<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. 1)
LIFE TECHNOLOGIES, INC.
(NAME OF SUBJECT COMPANY)
DEXTER CORPORATION
DEXTER ACQUISITION DELAWARE, INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
532177201
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
BRUCE H. BEATT, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
DEXTER CORPORATION
ONE ELM STREET
WINDSOR LOCKS, CT 06096
(860) 292-7675
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
----------------
COPY TO:
JERE R. THOMSON, ESQ.
JONES, DAY, REAVIS & POGUE
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 326-3939
<PAGE> 2
Dexter Acquisition Delaware, Inc., a Delaware corporation ("Purchaser")
and a wholly-owned subsidiary of Dexter Corporation, a Connecticut corporation
("Parent") and Parent hereby amend and supplement their Tender Offer Statement
on Schedule 14D-1 (the "Schedule 14D-1") filed with the Securities and Exchange
Commission on November 2, 1998. Capitalized terms not defined herein have the
meaning ascribed to them in the Schedule 14D-1.
ITEM 11. Material to be Filed as Exhibits.
Item 11 of the Schedule 14D-1 is hereby amended to add the following
exhibits:
(a)(9) Text of Press Release issued by Parent, dated November 5, 1998.
(g)(1) Letter of Iain C. Wylie to the Company Board, dated November 3,
1998, resigning as a director of the Company.
(g)(2) Letter of Frank E. Samuel, Jr. to the Company Board, dated
November 3, 1998, resigning as a director of the Company.
<PAGE> 3
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 5, 1998 DEXTER ACQUISITION DELAWARE, INC.
By: /s/ KATHLEEN BURDETT
-------------------------------------
Name: Kathleen Burdett
Title: Treasurer
DEXTER CORPORATION
By: /s/ BRUCE H. BEATT
-------------------------------------
Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<S> <C> <C>
(a)(9) Text of Press Release issued by Parent, dated November 5, 1998.
(g)(1) Letter of Iain C. Wylie to the Company Board, dated November 3,
1998, resigning as a director of the Company.
(g)(2) Letter of Frank E. Samuel, Jr. to the Company Board, dated
November 3, 1998, resigning as a director of the Company.
</TABLE>
<PAGE> 1
DEXTER
Dexter Corporation N
One Elm Street E
W
Windsor Locks S
Connecticut 06096-2334
T: 860.292.7675
F: 860.292.7627
Contact:
Investors Media
- --------- -----
Kathleen Burdett Michael Freitag
John D. Thompson Mark Semer
Dexter Corporation Kekst and Company
(860) 292-7675 (212) 521-4800
or
Mark Harnett
MacKenzie Partners, Inc.
(212) 929-5877
For Immediate Release
TWO LIFE TECHNOLOGIES, INC. DIRECTORS RESIGN
WINDSOR LOCKS, CONNECTICUT, November 5, 1998 - Dexter Corporation (NYSE:DEX)
today announced that it has received copies of letters from Frank E. Samuel,
Jr. and Iain C. Wylie resigning as directors of Life Technologies, Inc.
(NASDAQ:LTEK), Dexter's majority-owned subsidiary.
On November 2, 1998, Dexter commenced a tender offer for $37 per share in cash,
for all of the outstanding shares of common stock, par value $.01 per share, of
Life Technologies, Inc. it does not currently own. K. Grahame Walker, Chairman
and Chief Executive Officer of Dexter Corporation, said, "We appreciate the
services of Frank and Iain as directors of Life Technologies and regret their
decision to resign. However, we disagree with their views of the special
committee process and our offer. We continue to believe that we have made a
full and fair offer and that it is in the best interest of Life Technologies'
public shareholders to have an immediate opportunity to take advantage of our
offer for the reasons fully set forth in our Offer to Purchase."
-more-
<PAGE> 2
DEXTER-2
Dexter will file today the resignation letters of Messrs. Samuel and Wylie in an
amendment to its Schedule 14D-1 previously filed with the Securities and
Exchange Commission on November 2, 1998.
Dexter Corporation is a global specialty materials supplier with three operating
segments: specialty polymers, nonwovens, and a majority ownership in Life
Technologies. The company supplies specialty materials to the aerospace,
electronics, food packaging and medical markets.
Life Technologies, Inc. develops, manufactures and supplies more than 3,000
products used principally in life sciences research and commercial manufacture
of genetically engineered products. The company is a leading supplier of sera
and other cell growth media, as well as enzymes and other biological products
necessary for recombinant DNA procedures.
Special Materials for Special Effects
####
<PAGE> 1
31, High Point,
Pirton Road,
Hitchin, Herts,
SG5 2BH,
England
The Board of Directors,
Life Technologies Inc.,
9800 Medical center Drive,
Rockville,
Maryland 20850,
U.S.A.
3 November, 1998.
Dear Members of the Board,
Following the decision on October 27 of the Dexter members on the LTI Board to
disband the Special Committee, apparently in response to our refusal to
recommend Dexter's $37 per share offer to the minority public shareholders, I
feel I am now unable to fulfill my obligation to these shareholders. This makes
my position as an LTI Director untenable, and I must regretfully tender my
resignation effective immediately.
I say regretfully sincerely, as I consider LTI to be an outstanding Company with
an exceptional management team and tremendous potential. It has been a privilege
and a pleasure to serve as a Board member.
A definitive statement regarding the Special Committee's Process is attached,
but I would just like to comment that, while I intentionally approached my
Special Committee responsibility with no preconceptions as to the fairness of
the Dexter offer, the intensive due diligence carried out during the past months
has convinced me that LTI has significant value, both in its base business and
the R+D Pipeline, which is not reflected in the Dexter Board's current bid.
I am sure you are aware that LTI's present share price reflects (1) the lack of
following by significant Wall Street Analysts and (2) the fact that LTI has
operated for some years in Dexter's 'shadow' as the majority shareholder.
However, the Special Committee's remit was to examine the underlying value of
the Company, not its short-term share price. The Committee and its advisers were
genuinely deeply committed to this Process; it has been hard for me to
understand Dexter's unwillingness to become involved in the evaluation of what
is likely to be its major business in the future and to continually ignore the
bases
<PAGE> 2
- 2 -
for our conclusions. As an example, I believe the detailed development and
evaluation of the R+D Pipeline to be of major value to the future direction of
LTI.
In its dealings with Dexter's advisers, the Special Committee took Merrill
Lynch's questions and comments very seriously as a sign that they were
interested in discussing our findings, put significant effort into researching
answers, and gave Merrill clear value ranges on several occasions that resulted
from our work. The fact that these were discounted without serious discussion or
consideration both troubled and mystified me. I was led to conclude from their
comments and comparables that the Dexter advisers were less familiar with this
complex and sophisticated field of biotechnology than we could have hoped.
Certainly three of the main assumptions in their advice to Dexter seemed to
indicate this. These were: a less than credible R+D programme in spite of
detailed, conservative and fully substantiated presentations by Management, a
questionable LTI track record, while its historical performance has been
exemplary, and general decline in business markets, of which there is no
significant evidence in this specialist area.
Whatever the reasons were for this uncooperative approach with an otherwise
constructive process, and for the summary disbanding without discussion of the
Special Committee, sadly I feel that the climate created has made it impossible
for me to contribute effectively as a Director of LTI. I would therefore
respectfully request that this letter with the attached statement be filed as an
exhibit to an LTI Form 8-K filed with the SEC. Please direct any questions to my
counsel, David Katz of Wachtell, Lipton, Rosen & Katz.
Yours sincerely,
/s/ Iain C. Wylie
<PAGE> 3
JOINT STATEMENT OF THE
FORMER MEMBERS OF THE SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF
LIFE TECHNOLOGIES, INC.
------------------------------
SUMMARY.
For the reasons described below under "Reasons for the Special
Committee's Recommendation," the Special Committee of Independent Directors of
Life Technologies, Inc. ("LTI") determined that Dexter Corporation's proposal to
purchase all of the shares of LTI that it does not already own at a price of $37
per share in cash would not adequately compensate LTI's public stockholders for
the inherent value of their LTI shares. Consequently, the Special Committee was
unwilling to recommend that LTI's public stockholders accept Dexter's $37 per
share proposal.
BACKGROUND OF THE COMMITTEE'S ACTIVITIES.
In May 1998, LTI's scheduled share repurchase was suspended by
order of Dexter Corporation without notice to the LTI Board. This repurchase
program had been the subject of extensive discussion by the LTI Board over many
months - in fact, the Chairman of the Board had specifically directed that the
share repurchase be pursued expeditiously - but the LTI Board was not informed
that the repurchase program was suspended, and no public announcement was ever
made.
On July 7, 1998, Dexter Corporation, which at that time owned
approximately 52% of the outstanding shares of common stock of LTI, publicly
announced its proposal to acquire the remaining 48% of LTI that it did not
already own at a price of $37 per share in cash. As was the case with the
canceling of the share repurchase, Dexter made this announcement without advance
notice to or consultation with the LTI Board. At a meeting of the LTI Board that
day, the LTI Board appointed directors Thomas H. Adams, Frank E. Samuel, Jr.,
and Iain C. Wylie as a Special Committee of independent directors charged with
evaluating and responding to Dexter's proposal on behalf of LTI's public
stockholders. Messrs. Adams, Samuel and Wylie were the only independent members
of the LTI Board; each of the other directors was either an officer of LTI, or
an officer or director of Dexter.(1) In addition, each of Messrs. Adams, Samuel
- ------------------------
(1) Subsequently, an independent director (who was not a member of the
Special Committee) resigned to pursue other opportunities (unrelated to
the Dexter proposal), and the Chairman of the Board recommended that
another director affiliated with Dexter be appointed to the LTI Board
of Directors to replace the resigning director. A replacement director
for the resigning director was required in order to keep the LTI Board
at the size required by LTI's certificate of incorporation. However,
there was no requirement that the replacement director be affiliated
with Dexter. Since there was no reason to give Dexter clear control of
the LTI Board (i.e., five of nine directors) or to appoint another
Dexter- affiliated director in the context of an interested party
transaction, the two members of the Special Committee who were
present at the relevant meeting voted against electing the new
director.
<PAGE> 4
and Wylie possess significant expertise in the life sciences which all but one
of the Dexter representatives do not. The Special Committee engaged Wachtell,
Lipton, Rosen & Katz as its counsel and, after interviewing a number of
financial advisory firms, engaged Goldman, Sachs & Co. as its financial advisor.
Shortly thereafter, the Special Committee and its legal and
financial advisors commenced their effort to respond to the Dexter proposal.
This effort began with an intensive, cooperative effort among the Special
Committee, Goldman Sachs and senior management of the Company to analyze and
understand the various contributing factors to LTI's inherent value. As has been
discussed by the LTI Board from time to time in the past, LTI is a difficult
company to value without intensive study for at least two reasons: first,
because a significant part of its future success and value is dependent upon the
success and value of products that currently are only under development--the
so-called "R&D pipeline" -- the details of which are not fully public for
competitive and other reasons (although Dexter has been well aware of them for
some time); and second, because LTI receives very little analyst coverage from
Wall Street, primarily due to Dexter's majority position. Because there is
substantial information relating to the value of LTI that has not been made
available to the public stockholders, the Special Committee felt a special
obligation to evaluate these assets in order to ensure that Dexter not unfairly
profit from its inside status at the expense of the public stockholders.
The Special Committee began by attempting to understand and
evaluate the Company's strategic plan, including a highly detailed analysis of
the Company's R&D pipeline. In this connection, with the assistance of Goldman
Sachs and senior management of the Company, the Special Committee reviewed all
of the Company's major assets, including sequencing technologies, transgenics,
and the cDNA library, and then analyzed the R&D pipeline on a product-by-product
basis in order to understand the success probabilities of each of the products
and the implications for LTI, the LTI stockholders, and the financial
projections contained in the base strategic plan. Among other things, the
analysis indicated that the commercialization of some of the major products in
the R&D pipeline could be expected to lead to an expansion of the Company's
earnings growth trajectory. The Special Committee and its advisors then
thoroughly analyzed LTI's financial projections, including spending a
significant amount of time questioning and pressing management on the viability
and achievability of the projections reflected in the strategic plan, as well as
separately analyzing the R&D pipeline.
Based on this work, in August and early September Goldman Sachs
and the Special Committee broke its valuation analysis into two components: (1)
the ongoing operations of the Company, and (2) the R&D pipeline. Application of
standard valuation techniques to these two components by Goldman Sachs indicated
discounted cash flow value ranges for the ongoing operations and for the R&D
pipeline which, when added together, supported values significantly in excess of
$37 per share. In the case of the R&D pipeline, Goldman Sachs based its analysis
on a product by product probability-of-success analysis, with each probability
2
<PAGE> 5
supplied by management. In addition, in its discounted cash flow analyses,
Goldman Sachs applied significantly higher discount rates to the R&D pipeline
than it did to the ongoing operations. Consequently, the Special Committee
believed, based in part on Goldman Sachs' work, that the results indicated by
the R&D pipeline analysis were conservative and not speculative.
In addition to the discounted cash flow analyses, the Special
Committee also considered (i) LTI's recent and historical stock price
performance, (ii) LTI's investor base and investment positions, (iii) LTI's
historical business and financial performance and prospects, (iv) comparable
public company stock values, (v) a review of premiums paid in prior life
sciences industry acquisitions, and (vi) a review of premiums paid in prior
minority buy-out transactions.
In September, after more than six weeks of this intensive work by
the Special Committee and its legal and financial advisors, the Special
Committee informed Dexter that, based on the work done as of that time, the
Special Committee had concluded that $37 per share was not an appropriate
valuation, and that the Special Committee was not prepared to recommend Dexter's
offer to LTI's public stockholders. In particular, the Special Committee told
Dexter that the analytical work performed by the Special Committee and its
advisors had led it to conclude that Dexter's $37 per share offer appropriately
reflected neither the substantial values indicated in the Company's base
strategic plan nor the incremental value of the Company's R&D pipeline. The
Special Committee chose to engage in private discussions, rather than public
negotiations, with Dexter in order to attempt to minimize any potential harm to
LTI from the process which Dexter initiated. The Special Committee believed that
a public disagreement on the values inherent in LTI's base business as well as
its very attractive R&D pipeline would ill serve the constituencies that the
Special Committee was charged with protecting.
The Special Committee also informed Dexter that the Special
Committee had been approached by a third party interested in acquiring all of
LTI at a price in excess of Dexter's $37 offer. Because Dexter has previously
stated that it is not interested in reducing its position in LTI, the Special
Committee could not respond to this third-party contact. Nevertheless, the
Special Committee found it highly significant that the values indicated in the
third party approach exceeded the value Dexter offered even though the third
party did not have access to the substantial inside information (including with
respect to the R&D pipeline) to which Dexter has had continued access, both
through its board representation and in connection with the proposed
transaction.
Based on the work it had done as of that time, the Special
Committee believed that the differing valuation approaches applied by Goldman
Sachs and by Merrill Lynch, Dexter's financial advisor, together with Merrill
Lynch's admitted failure to attribute any meaningful value to the R&D pipeline,
accounted for the gap between Dexter and the Special Committee. In particular,
the Special Committee believed that both the R&D pipeline and LTI's current
product portfolio could be valued objectively, and that once Dexter and Merrill
Lynch understood the significance and value of the R&D pipeline and the current
product portfolio, a common ground eventually could be found for a transaction
that would provide fair value to LTI's public stockholders. Dexter agreed that
Merrill Lynch and Goldman Sachs should meet to discuss their respective
valuation analyses. To this end, the Special Committee continued its work for an
3
<PAGE> 6
additional five weeks and, among other things, (1) instructed Goldman Sachs to
meet with Merrill Lynch in order to see if a common approach to valuing LTI
could be agreed upon, and (2) arranged meetings among the Special Committee,
Goldman Sachs, Merrill Lynch and the Company's senior management to review the
R&D pipeline and other components of LTI's strategic plan.
During one of these meetings in late October, Merrill Lynch raised
certain issues concerning several of the important assumptions underlying the
analysis performed by the Special Committee and its financial advisor. These
issues included (1) the impact of recent economic developments in international
markets; (2) the impact of current stock market conditions; (3) whether LTI can
maintain market share growth without sacrificing margins; and (4) the Company's
ability to successfully commercialize the products in the R&D pipeline. Although
the Special Committee had considered each of these issues, the Special Committee
asked Goldman Sachs to do additional work and perform additional analyses
directly related to these issues, and the Special Committee personally
questioned the Company's senior management on these matters (other than issue
(2), with respect to which management was presumed to have no particular
expertise). The result of our investigation of these issues was to reinforce
rather than to diminish, our view that Dexter's $37 per share offer did not
fully reflect the values inherent in LTI. Among other things, the Special
Committee determined or was informed by LTI's management:
- with respect to the impact of recent economic developments: (i)
international economic conditions had negatively impacted only
Asia and Latin America, which constitute very small parts of LTI's
overall business; (ii) the expectation that a weakening dollar
relative to European currencies will generate greater income and
larger margins for the European region, which represents more than
one-third of LTI's business, and the belief that LTI management
has positioned LTI to take advantage of this situation; (iii)
customer orders have held firm and LTI has a lengthy list of new
customers; and (iv) the National Institutes of Health has
increased, not decreased its budget;
- with respect to market share gain: (i) base case growth is
projected to be strongest in high margin products; and (ii) LTI
plans to continue necessary cost restructuring to maintain
margins; and
- with respect to the Company's ability to successfully
commercialize the products in the R&D pipeline: (i) the Company
has several recent examples of new products that have been
developed and commercialized effectively, including Custom Primers
and Platinum Paq, and has had significant success in new product
introductions; and (ii) the Company has assigned dedicated
experienced teams to its major commercialization efforts,
including to the Gateway line and Amplification program.
In addition, on October 22, 1998, Goldman Sachs presented the
Special Committee with an update to its September valuation analysis. Among
other things, Goldman Sachs' presentation indicated discounted cash flow value
ranges for the ongoing operations and
4
<PAGE> 7
for the R&D pipeline that, when added together, indicated a total Company value
range of $36.32 to $51.81. Goldman Sachs also noted for the Special Committee
that the assumptions used in arriving at the discounted cash flow value range
for the R&D pipeline were more conservative than those used in the September
presentation and included sensitivity analyses that significantly discounted
management's actual expectations. Similarly, the discounted cash flow ranges for
the Company as a whole reflected sensitivities to potential softness in market
and economic conditions.
Based on this reaffirmation of its view that $37 per share would
not appropriately compensate LTI's public stockholders, the Special Committee
instructed Goldman Sachs to convey its responses to the issues raised by Merrill
Lynch to Merrill Lynch in the hope that productive discussions leading to a fair
transaction could result. Such discussions occurred on October 26, 1998. But
prior to that time, K. Grahame Walker, exercising his power as chairman of the
Board of LTI, called a special meeting of the Board of Directors of LTI on
October 27, 1998. No agenda was provided for this meeting, but Mr. Walker
indicated to one member of the Special Committee that he expected to receive an
update from the Special Committee.
At the October 27 Board meeting, the Special Committee informed
the Board that Dexter had so far failed to convince the Special Committee that
$37 per share is an appropriate valuation and that, based on its work and the
information provided by Dexter and the Company, the Special Committee was not
prepared to recommend Dexter's offer to LTI's public stockholders. The Special
Committee also made clear, however, that it and its advisors stood ready to
review any additional information and to consider any revised proposal that
Dexter cared to make. Mr. Walker instead demanded that Dr. Adams, the Special
Committee's chairman, state a price that the Special Committee would be willing
to approve. Dr. Adams declined to do so, and instead reiterated the Special
Committee's offer to consider additional information or a new proposal from
Dexter. Following Mr. Walker's repeated requests for a specific price the
Special Committee would be willing to approve, Dr. Adams informed the Board of
the same information that Goldman Sachs had conveyed to Merrill Lynch earlier in
the day, namely (i) that the Special Committee saw the logic of a price in the
$50+ range per share but believed Dexter would be unwilling to offer such a
price, (ii) that the Special Committee was not prepared to recommend the $37 per
share price in Dexter's proposal or any price in the $30s, and (iii) that the
Special Committee was willing to consider any new proposal. Finding Dr. Adams'
response unacceptable, Mr. Walker stated that the Special Committee's usefulness
had ended and disclosed that Dexter would announce that it had withdrawn its
proposal and that Dexter had decided to proceed directly with a tender offer to
LTI's stockholders. He then proposed to the LTI Board that the Special Committee
be disbanded. Overruling a direct request from an independent director that the
wisdom of such an action be discussed prior to such a vote, the five Dexter
representatives on the LTI Board approved the disbanding of the Special
Committee, with all three members of the Special Committee voting against
disbanding.
REASONS FOR THE SPECIAL COMMITTEE'S RECOMMENDATION.
The former members of the Special Committee unanimously agree that
Dexter Corporation's proposal to purchase all of the shares of LTI that it does
not already own at a price of $37 per share in cash would not adequately
compensate LTI's public stockholders for the
5
<PAGE> 8
inherent value of their LTI shares. Consequently, the Special Committee was
unwilling to recommend that LTI's public stockholders accept Dexter's $37 per
share proposal.
In particular, the Special Committee believes that Dexter
Corporation has ignored or omitted from its $37 per share value significant
components to LTI's long term inherent value and earning power. Foremost among
these is the value of the products in LTI's R&D pipeline that have not yet been
commercialized. Even using conservative assumptions and probability discounts to
account for the probabilities of success associated with these products, the
Special Committee determined that the R&D pipeline has significant value that
LTI's public stockholders are entitled to be compensated for and that are not
reflected in Dexter's $37 per share offer.
In addition to the foregoing, in reaching its conclusions, the
former members of the Special Committee considered the following material
factors:
(i) the Special Committee's expectation of LTI's operating and
financial performance on a "status quo" (no change in Dexter ownership)
basis, taking into account, among other things:
- historical information concerning the business,
operations, financial condition and operating results
of LTI; and
- certain projections provided by LTI management
concerning the prospects and financial and operating
performance of LTI;
(ii) certain stock market and related financial indicators,
including:
- the recent and historical trading prices and market
multiples of LTI common stock;
- LTI's investor base and investment positions;
- comparable public company stock values;
- a review of premiums paid in prior life sciences
industry acquisitions; and
- a review of premiums paid in prior minority buy-out
transactions;
(iii) the multiple presentations by senior management of LTI
concerning the products under development in LTI's R&D pipeline,
including management's product by product assessment of the potential
revenue associated with each such product and the probability of
success or failure of each such product, and Goldman Sachs'
comprehensive analysis of the R&D pipeline information provided by
management, including the application of appropriate probability
discounts and the presentation of informative probability and
sensitivity analyses;
6
<PAGE> 9
(iv) the fact that each of the members of the Special Committee
has significant expertise and professional experience in the life
sciences, whereas all but one of the Dexter-affiliated directors do
not;
(v) the fact that the details of the R&D pipeline had not been
made fully public (for competitive and other reasons) and therefore was
not fully reflected in LTI's stock price, together with the fact that
Dexter, unlike the public stockholders, had had access to such
information for some time;
(vi) the fact that, because a significant part of the value of
LTI is in its R&D pipeline, the details of which are not fully public,
and because LTI receives very little analyst coverage from Wall Street
due to Dexter's majority position, mere application of a premium to
current trading prices would not be a sufficient approach to valuing
LTI, and that intensive, rigorous study -- of the type performed by the
Special Committee with the assistance of Goldman Sachs -- would be
required;
(vii) the bullet points following the tenth paragraph above under
"Background of the Committee's Activities";
(viii) the unsolicited views of certain significant LTI
stockholders who believed that $37 per share was not a fair price and
that a higher price was required to properly compensate the LTI public
stockholders.
In view of the variety of factors and the amount of information
considered, the former members of the Special Committee did not find it
practicable to and did not make specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination was made after consideration of all of the
factors as a whole.
/s/Thomas H. Adams /s/Frank E. Samuel, Jr. /s/Iain C. Wylie
- ----------------------- ------------------------- ------------------
Thomas H. Adams, Ph.D., Frank E. Samuel, Jr. Iain C. Wylie
Chairman
7
<PAGE> 1
FRANK E. SAMUEL, JR.
SUITE 300
11000 CEDAR AVENUE
CLEVELAND, OHIO 44106
November 3, 1998
Board of Directors
Life Technologies, Inc.
9800 Medical Center Drive
Rockville, Maryland 20950
Dear Fellow Board Members:
On October 27, 1998, the representatives of Dexter Corporation serving on
our Board of Directors took the extraordinary step of disbanding the Special
Committee of independent directors - apparently in response to the Special
Committee's refusal to approve a transaction between LTI and Dexter Corporation
at a price that the Special Committee believed was not fair to LTI's public
stockholders. This inappropriate act, taken upon the motion of the Chairman of
the Board, who is also the Chairman of the Board of Dexter Corporation,
occurred without discussion (even though discussion was requested by myself, an
independent director), and over the objection of all three members of the
Special Committee. This act, together with the events of the past several
months and the behavior of those directors who represent Dexter Corporation on
this Board, has made it impossible for me to fulfill my primary obligation as a
director: to represent and act in the best interest of LTI's stockholders.
Consequently, I hereby resign from the Board of Directors of Life Technologies,
Inc., effective immediately.
My decision to resign is made with the greatest reluctance, I have served
as a director of LTI since April of 1996. I am proud of my association with the
Company, its outstanding management team and its many achievements.
Consequently, my decision to resign, and Dexter's heavy-handed activities over
an extended period of time that led to it, leave me not only with a profound
sense of disappointment, but, more importantly, with deep concern as to the
fairness of the treatment that LTI's public stockholders can expect to receive
in the future from the Dexter majority on this Board.
A joint statement of the members of the Special Committee, which outlines
in greater detail the reasons for the Special Committee's conclusion that $37
per share is not an appropriate valuation for LTI, is attached as Annex A to
this letter. As that statement makes clear, Dexter and the Special Committee
appeared to have substantial disagreements as to the proper approach for
determining an appropriate value for the Company. In particular, the Special
Committee strongly believed that in arriving at its $37 per share price, Dexter
had not given sufficient credit to, or had ignored, important components of
LTI's overall value, including the value of the products in LTI's R&D pipeline.
The Special Committee, calling upon its expert advisors as well as each
member's individual expertise, spent a great deal of time studying these issues.
<PAGE> 2
Board of Directors
Life Technologies, Inc.
November 3, 1998
I am troubled by several features of the situation as it
unfolded: Dexter's refusal to consider or even discuss the issues relating to
LTI's value raised by the Special Committee, the termination of the Special
Committee by the Chairman of the Board and his conflicted colleagues, and
Dexter's coercive attempt to buy out the LTI public stockholders at a price
which, I believe, deprives these stockholders of the significant inherent values
to which they are rightfully entitled. This is particularly troubling because,
as has been discussed by LTI Board members from time to time, LTI is a difficult
company to value without intensive study. This is both because a significant
part of the value of LTI is in its R&D pipeline, the details of which are not
fully public, and because LTI receives very little analyst coverage from Wall
Street due to Dexter's majority position.
These are points, indeed, about which I had written earlier this
year to Grahame Walker, chairman of the Dexter and LTI boards (a copy of my
letter to Grahame is attached as Annex B). The analysis performed by Goldman,
Sachs & Co. (the Special Committee's financial advisor) was probably the first
time that a rigorous, independent study of LTI and its prospects had ever been
undertaken. It was not surprising to me -- for reasons reflected in my letter
to Grahame -- that Goldman Sachs' analysis supported a higher value than had
been attributed to LTI by the market prior to the Dexter proposal. I now fully
expect that, once LTI is wholly owned by Dexter, the "New Dexter", without the
former LTI public stockholders, will find Goldman Sachs' analysis to be
persuasive as it tells LTI's promising story to its investors.
In summary, with the termination of the Special Committee, I
believe that I am no longer able to represent the interests of and protect the
public stockholders -- the constituency the Special Committee was charged with
protecting. Consequently, I have no choice but to resign from the LTI Board of
Directors. Pursuant to the federal securities laws, I hereby request that this
letter and my disagreement with the actions taken by the Dexter
representatives on the Board of Directors be disclosed to LTI's public
stockholders by filing this letter (including the attachments) as an exhibit
to an LTI Form 8-K filed with the Securities and Exchange Commission. Any
questions regarding this matter should be directed to my counsel, David A.
Katz of Wachtell, Lipton, Rosen & Katz.
Sincerely,
/s/ Frank E. Samuel, Jr.
Attachments
cc: David A. Katz
2
<PAGE> 3
ANNEX A
JOINT STATEMENT OF THE
FORMER MEMBERS OF THE SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF
LIFE TECHNOLOGIES, INC.
----------------------------
SUMMARY
For the reasons described below under "Reasons for the Special
Committee's Recommendation," the Special Committee of Independent Directors of
Life Technologies, Inc. ("LTI") determined that Dexter Corporation's proposal to
purchase all of the shares of LTI that it does not already own at a price of $37
per share in cash would not adequately compensate LTI's public stockholders for
the inherent value of their LTI shares. Consequently, the Special Committee was
unwilling to recommend that LTI's public stockholders accept Dexter's $37 per
share proposal.
BACKGROUND OF THE COMMITTEE'S ACTIVITIES.
In May 1998, LTI's scheduled share repurchase was suspended by
order of Dexter Corporation without notice to the LTI Board. This repurchase
program had been the subject of extensive discussion by the LTI Board over many
months - in fact, the Chairman of the Board had specifically directed that the
share repurchase be pursued expeditiously - but the LTI Board was not informed
that the repurchase program was suspended, and no public announcement was ever
made.
On July 7, 1998, Dexter Corporation, which at that time owned
approximately 52% of the outstanding shares of common stock of LTI, publicly
announced its proposal to acquire the remaining 48% of LTI that it did not
already own at a price of $37 per share in cash. As was the case with the
canceling of the share repurchase, Dexter made this announcement without advance
notice to or consultation with the LTI Board. At a meeting of the LTI Board that
day, the LTI Board appointed directors Thomas H. Adams, Frank E. Samuel, Jr.,
and Iain C. Wylie as a Special Committee of independent directors charged with
evaluating and responding to Dexter's proposal on behalf of LTI's public
stockholders. Messrs. Adams, Samuel and Wylie were the only independent members
of the LTI Board; each of the other directors was either an officer of LTI, or
an officer or director of Dexter.(1) In addition, each of Messrs. Adams, Samuel
- ------------------------
(1) Subsequently, an independent director (who was not a member of the
Special Committee) resigned to pursue other opportunities (unrelated
to the Dexter proposal), and the Chairman of the Board recommended
that another director affiliated with Dexter be appointed to the LTI
Board of Directors to replace the resigning director. A replacement
director for the resigning director was required in order to keep the
LTI Board at the size required by LTI's certificate of incorporation.
However, there was no requirement that the replacement director be
affiliated with Dexter. Since there was no reason to give Dexter
clear control of the LTI Board (i.e., five of nine directors) or to
appoint another Dexter- affiliated director in the context of an
interested party transaction, the two members of the Special Committee
who were present at the relevant meeting voted against electing
the new director.
<PAGE> 4
and Wylie possess significant expertise in the life sciences which all but one
of the Dexter representatives do not. The Special Committee engaged Wachtell,
Lipton, Rosen & Katz as its counsel and, after interviewing a number of
financial advisory firms, engaged Goldman, Sachs & Co. as its financial advisor.
Shortly thereafter, the Special Committee and its legal and
financial advisors commenced their effort to respond to the Dexter proposal.
This effort began with an intensive, cooperative effort among the Special
Committee, Goldman Sachs and senior management of the Company to analyze and
understand the various contributing factors to LTI's inherent value. As has been
discussed by the LTI Board from time to time in the past, LTI is a difficult
company to value without intensive study for at least two reasons: first,
because a significant part of its future success and value is dependent upon the
success and value of products that currently are only under development--the
so-called "R&D pipeline" -- the details of which are not fully public for
competitive and other reasons (although Dexter has been well aware of them for
some time); and second, because LTI receives very little analyst coverage from
Wall Street, primarily due to Dexter's majority position. Because there is
substantial information relating to the value of LTI that has not been made
available to the public stockholders, the Special Committee felt a special
obligation to evaluate these assets in order to ensure that Dexter not unfairly
profit from its inside status at the expense of the public stockholders.
The Special Committee began by attempting to understand and
evaluate the Company's strategic plan, including a highly detailed analysis of
the Company's R&D pipeline. In this connection, with the assistance of Goldman
Sachs and senior management of the Company, the Special Committee reviewed all
of the Company's major assets, including sequencing technologies, transgenics,
and the cDNA library, and then analyzed the R&D pipeline on a product-by-product
basis in order to understand the success probabilities of each of the products
and the implications for LTI, the LTI stockholders, and the financial
projections contained in the base strategic plan. Among other things, the
analysis indicated that the commercialization of some of the major products in
the R&D pipeline could be expected to lead to an expansion of the Company's
earnings growth trajectory. The Special Committee and its advisors then
thoroughly analyzed LTI's financial projections, including spending a
significant amount of time questioning and pressing management on the viability
and achievability of the projections reflected in the strategic plan, as well as
separately analyzing the R&D pipeline.
Based on this work, in August and early September Goldman Sachs
and the Special Committee broke its valuation analysis into two components: (1)
the ongoing operations of the Company, and (2) the R&D pipeline. Application of
standard valuation techniques to these two components by Goldman Sachs indicated
discounted cash flow value ranges for the ongoing operations and for the R&D
pipeline which, when added together, supported values
2
<PAGE> 5
significantly in excess of $37 per share. In the case of the R&D pipeline,
Goldman Sachs based its analysis on a product by product probability-of-success
analysis, with each probability supplied by management. In addition, in its
discounted cash flow analyses, Goldman Sachs applied significantly higher
discount rates to the R&D pipeline than it did to the ongoing operations.
Consequently, the Special Committee believed, based in part on Goldman Sachs'
work, that the results indicated by the R&D pipeline analysis were conservative
and not speculative.
In addition to the discounted cash flow analyses, the Special
Committee also considered (i) LTI's recent and historical stock price
performance, (ii) LTI's investor base and investment positions, (iii) LTI's
historical business and financial performance and prospects, (iv) comparable
public company stock values, (v) a review of premiums paid in prior life
sciences industry acquisitions, and (vi) a review of premiums paid in prior
minority buy-out transactions.
In September, after more than six weeks of this intensive work by
the Special Committee and its legal and financial advisors, the Special
Committee informed Dexter that, based on the work done as of that time, the
Special Committee had concluded that $37 per share was not an appropriate
valuation, and that the Special Committee was not prepared to recommend Dexter's
offer to LTI's public stockholders. In particular, the Special Committee told
Dexter that the analytical work performed by the Special Committee and its
advisors had led it to conclude that Dexter's $37 per share offer appropriately
reflected neither the substantial values indicated in the Company's base
strategic plan nor the incremental value of the Company's R&D pipeline. The
Special Committee chose to engage in private discussions, rather than public
negotiations, with Dexter in order to attempt to minimize any potential harm to
LTI from the process which Dexter initiated. The Special Committee believed that
a public disagreement on the values inherent in LTI's base business as well as
its very attractive R&D pipeline would ill serve the constituencies that the
Special Committee was charged with protecting.
The Special Committee also informed Dexter that the Special
Committee had been approached by a third party interested in acquiring all of
LTI at a price in excess of Dexter's $37 offer. Because Dexter has previously
stated that it is not interested in reducing its position in LTI, the Special
Committee could not respond to this third-party contact. Nevertheless, the
Special Committee found it highly significant that the values indicated in the
third party approach exceeded the value Dexter offered even though the third
party did not have access to the substantial inside information (including with
respect to the R&D pipeline) to which Dexter has had continued access, both
through its board representation and in connection with the proposed
transaction.
Based on the work it had done as of that time, the Special
Committee believed that the differing valuation approaches applied by Goldman
Sachs and by Merrill Lynch, Dexter's financial advisor, together with Merrill
Lynch's admitted failure to attribute any meaningful value to the R&D pipeline,
accounted for the gap between Dexter and the Special Committee. In particular,
the Special Committee believed that both the R&D pipeline and LTI's current
product portfolio could be valued objectively, and that once Dexter and Merrill
Lynch understood the significance and value of the R&D pipeline and the current
product portfolio, a common ground eventually could be found for a transaction
that would provide fair value to LTI's public
3
<PAGE> 6
stockholders. Dexter agreed that Merrill Lynch and Goldman Sachs should meet to
discuss their respective valuation analyses. To this end, the Special Committee
continued its work for an additional five weeks and, among other things, (1)
instructed Goldman Sachs to meet with Merrill Lynch in order to see if a common
approach to valuing LTI could be agreed upon, and (2) arranged meetings among
the Special Committee, Goldman Sachs, Merrill Lynch and the Company's senior
management to review the R&D pipeline and other components of LTI's strategic
plan.
During one of these meetings in late October, Merrill Lynch raised
certain issues concerning several of the important assumptions underlying the
analysis performed by the Special Committee and its financial advisor. These
issues included (1) the impact of recent economic developments in international
markets; (2) the impact of current stock market conditions; (3) whether LTI can
maintain market share growth without sacrificing margins; and (4) the Company's
ability to successfully commercialize the products in the R&D pipeline. Although
the Special Committee had considered each of these issues, the Special Committee
asked Goldman Sachs to do additional work and perform additional analyses
directly related to these issues, and the Special Committee personally
questioned the Company's senior management on these matters (other than issue
(2), with respect to which management was presumed to have no particular
expertise). The result of our investigation of these issues was to reinforce
rather than to diminish, our view that Dexter's $37 per share offer did not
fully reflect the values inherent in LTI. Among other things, the Special
Committee determined or was informed by LTI's management:
- with respect to the impact of recent economic developments: (i)
international economic conditions had negatively impacted only
Asia and Latin America, which constitute very small parts of LTI's
overall business; (ii) the expectation that a weakening dollar
relative to European currencies will generate greater income and
larger margins for the European region, which represents more than
one-third of LTI's business, and the belief that LTI management
has positioned LTI to take advantage of this situation; (iii)
customer orders have held firm and LTI has a lengthy list of new
customers; and (iv) the National Institutes of Health has
increased, not decreased its budget;
- with respect to market share gain: (i) base case growth is
projected to be strongest in high margin products; and (ii) LTI
plans to continue necessary cost restructuring to maintain
margins; and
- with respect to the Company's ability to successfully
commercialize the products in the R&D pipeline: (i) the Company
has several recent examples of new products that have been
developed and commercialized effectively, including Custom Primers
and Platinum Paq, and has had significant success in new product
introductions; and (ii) the Company has assigned dedicated
experienced teams to its major commercialization efforts,
including to the Gateway line and Amplification program.
4
<PAGE> 7
In addition, on October 22, 1998, Goldman Sachs presented the
Special Committee with an update to its September valuation analysis. Among
other things, Goldman Sachs' presentation indicated discounted cash flow value
ranges for the ongoing operations and for the R&D pipeline that, when added
together, indicated a total Company value range of $36.32 to $51.81. Goldman
Sachs also noted for the Special Committee that the assumptions used in arriving
at the discounted cash flow value range for the R&D pipeline were more
conservative than those used in the September presentation and included
sensitivity analyses that significantly discounted management's actual
expectations. Similarly, the discounted cash flow ranges for the Company as a
whole reflected sensitivities to potential softness in market and economic
conditions.
Based on this reaffirmation of its view that $37 per share would
not appropriately compensate LTI's public stockholders, the Special Committee
instructed Goldman Sachs to convey its responses to the issues raised by Merrill
Lynch to Merrill Lynch in the hope that productive discussions leading to a fair
transaction could result. Such discussions occurred on October 26, 1998. But
prior to that time, K. Grahame Walker, exercising his power as chairman of the
Board of LTI, called a special meeting of the Board of Directors of LTI on
October 27, 1998. No agenda was provided for this meeting, but Mr. Walker
indicated to one member of the Special Committee that he expected to receive an
update from the Special Committee.
At the October 27 Board meeting, the Special Committee informed
the Board that Dexter had so far failed to convince the Special Committee that
$37 per share is an appropriate valuation and that, based on its work and the
information provided by Dexter and the Company, the Special Committee was not
prepared to recommend Dexter's offer to LTI's public stockholders. The Special
Committee also made clear, however, that it and its advisors stood ready to
review any additional information and to consider any revised proposal that
Dexter cared to make. Mr. Walker instead demanded that Dr. Adams, the Special
Committee's chairman, state a price that the Special Committee would be willing
to approve. Dr. Adams declined to do so, and instead reiterated the Special
Committee's offer to consider additional information or a new proposal from
Dexter. Following Mr. Walker's repeated requests for a specific price the
Special Committee would be willing to approve, Dr. Adams informed the Board of
the same information that Goldman Sachs had conveyed to Merrill Lynch earlier in
the day, namely (i) that the Special Committee saw the logic of a price in the
$50+ range per share but believed Dexter would be unwilling to offer such a
price, (ii) that the Special Committee was not prepared to recommend the $37 per
share price in Dexter's proposal or any price in the $30s, and (iii) that the
Special Committee was willing to consider any new proposal. Finding Dr. Adams'
response unacceptable, Mr. Walker stated that the Special Committee's usefulness
had ended and disclosed that Dexter would announce that it had withdrawn its
proposal and that Dexter had decided to proceed directly with a tender offer to
LTI's stockholders. He then proposed to the LTI Board that the Special Committee
be disbanded. Overruling a direct request from an independent director that the
wisdom of such an action be discussed prior to such a vote, the five Dexter
representatives on the LTI Board approved the disbanding of the Special
Committee, with all three members of the Special Committee voting against
disbanding.
5
<PAGE> 8
REASONS FOR THE SPECIAL COMMITTEE'S RECOMMENDATION.
The former members of the Special Committee unanimously agree that
Dexter Corporation's proposal to purchase all of the shares of LTI that it does
not already own at a price of $37 per share in cash would not adequately
compensate LTI's public stockholders for the inherent value of their LTI shares.
Consequently, the Special Committee was unwilling to recommend that LTI's public
stockholders accept Dexter's $37 per share proposal.
In particular, the Special Committee believes that Dexter
Corporation has ignored or omitted from its $37 per share value significant
components to LTI's long term inherent value and earning power. Foremost among
these is the value of the products in LTI's R&D pipeline that have not yet been
commercialized. Even using conservative assumptions and probability discounts to
account for the probabilities of success associated with these products, the
Special Committee determined that the R&D pipeline has significant value that
LTI's public stockholders are entitled to be compensated for and that are not
reflected in Dexter's $37 per share offer.
In addition to the foregoing, in reaching its conclusions, the
former members of the Special Committee considered the following material
factors:
(i) the Special Committee's expectation of LTI's operating and
financial performance on a "status quo" (no change in Dexter ownership)
basis, taking into account, among other things:
- historical information concerning the business,
operations, financial condition and operating results
of LTI; and
- certain projections provided by LTI management
concerning the prospects and financial and operating
performance of LTI;
(ii) certain stock market and related financial indicators,
including:
- the recent and historical trading prices and market
multiples of LTI common stock;
- LTI's investor base and investment positions;
- comparable public company stock values;
- a review of premiums paid in prior life sciences
industry acquisitions; and
- a review of premiums paid in prior minority buy-out
transactions;
(iii) the multiple presentations by senior management of LTI
concerning the products under development in LTI's R&D pipeline,
including management's product by product assessment of the potential
revenue associated with each such product and the probability of
success or failure of each such product, and Goldman Sachs'
comprehensive analysis of the R&D pipeline information provided by
management,
6
<PAGE> 9
including the application of appropriate probability discounts and the
presentation of informative probability and sensitivity analyses;
(iv) the fact that each of the members of the Special Committee
has significant expertise and professional experience in the life
sciences, whereas all but one of the Dexter-affiliated directors do
not;
(v) the fact that the details of the R&D pipeline had not been
made fully public (for competitive and other reasons) and therefore was
not fully reflected in LTI's stock price, together with the fact that
Dexter, unlike the public stockholders, had had access to such
information for some time;
(vi) the fact that, because a significant part of the value of
LTI is in its R&D pipeline, the details of which are not fully public,
and because LTI receives very little analyst coverage from Wall Street
due to Dexter's majority position, mere application of a premium to
current trading prices would not be a sufficient approach to valuing
LTI, and that intensive, rigorous study -- of the type performed by the
Special Committee with the assistance of Goldman Sachs -- would be
required;
(vii) the bullet points following the tenth paragraph above under
"Background of the Committee's Activities";
(viii) the unsolicited views of certain significant LTI
stockholders who believed that $37 per share was not a fair price and
that a higher price was required to properly compensate the LTI public
stockholders.
In view of the variety of factors and the amount of information
considered, the former members of the Special Committee did not find it
practicable to and did not make specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination was made after consideration of all of the
factors as a whole.
/s/Thomas H. Adams /s/Frank E. Samuel, Jr. /s/Iain C. Wylie
- ----------------------- ------------------------- ------------------
Thomas H. Adams, Ph.D., Frank E. Samuel, Jr. Iain C. Wylie
Chairman
7
<PAGE> 10
ANNEX B
[EDISON BIOTECHNOLOGY CENTER LETTERHEAD]
June 2, 1998
PERSONAL AND CONFIDENTIAL
Mr. K. Grahame Walker
Chairman of the Board
Life Technologies, Inc.
One Elm Street
Windsor Locks, CT 06096
Dear Grahame:
At the conclusion of the LTI Board lunch in April, you suggested that I
reconsider my opposition to the stock re-purchase plan in light of the
"overwhelming" approval of the plan by the shareholders, whom I was elected to
represent. I have done so, and see no new factor that would require me to change
my position. Let me say that I have always assumed that the plan would receive
majority support from the LTI shareholders. Thus, for me, it is only the size of
the majority vote that is now known.
My analysis proceeds as follows.
First, there are special factors relating to the Dexter holding that I
shall set aside for the moment.
Second, when Dexter's 52% interest is subtracted from the 88% of the
total votes cast in favor of the re-purchase, 36% of LTI shares were voted to
approve the plan. 14% were either voted against the plan or abstained. This is
obviously still a large majority, but not so overwhelming as to render a
minority view irrational.
Third, philosophical tenets about the general importance of minority
views aside, the minority view in this case is persuasive, for the following
reasons.
1) Internal growth does not appear to provide the prospect of
appropriate increase in LTI shareholder value. Acquisitions are, consequently,
essential to greater shareholder value. Given the existence of a majority
shareholding, LTI begins the acquisition hunt at a disadvantage-in spite of its
high share price, which in ordinary situations would endow the company with an
extremely attractive medium with which to finance acquisitions-compared to other
potential acquirers because it cannot effectively use its shares as
consideration for an acquisition. Therefore,
<PAGE> 11
Mr. Walker - Personal and Confidential
June 2, 1998
Page 2
cash is of greater relative importance to its prospects for increasing
shareholder value than it otherwise would be. Accumulating cash has, therefore,
an overwhelming importance for increasing shareholder value. Anything that
applies cash to purposes other than acquisitions or significant opportunities
for enhancing internal growth has, therefore, a low priority. This includes, in
my view, not only share re-purchases, but dividends as well, but I will not
argue this point in view of LTI's history of paying dividends.
2) Share re-purchases have two aspects: the signal to the market
that the Board believes the shares at current prices are undervalued and
increases in share value and earnings that occur because of actual re-purchases.
In this case, there may be some value from the signal, even though LTI stock is
trading near its high-not, by the way, an ordinary case for a stock buy-back.
More important, actual re-purchases deplete cash in return for modest EPS gains;
an objective that is inconsistent with the cash retention objectives that are
for LTI the key to increasing shareholder value.
3) LTI is penalized in the market by the narrow float caused by
the Dexter holding. Because trading is thin, the company is followed by second
tier analysts and receives inadequate investor attention in comparison to its
key position in the biotechnology field. Any reduction of the float would only
serve to exacerbate these problems. The result of more analyst and investor
attention to the company's fundamentals could only increase share price.
Fourth, I recognize that current shareholders might conclude that the
value of their shares would be increased by a share re-purchase. There are a
variety of reasons for this conclusion that are plausible. Current financial
shareholders would, in general, favor any move that increased the price at which
they could sell their shares. They may well have given insufficient
consideration to how a narrower float would affect analyst and future investor
attention to the company's stock and thus its longer term prospects in the
market. Or there may have been "group think": if it's good for GE, it must be
good for LTI. Whatever the reasons for current stockholders to approve a
re-purchase, the LTI Board should take a view that ensures a market in which
investors can profitably buy and sell LTI shares over time. Benefitting current
shareholders is a factor, but not the only one, that the LTI Board should take
into account.
Fifth, As I indicated above, the majority Dexter shareholding is worth
separate consideration. You have clearly stated to the LTI Board that, wearing
your Dexter hat, you would never allow Dexter's ownership to drop below 50%, a
situation that would have occurred in the near term without the share
re-purchase. I do not know the reasons for this position, but it appears to be
unrelated to any factor that is intended to increase LTI shareholder value,
specifically including the value of LTI stock to The Dexter Corporation as an
LTI shareholder. Indeed, the position seems to conflict with the objective of
increasing shareholder value, because it suggests that LTI assets will be used
to maintain Dexter's majority holding without respect to alternative deployment
of those assets. In this case, because Dexter's 52% holding was voted in favor
of the re-purchase plan principally in order to maintain Dexter's majority
interest-- a reason that is essentially different from that of any other
<PAGE> 12
Mr. Walker - Personal and Confidential
June 2, 1998
Page 3
shareholder--I do not count it in considering whether the majority vote was so
large as to preclude another view.
In summary, having reviewed the results of the shareholder vote, I find
nothing to cause me to change my mind: the re-purchase remains a misuse of LTI
cash, and I would vote against it again were it to come before the Board.
But there is a final consideration. As you correctly pointed out,
majorities of both the Board and the shareholders voted to approve the buy-back,
and the company announced its intention to pursue that course. Indeed, as I
recall, the Board minutes include a statement that the buy-back would be pursued
expeditiously. Much as I disagree with the intended course, I nevertheless
believe that the company now has no choice but to proceed in accord with its
stated intentions. I also think that the Board should be kept abreast of
implementation of the repurchase plan and shall look forward to reports from
management from time to time.
As a last point: one hardly needs the news of the American
Home/Monsanto acquisition to know that significant consolidation is underway
among our customers and competitors. I remain concerned that LTI is hobbled in
aggressive pursuit of acquisition targets. Unless we change our intensity, I
fear that the value of the LTI business may slowly wither, as others are more
successful in playing the consolidation game. This would serve well no one
involved with the company.
Sincerely,
/s/ Frank E. Samuel Jr.
