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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
GUEST SUPPLY, INC.
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(Name of Registrant as Specified In Its Charter)
BFMA HOLDING CORPORATION
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(Name of Persons(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(1) Aggregate number of securities to which transaction applies:
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(1) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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(5) Total fee paid:
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[ ] Check box if any part of the fee is offset as provided by Exchange
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BFMA HOLDING CORPORATION
50 EAST SAMPLE ROAD, SUITE 400
POMPANO BEACH, FL 33064
January 8, 2001
Dear Fellow Shareholder:
PROTECT THE VALUE
OF YOUR INVESTMENT IN GUEST SUPPLY, INC.
Several weeks ago, we sent you a proxy statement and BLUE proxy card in
connection with the upcoming meeting of Guest Supply shareholders. BFMA has
been a holder of a substantial number of shares of Guest Supply for some time
and currently seeks your support in order to effect important changes at Guest
Supply. We believe that the management of Guest Supply and its Board of
Directors have not been acting in your best interests. It is time now to make
sure the Board is focused on maximizing shareholder value for ALL Guest Supply
shareholders. To protect your investment, we urge you to sign, date and return
the enclosed BLUE proxy card TODAY.
You may also have recently received a mailing from Clifford Stanley, the
current Chairman and Chief Executive Officer of Guest Supply. We believe that
his letter was a blatantly misleading attempt to distract your attention from
the real issues in this election. In our letter to you today, we want to set
the record straight.
YOUR VOTE FOR THE BFMA NOMINEES
IS A VOTE FOR THE SALE PROCESS
BFMA has made an offer to acquire Guest Supply for $21.00 per share;
however, we are not asking you to vote on our offer. We are requesting that a
sale process be initiated and that BFMA be given a fair chance to participate
in that process. If another bidder emerges to purchase Guest Supply at a higher
price, BFMA will either increase its offer price or bow out of the bidding
contest. If BFMA is ultimately the highest bidder in the process, you can
decide at a later date whether to accept the proposed transaction OR retain
your current investment. This proxy fight is about the sale process -- not
about price.
You have a simple but important choice to make: you can support the status
quo and suffer with a low multiple, low value and illiquid stock OR you can
elect the BFMA nominees, telling Guest Supply's management and Board that you
are tired of their delay and you want the company to truly explore a sale --
NOW.
The BFMA nominees are committed to affording the Guest Supply shareholders,
the TRUE owners of the company, the opportunity to consider BFMA's offer as well
as any other potential transactions that would provide a greater value to Guest
Supply shareholders. BFMA has offered to purchase all of the shares of Guest
Supply for $21.00 per share in cash; however, BFMA has continued to state that
we would consider offering a higher price if Guest Supply's management and Board
were able to demonstrate value not apparent in the publicly available
information.
We believe that, if you vote for Mr. Stanley and Teri Unsworth, the
incumbent Board will continue to resist exploring real opportunities to
maximize the value of your shares. This is especially true if the opportunities
do not also serve their self-interest. We are convinced that the incumbent
Board and management are not acting in your best interest.
WHAT IS GUEST SUPPLY HIDING?
On November 16, 2000, BFMA sent a letter to Mr. Stanley and the Board
offering to acquire all of the shares of Guest Supply, at $21.00 per share in
cash. At the same time, BFMA nominated Logan D. Delany, Jr. and Charles W.
Miersch to run against Mr. Stanley and Ms. Unsworth at Guest Supply's 2001
Annual Meeting to be directors of Guest Supply. At the time, Guest Supply's
2001 Annual Meeting was scheduled for January 17, 2001, according to the New
York Stock Exchange. In late November, Guest
<PAGE>
Supply postponed the meeting to February 9, 2001 and has now recently informed
the New York Stock Exchange that the meeting has been postponed indefinitely,
to a date "to be determined." Not only has Guest Supply indefinitely postponed
the meeting, it has not even filed any proxy materials with the SEC. What are
they hiding from you? What don't they want you to know? Why are they delaying
the vote on the election of directors? Is this Board really interested in
maximizing shareholder value or only in their own self-interest? The only
public communication from Guest Supply you have received is Mr. Stanley's
letter to shareholders dated December 18, 2000, in which he makes claims which
we believe are untrue and misleading.
GUEST SUPPLY'S STOCK PERFORMS VERY POORLY
MR. STANLEY CLAIMS: "The Board of Directors and management of Guest Supply
continue to act to build value for all shareholders."
THE TRUTH IS: Most shareholders have not done well at all. This proxy
contest is as much about Guest Supply's poor share price performance during
Clifford Stanley's nearly fifteen years as a senior officer of Guest Supply as
it is about BFMA's commitment to maximize shareholder value through a fair and
efficient sale process. The share price today is LESS than the share price of
Guest Supply's common stock when Mr. Stanley took over as Executive Vice
President and Chief Financial Officer in April 1986.
Guest Supply's feeble return to shareholders over the last few years is
indisputable. The graph below demonstrates that, although the share price may
have risen recently, the performance of Guest Supply common stock over the last
five years, relative to alternative investment opportunities, has been terrible.
A $100 investment in Guest Supply's common stock on December 31, 1995 was worth
approximately $74.59 on December 31, 2000, a 25.4% loss -- a 25% loss during one
of our nation's greatest periods of growth and profitability. If you had
invested the same $100 in the S&P 500 Index, the Russell 2000 Index or the Dow
Jones Industrial Index, your investment would have been worth $214.36, $153.03
and $210.80, respectively. This means that your investment would have been worth
2-3 times your investment in Guest Supply. The following chart, which compares
the price performance of the common stock of Guest Supply, the S&P 500 Index,
the Russell 2000 Index and the Dow Jones Industrial Index, illustrates the
point. The comparative price performance has been calculated as of December 31
of each year for the last five years and assumes an initial investment of $100
on December 31, 1995.
FIVE-YEAR COMPARABLE PRICE RETURNS
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ----- -----
Guest Supply $ 100 $ 78 $ 58 $ 53 $ 66 $ 75
S&P 500 $ 100 $ 120 $ 158 $ 200 $ 239 $ 214
Russell 2000 $ 100 $ 115 $ 138 $ 134 $ 160 $ 153
Dow Jones $ 100 $ 126 $ 155 $ 179 $ 225 $ 211
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Is this what Mr. Stanley believes is "building value for all
shareholders?" While BFMA has invested over $5,000,000 in cash to purchase
Guest Supply common stock, Mr. Stanley and the other executive officers and
directors received most of their currently held shares through the exercise of
options and warrants. Many of these options and warrants were "net exercised"
which means that management and the Board did not have to pay any actual cash
for their shares of stock. Therefore, even though Guest Supply share price
performance has significantly lagged behind the overall markets, the executive
officers and directors have made money through their options and warrants, at
your expense. Are they really on your side? Are they really looking to maximize
the value of your shares or just the value to themselves?
THE BFMA OFFER IS REAL AND CREDIBLE
MR. STANLEY CLAIMS: "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."
THE TRUTH IS: On November 16, 2000, BFMA sent a letter to Mr. Stanley and
the Board offering to acquire all of the shares of Guest Supply, at $21.00 per
share in cash. What's not "formal" about that? In the six weeks since BFMA made
its offer no one from Guest Supply has called to discuss the letter, even
though we reached out to them a number of times. Despite what Mr. Stanley says
now, BFMA has previously demonstrated to Guest Supply and its advisors BFMA's
ability to finance an offer at a higher price than its current offer. In August
2000, representatives of BFMA arranged for Daniel J. Donoghue, a Managing
Director of U.S. Bancorp Piper Jaffray, Guest Supply's financial advisor, to
speak with BFMA's financing sources regarding BFMA's ability to finance a
transaction at $24.00 per share. These sources indicated to U.S. Bancorp Piper
Jaffray that the financing for the transaction was readily available.
Subsequent to these conversations, U.S. Bancorp Piper Jaffray continued to
encourage the parties to talk without raising any concerns as to BFMA's ability
to finance the transaction or the seriousness of BFMA's intentions. BFMA is
highly confident that it can finance its current offer. That is why we have
committed substantial resources to encourage the Board to seek a sale of Guest
Supply. BFMA has, in fact, received indications of interest and proposals from
substantial and well-respected institutional financing sources for commitments
in excess of $250,000,000.
MR. STANLEY CLAIMS: If BFMA wants to purchase Guest Supply stock, . . .
it is free to make an unequivocal offer based on the comprehensive information
about Guest Supply that is publicly available . . . "
THE TRUTH IS: We assume that Mr. Stanley is suggesting that BFMA make a
public tender offer for Guest Supply's shares based on the information in Guest
Supply's public financial statements. This statement is disingenuous in that
Guest Supply has a significant number of anti-takeover devices put in place by
management and the Board, including:
o A Rights Agreement, commonly known as a "poison pill", which was
implemented without shareholder approval, makes an acquisition of
Guest Supply by a purchaser not approved by the Board practically
impossible by permitting the amount of Guest Supply stock
outstanding to be dramatically increased in the face of such a
proposed acquisition. As described in Guest Supply's Annual Report
on Form 10-K published last month, this acquisition-busting scheme
automatically goes into effect "10 days following the commencement
or announcement of an intention to make a tender offer or exchange
offer, the consummation of which would result in the beneficial
ownership by a person or group of 20%" of Guest Supply stock. In
other words, once BFMA or any other would-be purchaser not approved
by the Board merely announced its intention to make a tender offer
to acquire Guest Supply, the poison pill would be triggered;
o An 80% supermajority stockholder vote requirement for all business
combinations effected without the approval of the Board; and
o A staggered board, divided into three classes which means that,
even if 100% of the shareholders vote to change the Board, only two
directors could be replaced at this meeting.
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In addition, Guest Supply is governed by New Jersey law which provides
that, without prior approval of the Board, an owner of more than 10% of Guest
Supply's common stock cannot engage in any business combination with Guest
Supply for five years. Therefore, even if BFMA, or anyone else, made any
unequivocal offer, the Board would still have to approve the transaction in
advance. To suggest that BFMA could buy Guest Supply without Board approval is
entirely misleading.
If any potential purchaser were to make an offer without the benefit of
performing at least some due diligence and without an understanding of the
potential synergies, the offer price would have to anticipate the worst
possible outcome. Management's unwillingness to cooperate with potential buyers
serves to reduce the purchase price BFMA or anyone else would be willing to
pay. This protects their interest, not yours.
MR. STANLEY CLAIMS: "BFMA is attempting to entice you to vote for its
director nominees with an illusory proposal to purchase stock that may never be
realized."
THE TRUTH IS: BFMA's proposal is not illusory. Evidence of BFMA's
commitment is the investment of more than $5,000,000 in Guest Supply common
stock and the expenditure of hundreds of thousands of dollars on legal fees and
related expenses in connection with this process. BFMA has made it clear from
the beginning that, if elected, the BFMA nominees will constitute a minority of
the current six members of the Board. At least two of the incumbent members of
the Board would have to vote with the BFMA nominees to sell Guest Supply. Is
this what Mr. Stanley means by illusory? Is he telling us that, no matter how
many shareholders support the exploration of a sale of Guest Supply, he and his
Board will block that action? Vote for the BFMA nominees and tell Mr. Stanley
and the Board to explore the sale of Guest Supply -- NOW. Tell them you want
them to commit to the prompt sale of Guest Supply to the highest bidder and to
give ALL of Guest Supply's shareholders an opportunity to receive maximum value
for their shares.
GUEST SUPPLY IS NOT REALLY
"EXPLORING STRATEGIC ALTERNATIVES"
MR. STANLEY CLAIMS: "In June 2000, Guest Supply retained financial
advisers, U.S. Bancorp Piper Jaffray, to assist the Company in exploring
strategic alternatives."
THE TRUTH IS: We believe that Mr. Stanley hired Piper Jaffray to stall our
efforts. That is why he didn't let you know he hired Piper Jaffray or that
Guest Supply was exploring strategic alternatives until BFMA's action forced
his hand. In fact, during the nearly seven months since U.S. Bancorp Piper
Jaffray was hired as Guest Supply's financial advisors, there has been no
public announcement regarding any strategic alternative. After seven months you
would expect Guest Supply to provide some feedback on its progress in exploring
"strategic alternatives." What was U.S. Bancorp Piper Jaffray really paid for?
What other alternatives have they really explored or is this just another stall
tactic? BFMA has learned from its discussions with industry contacts,
investment bankers and other shareholders of Guest Supply that Mr. Stanley has
consistently created roadblocks to having substantive conversations with other
potential buyers as well. This leads us to believe that Guest Supply's
"strategic alternatives" do not involve a sale of Guest Supply to BFMA or
anyone else. We are convinced that the only alternatives Mr. Stanley, Ms.
Unsworth and the rest of the Board will consider are ones that will allow them
to maintain the status quo. BFMA welcomes a true, formal sale process in which
all interested parties could participate.
BASELESS ATTACKS ON THE BFMA NOMINEES AND PRINCIPALS
MR. STANLEY CLAIMS: "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."
THE TRUTH IS: While BFMA is very interested in acquiring Guest Supply, we
are waging this proxy battle to get Guest Supply to put itself up for sale to
the highest bidder. BFMA realizes that, in such a process, it may not be the
highest bidder and that if another bidder offers to purchase Guest Supply at
a higher price, BFMA will either increase its offer price or bow out of the
bidding. Remember, the BFMA nominees would represent a minority of the Board
and it would require at least two other directors to effect any action. BFMA
and the BFMA nominees have not deviated from their request that Guest Supply
should be promptly sold to the highest bidder so that ALL of Guest Supply's
shareholders will have an opportunity to maximize the value of their shares.
<PAGE>
MR. STANLEY CLAIMS: "We are convinced that they [Logan D. Delany, Jr. and
Charles W. Miersch, the BFMA nominees] would not represent the interests of all
Guest Supply shareholders. . . . Messrs. Delany and Miersch would be
hopelessly conflicted in most important decisions of the Company . . . they
would have conflicts regarding their purported objective of arranging for a
sale of the Company."
THE TRUTH IS: If Messrs. Miersch and Delany are elected, they have pledged
to take all possible actions to maximize Guest Supply shareholder value through
the sale of Guest Supply to the highest bidder. As stated in our proxy
statement, they have both committed to tender their resignations as directors of
BFMA and Marietta, effective immediately upon their election as a director of
Guest Supply. They will therefore not be "hopelessly conflicted" from serving as
directors of Guest Supply and to suggest otherwise is misleading. In fact, given
Mr. Stanley's own actions, it is offensive and hypocritical that he would allege
that these two upstanding and prominent citizens would do anything other than
fulfill their fiduciary and other duties to the shareholders of Guest Supply.
We note again that, if Messrs. Miersch and Delany are elected, the BFMA
nominees will constitute a minority of the current six members of the Board.
Accordingly, the BFMA nominees would not be in a position, without the support
of at least two other members of the Board, to effect any action. Messrs.
Delany and Miersch have indicated that, subject to their fiduciary duties to
Guest Supply's shareholders, they will seek to convince other members of the
Board to vote with them to form a Special Committee of the Board and hire
independent financial and legal advisors to arrange a prompt sale of Guest
Supply to the highest bidder and on the most favorable terms available to Guest
Supply. So, it is unclear why Mr. Stanley is "convinced" that Messrs. Miersch
and Delaney would not represent your interests as shareholders. What is
perfectly clear is that the incumbent Board has not done a good job of
representing your interests as shareholders -- of maximizing the value of your
shares -- and that they are resistant to the idea of bringing people in who
will seek to maximize the value of your shares.
MR. STANLEY CLAIMS: That Mr. Florescue [Barry W. Florescue, BFMA's
President and Chief Executive Officer] 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 has a history of decreasing its offer
as a potential transaction progresses.
THE TRUTH IS: In his letter, Mr. Stanley had a number of uncomplimentary
things to say about Mr. Florescue. In fact, he went so far as to use your money
to pay Forbes Magazine an estimated $10,000-$20,000 to reprint and distribute a
13 year old article about Mr. Florescue's activities at an unrelated company.
We believe that Mr. Stanley's attacks against Mr. Florescue are a costly
distraction and are unwarranted. Not only is Mr. Florescue not a director of
Guest Supply or a nominee to be a director of Guest Supply, but Mr. Florescue
has a long track record of creating shareholder value. Anyone who wishes to
review the track record of the company cited in the article distributed by Mr.
Stanley will conclude for themselves that the shareholder value created by Mr.
Florescue during the ten year period from his arrival to the date of the
article far exceeds the feeble return to shareholders during Mr. Stanley's
nearly fifteen years as a senior officer and director of Guest Supply.
In addition, BFMA has offered to acquire all of the shares of Guest Supply,
at $21.00 per share IN CASH. Mr. Florescue's stewardship of BFMA, Marietta and
other companies is irrelevant. BFMA is offering to pay cash at a premium of
approximately 25% over the $16.75 reported closing sales price of Guest Supply's
shares on the New York Stock Exchange on November 16, 2000, the day prior to
BFMA making its offer. If BFMA purchases Guest Supply, the company would be
privately-held and the current shareholders would no longer have a continuing
interest in Guest Supply going forward.
Furthermore, the alleged facts underlying Guest Supply's attacks on Mr.
Florescue's activities with respect to Century Bank are misleading and
incomplete. In February 1997, the OTS (the Office of Thrift Supervision) made
certain allegations that Mr. Florescue abused his ownership and control of
Century Bank (of which he owns 98%). In order to avoid the long and costly
process of litigating and fighting with the U.S. government, Mr. Florescue
signed a stipulation agreement with the OTS neither admitting nor denying any of
their allegations and agreed to pay a nominal fine. Since that time, there have
been no issues and Mr. Florescue continues to own the bank while remaining on
its board and is the Chairman and CEO of the bank's holding company.
<PAGE>
Perhaps Guest Supply is attacking Mr. Florescue because Clifford Stanley
and Teri Unsworth will do anything in their power not to sell Guest Supply to
BFMA, even if it means that they spend your money to retain their positions.
Mr. Stanley cited BFMA's 1996 purchase of Marietta as an example of how
BFMA initially made an offer at a higher price but actually purchased the
company at a lower price later. What Mr. Stanley did not tell you is that
Marietta's operating performance collapsed during their long and drawn out sale
process over five years ago. Notwithstanding this collapse, BFMA continued with
the process and ultimately purchased Marietta. A special committee of the board
of directors of Marietta at that time received a fairness opinion rendered by
Goldman Sachs & Company, one of the preeminent investment banking firms in the
world, that the price per share that BFMA paid to the-then shareholders of
Marietta was fair, from a financial point of view. As to the BFMA offer to
purchase Guest Supply, BFMA decreased its offer from $24.00 to $21.00 per share
for, among other reasons (a) BFMA being misled by management to expect better
operating performance for Guest Supply's June and September quarters than were
realized, (b) the offer of $24.00 per share being made six months prior to its
current offer and at a time when public market and private valuation multiples
were higher and the overall financial markets were not as volatile and (c) the
delays by the Board and Mr. Stanley in moving forward with discussions over the
summer. Even now, the economy has begun showing signs of slowing which will
negatively affect the hospitality and lodging industries and the companies that
supply them. Had Mr. Stanley and Ms. Unsworth cooperated with BFMA in June when
BFMA made its first formal offer, you, Guest Supply's shareholders, may have
well received your $24.00 in cash per share by now. Guest Supply's resistance
to seriously discuss with BFMA its previous offer has cost you a great deal of
money.
MR. STANLEY FALSELY CLAIMS THAT
MARIETTA IS A PRINCIPAL COMPETITOR
MR. STANLEY CLAIMS: "BFMA is the corporate parent of our principal
competitor in the lodging amenities industry . . . "
THE TRUTH IS: Guest Supply is attempting to create the appearance of an
issue when in fact there is no issue over Guest Supply and Marietta's
competitive relationship. Guest Supply and Marietta are competitors. This fact
was clearly disclosed in BFMA's proxy materials. What Mr. Stanley omits (and,
apparently, would like you to forget) is that Guest Supply has repeatedly
characterized its business as "highly competitive." In a highly competitive
market, there is no significance to the competitive relationship between any two
particular companies because there is so much other competition. Mr. Stanley
also omits that the relationship between Guest Supply and Marietta is largely
vertical. Guest Supply is primarily a distributor. Marietta is primarily a
manufacturer. The combination of the two companies would provide for a clear
vertical integration. Both companies do fill some small bottles and press bars
of soap -- however, based on the "comprehensive information about Guest Supply
that is publicly available," Guest Supply only makes approximately $11.9 million
of this product (as their inter-segment sales are publicly reported) which is
only approximately 3% of Guest Supply's total 2000 sales. There are many other
companies that fill bottles and press bars of soap. There are many more
companies, domestic and foreign, that could enter these markets easily and
without substantial cost or effort. Furthermore, Mr. Stanley's claim that
Marietta is already attempting to subvert any of the company's relationships is
simply untrue. This "competition" argument generated by Guest Supply is a
smokescreen hiding the real issue: management does not want to sell Guest Supply
to BFMA or anyone else, no matter what the price or the cost to Guest Supply
shareholders.
MR. STANLEY'S DECEPTION CONTINUES
MR. STANLEY CLAIMS: "We pursued our discussions with BFMA seriously, after
over three months of effort, we terminated discussions 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."
<PAGE>
THE TRUTH IS: BFMA agreed to all of Guest Supply's substantive requests
regarding the provisions of the Confidentiality Agreement, so long as BFMA
received sufficient information to be able to quickly evaluate the potential
benefits of putting the two companies together. BFMA's initial request for
information was made for materials that could not reasonably be used against
Guest Supply in a competitive environment. We did this because we were aware of
Mr. Stanley's purported competitive paranoia. At first Mr. Stanley agreed to
supply a very limited amount of information regarding Guest Supply's business.
However, even after numerous conversations between representatives of BFMA and
Guest Supply regarding the information, Mr. Stanley refused even to commit to
provide the requested information to BFMA despite the fact that BFMA would sign
the Confidentiality Agreement. In fact, Guest Supply stated that it would
accept less money from BFMA or anyone else rather than supply the requested
information. As a result, BFMA saw no reason to execute the Confidentiality
Agreement. In fact, had BFMA executed the Confidentiality Agreement, you, the
shareholders, may not have known for another two years that BFMA made an offer
to buy Guest Supply. We believe that you, as shareholders, should be appalled
that the directors and senior management of Guest Supply were willing to give
away your money in order to protect their coveted positions.
As stated above, BFMA previously demonstrated to Guest Supply its ability
to finance an offer at a higher price than its current offer and is highly
confident that it can finance it now. BFMA never stated that it needed to
identify $10,000,000 in synergies or cost savings to finance the deal. It did,
however, indicate that the amount of synergies it could reasonably expect would
affect the price that BFMA would be willing to pay, given the cost of capital
and expected returns to BFMA. Once again, Mr. Stanley "spins" the facts to
serve his self interested objectives. BFMA has, in fact, received indications
of interest and proposals from substantial and well-respected institutional
financing sources for commitments in excess of $250,000,000.
BFMA has offered to acquire all of the shares of Guest Supply for cash.
BFMA's true intention is to pay the other Guest Supply shareholders a premium
of approximately 25% over the $16.75 reported closing sales price of Guest
Supply's common stock on the New York Stock Exchange on November 16, 2000, the
last trading day prior to BFMA's delivery of the offer, and a premium of
approximately 29% over the $16.30 average closing sales price of Guest Supply's
common stock over the 20 trading days ending on the same date. What you should
question is the true motivations of Clifford Stanley and Teri Unsworth, in not
responding to BFMA's offers or in otherwise taking steps to maximize the value
of your shares of Guest Supply.
WHAT ARE THE TRUE MOTIVATIONS OF
CLIFFORD STANLEY AND TERI UNSWORTH?
We question the commitment of Clifford Stanley, Teri Unsworth and the
other Guest Supply directors to maximize shareholder value for all shareholders.
Mr. Stanley, Ms. Unsworth and other officers and directors sold
personally-held shares of Guest Supply stock at prices below $20.00 per share in
May and early June, at a time when Guest Supply had engaged an investment banker
(U.S. Bancorp Piper Jaffray) to "explore strategic alternatives" and was engaged
in discussions with BFMA regarding the sale of Guest Supply at a much higher
price.
o Why were these directors selling at prices below $20.00 per share
at a time they were rejecting a $24.00 offer as inadequate and
demanding $30.00 per share? Did the directors of Guest Supply have
knowledge about the business that they were not willing to share?
o Why were these directors trading at a time where they had material
non-public information?
o Do these officers and directors have another agenda other than
seeking the maximum appreciation in the value of your shares?
During the period which Mr. Stanley, Ms. Unsworth and other directors were
selling shares of Guest Supply common stock, BFMA was buying shares. In
addition, by telling BFMA that it had to pay $30.00 per share but not providing
BFMA with any information to help them understand why BFMA should pay that much
was essentially saying "go away". Did we mention that last year Mr. Stanley, Ms.
Unsworth and Paul Xenis, Guest Supply's Chief Financial Officer, arranged to
have their personally-held shares of Guest Supply common stock repurchased
directly by the company in the amounts of 120,000, 40,000 and 35,000,
<PAGE>
respectively? Ask yourself, why were they entitled to liquidity for their shares
at your expense when other shareholders were not? In addition, management and
directors have since sold and surrendered additional personally-held shares of
Guest Supply stock at below $20.00 per share.
BFMA believes Mr. Stanley, Ms. Unsworth and the other directors have been
resistant to BFMA's offers because they realize that, in any potential business
combination with BFMA, they would most likely no longer be officers or directors
of Guest Supply. BFMA has learned from its discussions with industry contacts,
investment bankers and other shareholders of Guest Supply that Mr. Stanley has
had preliminary discussions with other entities with respect to buying Guest
Supply. Yet he has consistently created roadblocks to having any real
conversations with BFMA and the other potential buyers. It appears to us that
Mr. Stanley, Ms. Unsworth and the other directors are only seeking a "strategic
alternative" that keeps them in power -- even if it means less value to you, the
true owners of Guest Supply. Remember, they hired an advisor nearly seven months
ago to explore strategic alternatives, and nothing has happened yet. Are Mr.
Stanley, Ms. Unsworth and the other directors truly concerned with the best
interests of the Guest Supply shareholders or their own self-interests? Decide
for yourself what their true motivations are.
NOW IS THE TIME TO EXPLORE A SALE
Despite Guest Supply's reported record operating performance in fiscal year
2000, its stock trades at very low multiples of its EBITDA (earnings before
depreciation, amortization, interest and taxes) and earnings per share. We
believe that Guest Supply's poor valuation and low multiples are not temporary
anomalies. Rather, they are based on the relatively small size of Guest Supply's
total market capitalization, the limited liquidity in Guest Supply's stock, the
poor communication by management with its current and potential shareholders,
lack of research and sponsorship of the stock, and the cyclical nature of the
industry Guest Supply services. We believe that these are unlikely to improve in
the future.
VOTE NOW TO PROTECT THE VALUE OF YOUR INVESTMENT
Each Guest Supply shareholder has a clear-cut choice: vote for the two
BFMA nominees who will attempt to convince the other directors to form a
Special Committee to explore the sale of Guest Supply OR choose the status quo
and allow management to continue to act in its own self-interest. Management's
inaction speaks for itself. We believe that they are more interested in keeping
their positions and perquisites than in maximizing shareholder value.
It is important to note that, after all of these months, Guest Supply's
management and directors have failed to either deliver an alternative
transaction or take any other major steps to maximize shareholders value. Their
request that you stick with them is neither credible nor likely to result in a
higher value for your shares.
A VOTE FOR THE BFMA NOMINEES IS A VOTE FOR SHAREHOLDER VALUE. IF YOU
BELIEVE THAT GUEST SUPPPLY SHOULD EXPLORE A SALE TO THE HIGHEST BIDDER TO
MAXIMIZE VALUE, YOU MUST ACT NOW! YOUR VOTE AND PROMPT ACTION ARE IMPORTANT. WE
URGE YOU TO GRANT YOUR PROXY FOR THE BFMA NOMINEES BY SIGNING, DATING AND
RETURNING THE ENCLOSED BLUE PROXY CARD TODAY. If you have any questions or need
assistance in voting your shares, please call Innisfree M&A Incorporated, the
firm assisting us in the solicitation, TOLL-FREE at 1-888-750-5834.
Sincerely,
/s/Barry Florescue
---------------------------------------
Barry Florescue
President and Chairman of the Board
of BFMA Holding Corporation
<PAGE>
SECURITIES LAW LEGEND
A PROXY STATEMENT DATED DECEMBER 7, 2000 DESCRIBING BFMA'S SOLICITATION
OF PROXIES TO ELECT CLASS C DIRECTORS WAS PREPARED AND MAILED TO ALL
SHAREHOLDERS. YOU SHOULD READ THE PROXY STATEMENT TO OBTAIN INFORMATION ABOUT
BFMA HOLDING CORPORATION, ITS OFFICERS AND DIRECTORS, INCLUDING CHARLES W.
MIERSCH AND LOGAN D. DELANY, JR. A COPY OF THE PROXY STATEMENT AND OTHER RELATED
DOCUMENTS PREPARED BY OR ON BEHALF OF BFMA AND FILED WITH THE SEC ARE AVAILABLE
FOR FREE, EITHER AT THE WEB SITE OF THE SEC (http://www.sec.gov) OR FROM BFMA BY
WRITING TO: BFMA HOLDING CORPORATION, 50 EAST SAMPLE ROAD, SUITE 400, POMPANO
BEACH, FL 33064, ATTENTION: SECRETARY.
