must either (i) offer to
acquire all of the Other Shares on terms at least as
favorable as those contemplated by such third party
offer or (ii) support such third party offer by voting
its shares of Hexcel common stock in favor of the offer
or, if applicable, tendering/selling such shares to the
offeror.
* In the event of a third party offer to acquire Hexcel
that is not approved by (i) a majority of the
Independent Directors acting solely in the interests of
the holders of the Other Shares (the "Other Holders")
or (ii) a majority in interest of the Other Holders by
means of a stockholder vote solicited pursuant to a
proxy statement containing the information required by
Schedule 14A (it being understood that the Independent
Directors will, consistent with their fiduciary duties,
be free to include in such proxy statement the reasons
underlying their failure to approve such offer by the
requisite vote, including whether a fairness opinion
was sought and any opinions or recommendations
expressed in connection therewith), Ciba will be
prohibited from supporting such offer or
tendering/selling its shares of Hexcel common stock to
the offeror.
Certain Prohibited Activities
* Ciba will not acquire any shares of Hexcel common stock
(except for (i) shares acquired pursuant to the
exercise of the preemptive rights described under "Ciba
Contractual Preemptive Rights" below and (ii) open
market purchases to the extent necessary to maintain
Ciba's percentage ownership at or below 49.9% until the
third anniversary of the closing and 57.5% thereafter).
* Ciba will not dispose of any shares of Hexcel common
stock (except (i) as contemplated under "Third Party
Offers" above, (ii) pursuant to a registered public
offering or other manner of sale permitting a broad
distribution or (iii) in accordance with Rule 144 (in
each case under (ii) and (iii), in a manner calculated
to achieve a broad distribution).
* Ciba will not make, participate in or support any
acquisition proposal (except as contemplated under
"Third Party Offers" above or "Ciba Purchase of Other
Shares" below). If applicable, Ciba may, consistent
with its obligations under the federal securities laws,
disclose its desire for Hexcel to engage in a
transaction that would satisfy the board/stockholder
approval requirements described under "Third Party
Offers" above.
* Ciba will not make or participate in any solicitation
of proxies.
* Ciba will not deposit any of its shares of Hexcel
common stock in a voting trust or subject such shares
to a voting agreement or join or participate in any
Schedule 13D group.
Voting Agreement
* Except as contemplated under "Third Party Offers"
above, for so long as Ciba's percentage ownership is at
least 10% (15% if, and for so long as, there is another
Schedule 13D/G reporting person or group that
beneficially owns 10% or more of Hexcel's common
stock), Ciba will vote its shares of Hexcel common
stock in favor of the director designees selected as
set forth under "Board of Directors and Principal
Officers" above and, at the discretion of Ciba, either
as recommended by Hexcel's board of directors or in
proportion to the votes cast with respect to the Other
Shares on all other matters presented to the
stockholders for a vote (except that, subject to the
limitations set forth in this term sheet, Ciba will be
free to vote its shares of Hexcel common stock in its
sole discretion on fundamental transactions such as
charter amendments, acquisitions, dispositions and
liquidations).
Registration Rights
* Ciba will have the right to demand up to four
registrations for the sale of its shares of Hexcel
common stock. Ciba's demand registration rights will
become exercisable at one year intervals beginning on
March 1, 1998, with a number of shares equal to 25% of
its initial shares eligible for sale in each demand
registration. Shares eligible for sale in a previous
demand registration but not sold will be eligible for
sale in subsequent demand registrations.
Alternatively, Hexcel will consider the use of a shelf
registration procedure that provides Ciba with
equivalent public resale rights.
Ciba Contractual Preemptive Rights
* Ciba will have the right to purchase from Hexcel its
pro-rata share of any primary offering for cash of
Hexcel common stock or common stock equivalent (other
than offerings in connection with employee benefit
plans). Such right shall be exercisable for the price
at which such common stock or common stock equivalent
is being offered by Hexcel to third parties.
Ciba Purchase of Other Shares
* At any time after the fifth anniversary of the closing,
Ciba may propose, participate in or support a
transaction that would result in Ciba's acquisition of
the Other Shares or a merger, consolidation, business
combination, sale of substantial assets or similar
transaction involving Hexcel, but only if the Other
Holders are entitled to receive "Requisite
Consideration" for the Other Shares in connection with
such transaction. Requisite Consideration means
consideration that is (i) approved by (x) a majority of
the Independent Directors acting solely in the
interests of the Other Holders or (y) a majority in
interest of the Other Holders by means of a stockholder
vote solicited pursuant to a proxy statement containing
the information required by Schedule 14A (it being
understood that the Independent Directors will,
consistent with their fiduciary duties, be free to
include in such proxy statement the reasons underlying
their failure to approve such offer by the requisite
vote, including whether a fairness opinion was sought
and any opinions or recommendations expressed in
connection therewith) and (ii) in the opinion of an
independent nationally recognized investment banking
firm, fair to the holders of the Other Shares from a
financial point of view (if instructed by a majority of
the Independent Directors, such investment banking firm
will assume for purposes of such opinion that the Other
Holders are entitled to a customary acquisition/control
premium).
Expiration Date Election
* If Ciba's percentage ownership on the tenth anniversary
of the closing (or any other date to which the
Standstill Agreement is extended pursuant to clause (a)
below) is greater than 10% but less than 100%, Ciba
must elect one of the following alternatives:
* to extend the Standstill Agreement for an additional
two years; provided, however, that so long as Ciba's
percentage ownership interest is at least 25%, Ciba
may, no more than once during such extension period,
request that Hexcel offer itself for sale in a
transaction in which Ciba and the Other Holders
receive the same consideration (in which case, the
provisions of the Standstill Agreement will continue
in full force and effect, except that Ciba will be
free to support, or tender/sell its shares pursuant
to, any bid that offers the same consideration to
all of Hexcel's stockholders); or
* to sell down its position to below 10% during the
subsequent 18 month period pursuant to one or more
offerings calculated to achieve a broad distribution
(in which case, the provisions of the Standstill
Agreement will continue in full force and effect
until Ciba has reduced its position to less than
10%).
Principal Conditions
* Hart-Scott-Rodino, European antitrust, security clearance
and other material governmental, regulatory and/or third
party approvals.
* Hexcel stockholder approval.
* Hexcel's receipt of adequate high yield debt and/or bank
financing on commercially reasonable terms.
* Absence of any material adverse change affecting Hexcel
or the Business, as the case may be.
* Conduct of Hexcel's business or the Business, as the case
may be, in the ordinary and usual course, consistent with
past practice.
* Other conditions to be negotiated.
Other
* Reimbursement of actual out-of-pocket expenses (subject
to a negotiated cap) will be paid to Ciba if Hexcel's
stockholders fail to approve this transaction after a
competing transaction has been announced (a "Stockholder
Rejection"). An additional fee to be negotiated will be
paid to Ciba if a competing transaction is consummated
within 12 months after a Stockholder Rejection.
* Mutual no-shop agreement pending closing (subject to a
fiduciary out relating to the provision of information to
third parties who propose competing transactions).
* Appropriate transition services and supply arrangements
to be negotiated.
* Certain royalty arrangements to be discussed.
* Ciba will support refinancing to reduce interest expense.
* Ciba will support insurance negotiations.
FOR IMMEDIATE RELEASE
HEXCEL AND CIBA COMPOSITES SIGN LETTER OF INTENT
TO COMBINE FORCES IN STRUCTURAL MATERIALS AND PRODUCTS
__________________________
Plan to Form Company With Complementary Strengths
and Over US$600 Million in Worldwide Sales
Combination Would Create Major Global Presence
in Advanced Materials and Products for
Aerospace and Other Industries
Ciba to Have 49.9% Stake in Hexcel
PLEASANTON, CALIFORNIA and BASLE, SWITZERLAND (July 12,
1995) -- Hexcel Corporation ("Hexcel") and Ciba-Geigy
Limited ("Ciba") today jointly announced that they have
signed a letter of intent, subject to various conditions,
to combine Ciba's worldwide Composites Division ("Ciba
Composites") -- including composites, honeycomb,
structures and interiors -- with Hexcel's business.
Hexcel, a leading manufacturer of honeycomb, advanced
composites and reinforced fabrics, and Ciba Composites, a
division of Ciba, the worldwide biological and chemical
group, both specialize in lightweight, high-strength
structural materials for the aerospace and other
industries. The company would retain the Hexcel
Corporation name and would continue to trade on the New
York and Pacific Stock Exchanges under the symbol "HXL."
The objective of Hexcel and Ciba is to form a global
strategic partnership. The combined company would be
well positioned to meet changing customer needs in the
rapidly evolving -- and increasingly challenging --
competitive environment of the structural materials
industry. The company, which would be a major global
presence in its industry, generated, on a pro-forma
combined basis, 1994 sales in excess of US$600 million.
According to the provisions of the letter of intent, Ciba
would receive approximately 49.9% of Hexcel's common
stock at the conclusion of the transaction, in exchange
for Ciba Composites. Hexcel would also pay additional
consideration in the form of cash and securities to
reflect its debt and certain liabilities in excess of
amounts carried by Ciba Composites. Such additional
consideration is currently estimated at approximately
US$80 million and will be adjusted at closing to reflect
actual account balances.
It is planned that John J. Lee, the current Chief
Executive Officer of Hexcel, would remain as Chief
Executive Officer and become Chairman of the Board, and
Juergen Habermeier, the current President of Ciba
Composites, would become President and Chief Operating
Officer. It is also expected that Ciba would be entitled
to Board representation commensurate with its percentage
ownership interest.
Although there is no assurance that Hexcel and Ciba will
reach agreement or close the transaction, the companies
are hopeful that a definitive agreement will be signed in
the third quarter, with the transaction closing in the
fourth quarter. The consummation of the transaction is
subject to significant conditions, including: definitive
documentation; due diligence; no material adverse changes
in either business; approval of Hexcel's stockholders;
financing; and applicable antitrust and other regulatory
clearances. The terms of the transaction would also
include, among other items, certain standstill provisions
relating to Ciba's ownership of Hexcel shares.
In announcing the proposed transaction, Heini Lippuner,
Ciba's Chairman of the Executive Committee and Chief
Operating Officer, said: "The combination of these two
businesses, each with a significant presence in the
composites industry, would be a pragmatic solution to the
changes within that market over the past few years. This
is a win-win for both companies, our customers, our
employees and other stakeholders."
"By combining Ciba Composites with Hexcel in a US-listed
entity, we could accelerate the independent development
of our composites business. And for Ciba, the
partnership also would provide an opportunity to unlock
shareholder value and demonstrate our commitment to
actively managing our portfolio of businesses," Mr.
Lippuner added.
John J. Lee, Chief Executive Officer of Hexcel, said:
"For Hexcel, the combination of these two businesses
makes a great deal of strategic sense, particularly in
light of the competitive environment in which we operate.
The two operations are unusually complementary in terms
of both product line and geographic reach. This
transaction would allow Hexcel to emerge from its global
restructuring as one of the strongest, most diversified
and technologically advanced players in our industry,
with a greatly enhanced ability to support our
customers."
Juergen Habermeier, President of Ciba Composites, said:
"This proposed partnership effectively addresses ongoing
changes in the industry. Aerospace customers, for
example, are sharpening their focus on their basic
operating capabilities -- a trend which is leading to
outsourcing. Improvements in the benefit/cost ratio of
such products are of fundamental importance. In
addition, the combined company could lead to broader
access to Asia -- a fast-developing market in aerospace."
Ciba is a leading Swiss-based worldwide biological and
chemical group with 1994 sales of Sfr. 22.049 billion
(US$16.213 billion). Ciba Composites, with 1994
worldwide sales of Sfr. 399 million (US$ 293 million), is
headquartered in Anaheim, California, operates in more
than 20 countries and has production facilities in 5 of
these. The division supplies lightweight, high-strength
materials and structures. Its most important market is
the aircraft manufacturing and airline industries, where
meeting high quality standards is essential. Persistence
in demonstrating the benefits of composites in industrial
markets has paid off with the development of products for
sports applications, wind energy and railway, shipping
and other transportation industries.
Hexcel is a leading U.S.-based international developer
and manufacturer of honeycomb, advanced composites and
reinforced fabrics, with 1994 sales of US$313.8 million.
Headquartered in Pleasanton, California, Hexcel operates
in 8 countries, has production facilities in 5 of these
and sells its products in more than 23 countries. While
aerospace is Hexcel's most important market, automotive,
mass transit, athletic footwear, marine, architectural
design, recreational products, orthotics, prosthetics,
printed circuit boards, ballistics protection, decorative
window coverings and civil engineering represent highly
diverse areas where Hexcel's materials are utilized.
Hexcel has been the world leader in developing and
manufacturing honeycomb for almost 50 years.
###
Contact:
For Hexcel Corporation: Tara Owen
212.484.7724
For Ciba: In Switzerland: Kai Romot
41.61.696.4444
In U.S.: Skip Ragland
914.479.4050
Joe Schepers (investors)
914.479.4121
