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
Date of Report (Date of earliest event reported) DECEMBER 19, 1997
MERISEL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-17156 95-4172359
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
200 Continental Boulevard, El Segundo, California 90245-0948
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 615-3080
Item 1. CHANGE OF CONTROL OF REGISTRANT
On December 19, 1997, Merisel, Inc. (the "Company") issued the press
release attached hereto as Exhibit 99.1 announcing that, as of such date,
Phoenix Acquisition Company II, L.L.C. ("Phoenix") acquired 44,014,379
shares of the common stock, par value $.01 per share (the "Common
Stock"), of the Company pursuant to the conversion (the "Conversion") of
the $133,803,714.30 principal balance of the Convertible Promissory Note,
dated September 19, 1997 (as amended and restated, the "Convertible
Note"), of the Company and Merisel Americas, Inc., a wholly owned
operating subsidiary of the Company ("Merisel Americas"). As a result of
the Conversion, Phoenix's ownership interest in the Company increased to
an aggregate of 50,000,000 shares of Common Stock, which represented
approximately 62.4% of the outstanding Common Stock as of the close of
business on December 19, 1997. The Common Stock is the only class of
securities of the Company entitled to vote in the election of directors
of the Company.
The Convertible Note was issued pursuant to the Stock and Note Purchase
Agreement, dated September 19, 1997, by and among the Company, Merisel
Americas and Phoenix (as amended, the "Stock and Note Purchase
Agreement"). Pursuant to the Stock and Note Purchase Agreement, on
September 19, 1997, Phoenix acquired the Convertible Note, in an initial
principal amount of $137,100,000, as well as 4,901,316 shares of Common
Stock (the "Purchased Shares") for an aggregate purchase price of
$152,000,000. On October 10, 1997, Phoenix exercised its option to
convert $3,296,285.70 principal amount of the Convertible Note into
1,084,305 shares of Common Stock, which reduced the outstanding principal
amount of the Convertible Note to $133,803,714.30. On December 19, 1997,
the Company's stockholders ("Stockholders") approved the Conversion at a
special meeting of Stockholders and the Conversion was consummated.
Phoenix is a Delaware limited liability company whose sole member is
Stonington Capital Appreciation 1994 Fund, L.P. (the "Fund"). The Fund is
managed by Stonington Partners, Inc., a Delaware corporation and a New
York-based private investment firm ("Stonington"), and was organized by
Stonington to finance investments in industrial and other companies.
Through the Fund, Stonington raised the consideration required for
Phoenix to acquire the Convertible Note and the Purchased Shares. The
Fund's principal investors include major pension funds, United States and
foreign banks, insurance companies and corporations.
Subsequent to the consummation of the Conversion, the board of directors of
the Company was reconstituted to consist of three pre-Conversion directors
(Mr. Dwight A. Steffensen, Dr. Arnold Miller and Mr. Lawrence J.
Schoenberg), three Phoenix designees (Messrs. Albert J. Fitzgibbons III,
Bradley J. Hoecker and Stephen M. McLean), two additional management
nominees (Messrs. James E. Illson and Robert J. McInerney) and one
additional independent director (Mr. Thomas P. Mullaney).
Item 5. OTHER EVENTS
Prior to the Conversion, the Company had been notified by The Nasdaq
Stock Market, Inc. ("Nasdaq") that it was no longer in compliance with
Nasdaq's net tangible assets test (the "Net Assets Test") required for
continued listing on the Nasdaq National Market. In order for the Company
to avoid the de-listing of its securities from the Nasdaq National
Market, Nasdaq required the Company to make a public filing by December
31, 1997 with Nasdaq and the Securities and Exchange Commission
demonstrating compliance with the Net Assets Test.
Attached hereto as Exhibit 99.2 is the balance sheet of the Company for
the fiscal month ended November 30, 1997, including pro forma adjustments
for the Conversion and related transactions (the "Balance Sheet"). The
Balance Sheet is required by Nasdaq and indicates that, on a pro forma
basis, the Company had greater than the required $4,000,000 in net
tangible assets as of the end of such fiscal month and, therefore,
demonstrates compliance with the Net Assets Test. As of immediately
following the Conversion, the Company was in compliance with the Net
Assets Test and all other listing criteria of the Nasdaq National Market.
The Company's November fiscal month ended on the four-week period ended
November 22, 1997. For clarity of presentation, the Company has presented
the Balance Sheet as of November 30, 1997.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release dated December 19, 1997.
99.2 November 30, 1997 balance sheet of the Company including
pro forma adjustments for the Conversion and related
transactions.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly autho rized.
MERISEL, INC.
Date: December 23, 1997 By: /s/ KAREN A. TALLMAN
-----------------------
Karen A. Tallman
Vice President, General
Counsel and Secretary
EXHIBIT 99.1
Contacts:
James Illson
Senior Vice President, Finance and CFO
(310) 615-1295
Karen Tallman
Vice President, General Counsel
(310) 615-1235
Investor Relations
Charles B. Freedman, Assistant Treasurer
(310) 615-1376
Rivian Bell
(310) 615-6812
(800) 686-1910 (24-hour pager)
MERISEL STOCKHOLDERS APPROVE DEBT RESTRUCTURING;
COMPANY CONVERTS $133.8 MILLION OF DEBT TO EQUITY
BOARD TO EXPAND FROM FIVE TO NINE DIRECTORS
El Segundo, Ca1if. (Dec. 19, 1997) - The stockholders of Merisel, Inc.
(NASDAQ:MSEL) today gave the company approval to consummate the
conversion to equity of approximately $133,800,000 in financing provided
by Stonington Partners through Phoenix Acquisition Company II, L.L.C.
Today's affirmative vote effectively concluded the debt restructuring
process which Merisel undertook earlier this year. Stonington also
reaffirmed its agreement to provide, upon request, a $50 million working
capital facility that would mature on June 30, 1998.
"With the debt restructuring behind us, we can now turn our full
attention to continuing our business growth and sales momentum," stated
Dwight A. Steffensen, Merisel chairman and chief executive officer.
"Merisel has experienced an exciting year in which we expanded our
management team and sales force, achieved double-digit sales growth,
added more than 40 vendors and product lines, and reached new levels of
operational excellence. We are planning aggressively for the future to
bring a number of new programs to the market that will enhance Merisel's
growth opportunities and competitive strengths."
Mr. Steffensen went on to state that "We are very pleased that Merisel's
stockholders have recognized the value of the Stonington investment and
given it their support. As a result of today's actions, Merisel has
eliminated substantially all of the debt for its Merisel Americas operating
subsidiary and greatly improved liquidity by freeing up more than $15
million in cash annually that would have otherwise been used for interest
payments. Moreover, Merisel has acquired a valuable business partner in the
Stonington organization. We believe that Merisel's constituents --
stockholders, noteholders, customers, vendors, and associates -- will
benefit from the company's strengthened balance sheet."
Stockholders granted approval for three proposals: (1) adoption of a
charter amendment to increase the number of authorized shares of common
stock from 50,000,000 to 150,000,000; (2) the conversion of the Phoenix
note to 44,014,379 shares of common stock; and (3) the Merisel, Inc. 1997
Stock Award and Incentive Plan, designed to reinforce the long-term
commitment to Merisel's success by its directors, officers, and
employees. With the conversion effective immediately, Phoenix, which
previously held 16.6 percent of the outstanding common stock, will now
hold approximately 62.4 percent of the shares.
There are no changes anticipated in the management of the company. The
company's board of directors will expand from five to nine members. New
directors will include three Stonington partners (Albert J. Fitzgibbons
III, Bradley J. Hoecker, and Stephen M. McLean); two management
designees (Robert J. McInerney, Merisel president and chief operating
officer, and James E. Illson, senior vice president and chief financial
officer); and a new independent director (Thomas P. Mullaney, a former
president and director of the company).
Merisel, Inc. (NASDAQ:MSEL) is a leader in the distribution of computer
hardware and software products and reported 1996 sales of $3.44 billion
from its North American operations. Merisel distributes a full line of
25,000 products and services from the industry's leading manufacturers to
more than 45,000 resellers throughout North America. @Merisel, the
company's corporate home page, is located at http://www.merisel.com.
Additional information can be obtained by fax at (310) 615-6811.
# # #
EXHIBIT 99.2
MERISEL, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
NOVEMBER 30, 1997 ADJUSTMENTS NOVEMBER 30, 1997
----------------- ----------- -----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and Cash equivalents...................... 48,238 (11,467)(1) 36,771
Accounts receivable (net allowances of
$17,455)..................................... 164,267 - 164,267
Inventories.................................... 476,036 - 476,036
Prepaid expenses and other current assets...... 12,007 1,000(2) 13,007
Deferred income tax benefit.................... 466 - 466
----------- ------------ ---------
Total current assets................. 701,014 (10,467) 690,547
PROPERTY AND EQUIPMENT, NET......................... 53,941 - 53,941
COST IN EXCESS OF NET ASSETS
ACQUIRED, NET.................................. 25,466 - 25,466
OTHER ASSETS........................................ 10,993 (4,555)(3) 6,438
---------- ------------- ---------
TOTAL ASSETS......................... 791,414 (15,022) 776,392
========== ============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable............................... 456,195 - 456,195
Accrued Liabilities............................ 38,971 - 38,971
Income Taxes Payable........................... 1,668 - 1,668
Convertible Notes - Current.................... 125,004 (125,004)(4) -
Long Term Debt - Current....................... 1,698 - 1,698
---------- ---------------- ---------
Total current Liabilities............ 623,536 (125,004) 498,532
CONVERTIBLE NOTES - LONG TERM....................... 8,800 (8,800)(5) -
LONG TERM DEBT...................................... 132,004 - 132,004
---------- ---------------- ---------
TOTAL LIABILITIES.................... 764,340 (133,804) 630,536
STOCKHOLDERS' EQUITY:
Preferred Stock................................ - -
Common Stock................................... 361 440(6) 801
Additional Paid-in Capital..................... 160,437 122,092(7) 282,529
Accumulated Deficit............................ (125,889) (3,750)(8) (129,639)
Cumulative Translation Adjustment.............. (7,834) - (7,834)
---------- ---------------- ----------
Total Stockholders Equity............ 27,074 118,782 145,856
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY....................... 791,414 (15,022) 776,392
========== ============== =========
Footnote
Number (1) (2) (3) (4) (5) (6) (7) (8)
Convertible Additional Accumu-
Prepaid Convertible Notes - Common Paid-in lated
Cash Assets Other Assets Notes - Current Long Term Stock Capital Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a). . . . (6,717) (4,555) (125,004) (8,800) 440 122,092
(b) . . . . (4,750) 1,000 (3,750)
Total . . (11,467) 1,000 (4,555) (125,004) (8,800) 440 122,092 (3,750)
========== ======== ========== ============= ========== ======= ========= ========
(a) To reflect the conversion of $133.8 million of convertible debt and
the issuance of 44.0 million shares of Common Stock to Phoenix, net
of estimated professional and other fees associated with the
Conversion of $11.3 million.
(b) To record payment of estimated fees and other costs associated with
obtaining a new revolving credit agreement and a remarketing
facility related to the 12.5% Notes assuming a substantial portion
of the 12.5% Notes were repurchased.
</TABLE>
