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SCHEDULE 14A
(Reg. (S) 240.14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[X] Soliciting Material Pursuant to (S) 240.14a-12
GUEST SUPPLY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
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[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO OF GUEST SUPPLY/R/ INC.]
4301 U.S. Highway One, P.O. Box 902, Monmouth Junction, NJ 08852-0902
Fax (609) 514-2692 [LOGO]
December 18, 2000
Dear Fellow Shareholder:
As you may know, BFMA Holding Corporation, the parent company of
one of Guest Supply's principal competitors, has filed a Proxy
Statement with the Securities and Exchange Commission in order to
solicit proxies to elect two BFMA nominees as Class C directors at our
next Annual Meeting of Shareholders. BFMA's Proxy Statement also says
that it has "proposed" to pay $21 per share for all the outstanding
shares of Guest Supply common stock that it does not already own.
BFMA's Proxy Statement is not an offer for your Guest Supply stock,
nor has BFMA demonstrated that it has the financial ability to make an
offer. If BFMA wants to purchase Guest Supply stock, and if it has the
financing to do so, it is free to make an unequivocal offer based on
the comprehensive information about the Company that is publicly
available and BFMA's own in-depth knowledge of our industry.
We plan to mail a Proxy Statement containing reasons why you should
not vote for BFMA's nominees. In the meantime, we believe you should
consider the following information:
. BFMA has never made a formal offer to acquire Guest Supply and
has not demonstrated an ability to finance a purchase at $21
per share.
. BFMA is the corporate parent of our principal competitor in the
lodging amenities business, Marietta Corporation, and is
controlled by Barry W. Florescue.
. We believe that Mr. Florescue has a track record of acting
contrary to shareholder interests and for his own financial
gain, which leads us to question his true motivation.
. BFMA's nominees for the Guest Supply Board of Directors, Logan
D. Delany, Jr. and Charles W. Miersch, are directors of BFMA
and of Marietta, and Mr. Delany's company, Delany Capital
Management Corp., is an investor in Marietta. We are convinced
they would not represent the interests of all Guest Supply
shareholders.
. Guest Supply has delivered on its strategic plan and is
financially strong.
. In June 2000, Guest Supply retained financial advisers, U.S.
Bancorp Piper Jaffray, to assist the Company in exploring
strategic alternatives.
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Your Board believes that, based on its discussions with BFMA dating back
over two years, and its knowledge of Mr. Florescue's track record, BFMA is
attempting to entice you to vote for its director nominees with an illusory
proposal to purchase stock that may never be realized. Your Board also believes
that BFMA's nominees, if elected, may pursue a strategy in the interests of
BFMA, Marietta and Florescue, rather than in the interests of all Guest Supply
shareholders.
BFMA Has Not Made an Offer to Acquire Guest Supply and Has Not Demonstrated an
Ability to Finance a Purchase at $21 Per Share
In its proposal, BFMA says it is "prepared" to pay $21 per share for Guest
Supply common stock, but we doubt it will ever actually do so. It says it
expects to achieve "cost savings" by combining Guest Supply with Marietta and
that it hopes to be able to confirm such savings through due diligence. If--as
we expect--the necessary cost savings cannot be confirmed through due
diligence, BFMA will presumably re-evaluate its position and either reduce the
sum it says it is "prepared" to pay (as it has already done once, from a
possible $24 per share to a possible $21 per share) or decline to make any
offer.
From June until September of this year, we had extensive discussions with
BFMA, based on BFMA's then-stated intention to offer $24 per share for the
Company's stock. In June, we retained U.S. Bancorp Piper Jaffray to assist us
in our negotiations with BFMA and to explore other strategic alternatives. We
pursued our discussions with BFMA seriously but, after over three months of
effort, we terminated negotiations for several reasons, including: (i) our
concerns over BFMA's repeated requests for competitively-sensitive information
while refusing to sign a Confidentiality Agreement, which it said on several
occasions it would sign; (ii) the unresolved issue of how the transaction could
be financed, particularly in light of BFMA's stated need to identify at least
$10 million in synergies or cost savings to finance the deal; and (iii) a
growing distrust of the true motivations of BFMA and Mr. Florescue.
Now, BFMA has come back with a possible offer to purchase Guest Supply at a
lower price in the context of a proxy fight, stating that it may seek to recoup
the cost of a proxy contest (which it estimates will be approximately $500,000)
from Guest Supply.
BFMA's Nominees Would Be Paralyzed by Conflicts of Interest
BFMA's nominees, Messrs. Delany and Miersch, are directors of BFMA and
Marietta. In addition, Mr. Delany's investment company, Delany Capital
Management Corp., lists Marietta as one of its "portfolio companies"--a fact
that BFMA and Mr. Delaney have not disclosed in their proxy statement.
As nominees of our principal competitor, Messrs. Delany and Miersch would
be hopelessly conflicted in most important decisions of the Company, including
all matters that
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would affect our competitive position in the lodging amenities market.
Moreover, as nominees of a shareholder with an expressed intent to acquire the
Company, they would have conflicts regarding their purported objective of
arranging for a sale of the Company. Our shareholders should seriously consider
whether BFMA's nominees would be motivated to assure the highest price for
Guest Supply's shareholders, or--as we fear--the lowest price for BFMA.
Indeed, the conflict between BFMA's interests and our shareholders'
interests is already apparent. We are concerned to hear that Marietta is
already attempting to subvert our relationship with at least one long-term
customer by telling them not to sign a contract with Guest Supply because
Marietta will eventually own us.
Florescue is Not Likely to Enhance Shareholder Value
According to an article published in Forbes in June 1987, after Mr.
Florescue took control of Horn & Hardart through a proxy fight, he drew an
annual cash salary of $850,000 but did little to enhance shareholder value. The
Forbes article goes on to say that a company co-owned by Mr. Florescue received
$1.2 million from Horn & Hardart over three years for the use of two corporate
jets.
According to the Forbes, article "Why Didn't They Pay Him To Stay Home":
"Last year [1986] . . . Horn & Hardart Co. lost $28.4 million on $405
million in revenues. . . . How did the company go so far astray? Look
no further than Barry Florescue, 44, who has been Horn & Hardart's
chairman and chief executive officer since 1977."
"However poorly the company does, Florescue seems to be doing just
fine."
A copy of the Forbes article is enclosed./1/
In 1996, the United States Office of Thrift Supervision ("OTS") filed civil
charges against Mr. Florescue, according to a press release by the OTS. The OTS
alleged that when he controlled Century Bank, a Florida Savings and Loan
Association, Mr. Florescue illegally used bank assets for his personal use. On
June 14, 1996, the Sarasota Herald-Tribune reported that Mr. Florescue
allegedly had Century Bank buy a Lexus automobile for his use which he then
transferred to his wife; took compensation before it was earned, received
reimbursement from the bank for travel and personal expenses not for the
benefit of the bank, and caused the bank to lend him money on favorable terms.
Mr. Florescue's lawyer was quoted in the June 15, 1996 edition of the Sarasota
Herald-Tribune responding to the charges by explaining that, prior to the OTS
filing of formal charges, Mr. Florescue had paid the bank back for the vast
majority of the questioned items.
Lastly, Mr. Florescue's company, BFMA, has a history of decreasing its
offer as a potential transaction progresses. In 1995, BFMA acquired the stock
of Marietta at $10.25 per share after having previously made a bid of $12.30
per share, according to The Reuters Business Report on August 28, 1995. BFMA
"proposed" $24 per share for Guest Supply
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/1/ Forbes, on behalf of itself and the author, has consented to the use of a
reprint of the article as proxy soliciting material. The participants have paid
Forbes for the rights to reprint the article.
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this summer and its latest proposal is for a "possible" $21 per share. You
should be concerned that if BFMA ever does make a real offer, once all
contingencies are removed, the amount offered might be substantially less than
even the latest proposal.
Guest Supply is Financially and Strategically Strong
The Board of Directors and management of Guest Supply continue to act to
build value for ALL shareholders. Fiscal 2000 proved that the Company is
financially and strategically strong:
. Sales growth of 20.7%
. Net income increased 35.5% to $1.44 per diluted share
. Operating margins increased from 5.1% to 5.6%
. Operating income increased 32.9%
. In August 2000, the Company entered the market for furniture,
fixtures, and equipment with the creation of Guest Purchasing
Services. Adding the FF&E products expands our potential market from
approximately $2.5 billion to over $7 billion
. Announced the launch of the Company's business-to-business e-commerce
site, www.guestsupply.com
. Engaged U.S. Bancorp Piper Jaffray to pursue and recommend other
strategic alternatives
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Your Board of Directors urges you not to take any action
concerning BFMA's nominees until you have had a chance to review Guest
Supply's proxy materials. We also urge you to read and compare these
materials carefully and then decide who is truly acting independently
in your best interests.
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In order to provide sufficient time for shareholders to consider the merits
and risks of BFMA's proxy solicitation, your Board of Directors intends to
reschedule the Annual Meeting. When the Annual Meeting date is set,
shareholders will receive a Proxy Statement from Guest Supply, containing
detailed reasons why you should not vote in favor of BFMA's nominees.
Sincerely,
/s/ Clifford W. Stanley
Chairman, President & Chief
Executive Officer
GUEST SUPPLY, INC. AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO BE
PARTICIPANTS IN THE SOLICITATION OF PROXIES FROM GUEST SUPPLY SHAREHOLDERS. THE
DIRECTORS AND EXECUTIVE OFFICES OF GUEST SUPPLY INCLUDE CLIFFORD W. STANLEY,
TERIE UNSWORTH, PETER L. RICHARD, EDWARD J. WALSH, THOMAS M. HAYTHE, GEORGE S.
ZABRYCKI, AND PAUL XENIS. COLLECTIVELY, AS OF DECEMBER 1, 2000, THE DIRECTORS
AND NAMED EXECUTIVE OFFICER OF GUEST SUPPLY BENEFICIALLY OWNED APPROXIMATELY
14% OF THE OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK. SHAREHOLDERS MAY
OBTAIN ADDITIONAL INFORMATION REGARDING THE INTERESTS OF SUCH PARTICIPANTS BY
READING GUEST SUPPLY'S PROXY STATEMENT WHEN IT BECOMES AVAILABLE. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT THAT WILL BE FILED BY
GUEST SUPPLY RELATING TO GUEST SUPPLY'S 2001 ANNUAL MEETING WHEN IT BECOMES
AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Security holders may
obtain a free copy of the proxy statement when it is filed) and other documents
filed by Guest Supply with the Securities Exchange Commission at the
Commission's web site at www.sec.gov. The proxy statement and such other
documents, when filed by Guest Supply with the SEC, may also be obtained for
free from Guest Supply, Inc. by directing such request to: MacKenzie Partners,
Inc., 156 Fifth Avenue, New York, New York, U.S.A., 10010 or by calling 800-
322-2885.
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FORBES
June 15, 1987
Why didn't they pay him to stay home?
Barry Florescue says, "I just washed my
hands of operations." Too bad he didn't wash
his hands of the job, as well.
By Burr Leonard
A COLOSSAL ROOFTOP sign at heavily trafficked 45th Street and Avenue of the
Americas in New York City points down to Bojangles' Famous Chicken 'N Biscuits.
But the gaudy yellow-and-orange storefront, like those of 83 other Bojangles'
outlets in 12 states, is boarded up. Last year the Bojangles' chain lost $47.6
million on sales of $90 million. Bojangles' parent, Las Vegas-based Horn &
Hardart Co., lost $28.4 million on $405 million in revenues.
Horn & Hardart, Once famous for its Automat restaurants, long a must for
visitors and New Yorkers alike. How did the company go so far astray?
Look no further than Barry Florescue, 44, who has been Horn & Hardart's
chairman and chief executive officer since 1977.
An accountant by training, Florescue (pronounced Flor-ES-cue) bought six
Burger King franchises in Florida and Long Island in the early 1970s and was on
the lookout for others.
He spotted Horn & Hardart, its automated cafeterias had fallen on bad times,
and the company had lost direction, veering haphazardly into the mail-order
catalog business and fast-food franchises, primarily Burger Kings. "What
attracted me to Horn & Hardart," remembers Florescue during an interview in New
York City's glamorous Crown Building, "was its Manhattan development rights for
Burger King."
In 1977 Florescue picked up 4% of horn & Hardart for less than $400,000 and
took control via a proxy fight The company was losing around $3 million a year
at the time. Florescue quickly sold the failing restaurants or converted them
into Burger Kings. As a result, shares outstanding have grown from 700,000,
when Florescue arrived, to 14.8 million now. For all the dilution, the stock
was still hot. Adjusted for splits, it climbed from around $2 in the late 1970s
to $29 by 1983.
Panting for expansion money and eager to show profits on the greatly swollen
capitalization, Florescue sold the company's valuable real estate, most of it in
Manhattan. The real estate sales have contributed $23 million to reported
profits over the past three years.
What did Florescue do with the money? Better you shouldn't ask. "I did
exactly the reverse of what most entrepreneurs are accused of doing," Florescue
boasts. "I just washed my hands of operations. My role was to look for
acquisitions and to get involved in other external things for the company such
as politics, going to trade functions and becoming a true chairman."
One of Florescue's first acquisitions was the Royal Inn Americana, a Las Vegas
casino Horn & Hardart acquired for $14.7 million in December 1979, In less than
two years the casino drained the company of $6 million. Florescue sold it to a
partnership controlled by his longtime pal Donald Schupak, Horn & Hardart
still owns 10% of the casino, holds a $14.5 million mortgage on the property and
guarantees $5.8 million in loans to the casino.
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Seven years ago Florescue sank another $2 million of Horn & Hardart's money
into a pizza-and entertainment concept called Mark Twain's Riverboat, which
failed, although one restaurant still lingers. Then came a nonstarter called
Goodbody's, a health-food hamburger idea that had already been tried without
success by D'Lites of America.
Then came Bojangles'. In 1981 Florescue paid $12 million for the regional
chicken-and-biscuit chain, whose 40 outlets were clustered mainly around the
Carolinas. For the next four years he tried to take the concept national,
building or franchising 284 more outlets in 20 states, including New Jersey,
Texas, Iowa and Florida.
Successful franchising, however, requires attention to detail, and as
Florescue reminds us, "I washed my hands of operations."
Some Bojangles' stores were poorly kept. At others, the franchisees walked,
leaving behind lawsuits and sticking Horn & Hardart with much of their debt. In
situations like this, there is always someone to blame.
Then who was to blame? Florescue blames John Gerlach, who was Horn & Hardart
president from 1982 until 1985. Gerlach now serves as associate director of
corporate finance at Bear, Sterns. Says Gerlach, dismissing Florescue alibis:
"The Bojangles' concept has proven not to be a success in markets other than the
heartland South around the Carolinas."
In all this, the board of directors have been wonderfully understanding.
Florescue draws an annual cash salary of $850,000, a handsome remuneration for
an executive who absents himself from daily operations and who has a terrible
record in what he does do.
The board has also paid $1.2 million over the last three years to a company
that is owned by Florescue and Corporate Vice Chairman Donald Schupak for the
use of two corporate jets. And it pays Schupak, Florescue's friend who bought
Horn & Hardart's casino operation, a $410,000-a-year "consulting fee." However
poorly the company does, Florescue seems to be doing just fine.
In the early 1980s Florescue purchased two shaky Bojangles' operations, 12
outlets in all, situated in southern Florida and New Jersey (6 of which were
formerly owned by Horn & Hardart).
But then the two ventures flopped, losing $2.6 million on $6.8 million in
sales in 1985. Florescue was successful in convincing Horn & Hardart's board to
buy the two disasters from him for $1 each, plus the assumption of $8.5 million
of liabilities. This is now the subject of a shareholders' lawsuit.
During Florescue's ten-year reign, Horn & Hardart's only significant success
has been in the one area Florescue knew little about and did not meddle with:
the Hanover House mail-order catalog division. Hanover House has 24 catalogs,
offering everything from clothing to stereo equipment. Last year, on revenues
of $256 million, Hanover House made $14 million.
Unfortunately, Florescue now has his hands in Hanover House. In March Horn &
Hardart and Lorimar Telepictures put up $4 million each, and Fox Television $2
million, to launch Value Television. This hour-long morning home shopping show
uses a talk-show host (currently TV health maven Richard Simmons) to sell high-
end merchandise from Hanover House catalog.
So far VTV has the mark of Florescue on it. The show premiered Jan. 19, and
during March it received a dismal 1 rating (i.e. 1% of viewers in the market);
a 6 or 7 rating is usually required for such a show to remain on the air.
What says Barry Florescue to all of this? "What we're trying to get back is a
sense of entrepreneurship, a sense of risk-taking and business development," he
says. "Whether it's restaurants or direct mail order or retail stores, we feel
we understand how to deal with the consumer."
Maybe so, but Florescue unloaded some 150,000 shares of Horn & Hardart stock
last September at a nice premium to the recent price of 12. It takes a lot to
send stock south during a roaring bull market, but leave it to Barry
Florescue.
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Reprinted by Permission of Forbes Magazine June 15, 1987 issue (c) 2000 Forbes
Inc. For information on ordering Forbes reprints, please call (212) 620-2399.
To subscribe to Forbes magazine, please call (800) 888-9896.
