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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 9)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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METROMAIL CORPORATION
(NAME OF SUBJECT COMPANY)
METROMAIL CORPORATION
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
591680 103
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS J. QUARLES
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
CHIEF ADMINISTRATIVE OFFICER AND SECRETARY
METROMAIL CORPORATION
360 EAST 22ND STREET
LOMBARD, ILLINOIS 60148
(630) 620-3300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON)
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
WITH COPIES TO:
CARTER W. EMERSON, P.C.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, IL 60601
(312) 861-2000
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
The information contained under this heading is hereby restated as follows:
(a) Recommendation of the Board of Directors. The Board has unanimously
determined that the Merger Agreement and the transactions contemplated
thereby, including without limitation the Offer and the Merger, are fair to
the stockholders of the Company and that the Offer and the Merger are
otherwise in the best interests of the Company and its stockholders, has
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and recommends that all holders
of Shares accept the Offer and tender their Shares pursuant to the Offer and
approve and adopt the Merger Agreement and the Merger.
(b) Background; Reasons for the Recommendation. The initial public offering
("IPO") of Shares in June 1996 by the Company's former parent corporation,
Donnelley, was part of a divestiture process initiated by Donnelley and a sale
of the Company was also considered and pursued on a limited basis
simultaneously with the IPO. This process included contacts with some
potential purchasers. One such candidate was the predecessor of Experian,
which is in the direct marketing services business and was at the time being
acquired by a financial buyer (which later sold Experian to Parent). After the
IPO, the Company was contacted from time to time by such potential purchasers
and others regarding their possible interest in a business combination.
Beginning in October 1997, the number and frequency of such contacts
increased. This increase may have been related to declines in the market price
of the Shares in the summer and fall of 1997 and the announcement by
Donnelley's new Chairman and Chief Executive Officer in October 1997 that his
company was going to focus on its core commercial printing business. At the
Direct Marketing Association trade show in Chicago in October 1997, senior
management of the Company was approached by senior officers of two companies
who expressed continued interest in a business combination (those companies
had previously expressed interest) and by another which expressed interest for
the first time. After the trade show, two other companies expressed interest
in a business combination in October and November 1997 and Company management
met with one of them. During the same period, Donnelley advised the Company of
several indications of interest it was receiving as the major stockholder of
the Company.
The Company engaged Lehman Brothers on November 13, 1997 to render financial
advisory services to the Company. This engagement included evaluating the
Company's posture with respect to unsolicited and other acquisition proposals
(see Item 5 in the Schedule 14D-9 dated March 16, 1998 (the "Initial Schedule
14D-9")). At its December 15, 1997 meeting in Chicago, the Board was presented
with information by Lehman Brothers and management with respect to how a
process could be organized to better determine the interest in a business
combination of the Company with the entities that had been contacting Company
management and others, as well as information with respect to possible
acquirors of the Company, the historical market prices of the Shares and the
Company's earnings performance compared to analysts' expectations since the
IPO and the Company's public market trading valuation compared to other
companies in the direct marketing services industry. Lehman Brothers also
described recent acquisition activity in such industry and gave a general
summary of potential revenue and cost synergies that might be realized through
a business combination with some of the potential acquirors. At that meeting,
the Board authorized management to continue to explore whether to embark on
such process and report further on it at the February 10, 1998 Board meeting.
In December 1997 and the first part of January 1998, Company representatives
met three times with personnel from the company that had expressed interest
for the first time at the Direct Marketing trade show to explore how the two
companies could be combined. At a fourth meeting with such company late in
January 1998, Company management told the representatives of such company that
a combination did not appear to be as attractive as other alternatives the
Company might have. At a meeting with a second company late in January 1998
held for other purposes, such second company expressed for the first time its
conditional interest in a business combination.
On January 21, 1998, the Chairman of the Company met in Chicago with the
Chairman of Experian North America, at his request. At such meeting, the
Company's Chairman was advised that Experian and Parent were
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interested in acquiring the Company. Parent communicated to the Company that
it was important that an acquisition be structured so that Parent could
include the Company in its consolidated financial statements for the fiscal
year ending March 31, 1998 such that goodwill arising from the acquisition
could be accounted for under U.K. GAAP applicable to Parent's financial
statements for such fiscal year. On January 27, 1998, the Company received a
letter from a third company expressing a conditional interest in purchasing
the Company. On January 29, 1998, the Company received a letter to that effect
from a fourth company. On February 4, 1998, the Company's Chairman, its Senior
Vice President and Chief Financial Officer and its Senior Vice President,
Corporate Development met in Chicago with the Chairman of Experian North
America, a director of Parent and the Chief Executive of its Information
Services Division, and the Deputy Chairman of Parent and Chairman of its
Information Services Division to further discuss a possible acquisition of the
Company. On February 6, 1998, Experian entered into a Confidentiality
Agreement with Lehman Brothers on behalf of the Company. See Item 3(b) in the
Initial Schedule 14D-9.
On February 10, 1998, the Board met and, after presentations by Lehman
Brothers and management, determined to evaluate the Company's strategic
alternatives, including through a controlled, publicly announced process
intended to determine the level of interest of all potential acquirors of the
Company, and authorized the engagement of Lehman Brothers pursuant to an
agreement dated that date (see Item 5 in the Initial Schedule 14D-9). These
actions were publicly announced following the Board meeting. On the same day,
the Company received a letter from Experian indicating an interest in
acquiring the Company for cash at a price in the range of $26 to $31 per
Share. On the next day, Experian sent another letter increasing its price
range for a possible transaction to $28 to $32 per Share. Beginning on
February 11, 1998, Lehman Brothers began the process authorized by the Board,
including obtaining confidentiality agreements (substantially similar to the
Confidentiality Agreement described in Item 3(b)) from 30 other potentially
interested parties, including those referred to above. On February 12, 1998,
there was a conference call between members of senior management of the
Company and Experian and Parent, as well as Lehman Brothers and counsel to the
parties, in which the timing of the due diligence process and other timing
issues were discussed. Management of the Company met in Chicago on February
13, 1998 with representatives of Experian and Parent to provide information
about the Company's business. During the next two weeks, representatives of
Experian and Parent reviewed due diligence materials provided by the Company
and held further meetings with Company management and Lehman Brothers
distributed confidential information to other third parties, responded to
questions in order to assist such parties in their review of the Company and
scheduled meetings between Company management and such third parties. The
Company, through Lehman Brothers, also received written and oral conditional
indications of interest from certain of these parties as to the price levels
such parties might be willing to consider for an acquisition of the Company.
Outside counsel for the Company provided a draft of the Merger Agreement to
outside counsel for the Parent and received and discussed comments on such
draft during these two weeks.
On February 25, 1998, representatives of Parent called Lehman Brothers and
said that Parent wished to acquire the Company, but that this was contingent
on the satisfactory resolution of certain issues, including issues related to
a lawsuit involving the Company, the Company's projected operating plan, a
provision in an agreement under which the Company had previously acquired
another business and the extension of certain commercial arrangements between
the Company and Donnelley. On that day, the Company began discussing such
extension with Donnelley and providing additional information and working
towards a resolution regarding the other issues raised by Parent.
On February 27, 1998, the Chief Executive of Parent's Information Services
Division advised the Company that Parent did not wish to proceed with a
transaction with the Company because it determined that it would be unable to
resolve certain issues. The Company then began exploring additional means by
which to resolve these issues and scheduled management presentations to, and
due diligence access for, five other companies which had expressed possible
interest in a transaction. Such parties met with Company management and
conducted due diligence investigations of the Company from March 2 through
March 10, 1998. On March 5, 1998, such parties were sent draft merger
agreements by the Company. On March 6, 1998, Parent indicated that if it went
forward with a transaction, it would only be willing to do so if, among other
things, the Company, Donnelley and the Executives were willing to enter into
the Stock Purchase Agreements. On March 8, 1998, the Company's
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Chairman met with the Chief Executive of Parent's Information Services
Division and was advised that, subject to reaching a resolution concerning the
lawsuit satisfactory to Parent, the requested extension of the Donnelley
commercial arrangements and execution of the Stock Purchase Agreements, Parent
was willing to acquire the Company for $31.50 in cash per Share. The next day,
Lehman Brothers advised the other five interested parties that they should
indicate in the next two days at what price and on what terms they were
interested in acquiring the Company. From March 10 up to the time of the Board
meeting on March 12, the Merger Agreement, the Stock Purchase Agreements, the
Donnelley extension and other documents were negotiated with Parent. From
March 10 until the March 12, 1998 Board meeting described below, the Company
and Lehman Brothers did not receive any indications of price or expressions of
interest from such other interested parties that were more definitive or more
favorable than those previously received. Certain of the expressions of
interest which had previously been received from such parties were subject to
financing contingencies.
As noted under Item 3. "The Stock Purchase Agreements and Donnelley
Commercial Agreements," Donnelley and the Company entered into extensions of
certain agreements between them in order to induce Parent and Purchaser to
enter into the Merger Agreement and make the Offer at the Purchase Price. In
the course of the Company's negotiations with Parent, Parent had requested
that Donnelley and the Company do so. Only one other bidder mentioned the
possibility of requesting such extensions and, since the Board concluded on
March 12 that none of the other bidders appeared reasonably likely and
currently able to make a firm offer at or above $31.50 per Share, the interest
or lack thereof of the other bidders in pursuing extensions to the Donnelley
commercial agreements was not a factor in the Board's decision to accept
Parent's Offer rather than the other bids.
As of the March 12, 1998 Board meeting, the Company had eight indications of
interest in acquiring the Company from parties or groups other than Parent and
Purchaser. Such indications of interest were communicated to the Board at or
prior to such meeting and discussed at such meeting. One (whose range went as
high as $35.00 per Share) proposed a stock for stock pooling of interests
transaction. Because such transaction could not have been initiated until the
summer of 1998 for accounting reasons and because of the Board's preference
for cash transactions that could be consummated on a more timely basis, such
party was not invited to conduct due diligence. The remaining seven had
indicated interest in a cash transaction, with initial indications of price
ranging from $23.70-$34.00 per Share. However, based on discussions with such
parties prior to the March 12 Board meeting, Lehman Brothers reported at such
meeting that none of the seven (including the five who had interviewed
management and conducted due diligence) appeared reasonably likely and
currently able to make a firm offer at a price above $31.50 per Share. Of the
seven parties who had indicated interest in a cash transaction, only three had
ever indicated prices at or above $31.50 per Share. However, as of the March
12 Board meeting, (i) one of these three had indicated to Lehman Brothers that
it only had interest in a price toward the lower end of its range, placing it
below $31.50 per Share, (ii) another one of these three had indicated to
Lehman Brothers that it no longer was interested in a transaction at or above
$31.50 per Share and (iii) the third party was ABI and, as discussed below,
the Board believed that ABI was no longer interested in a transaction at or
above $31.50 per Share because ABI had indicated that it had become aware of
several items during its due diligence which it believed had a negative impact
on the Company's value. Additionally, while ABI had not established a time
frame for securing the necessary financing for such a transaction, the Offer
was not subject to any financing contingency and, as described below, Parent
had the cash on hand necessary to consummate the Offer and the Merger. Based
on the fact that each of these three parties had interviewed management and
conducted due diligence, the Board did not believe that further discussions
with these parties would yield interest in a transaction at or above $31.50
per Share.
One of the seven was American Business Information, Inc. ("ABI"). As
described below, ABI sued the Company, certain of its officers and directors
and Parent in Delaware to enjoin the Offer and the Merger and made an offer,
after announcement of the Offer and the Merger, of at least $33.00 per Share
in cash (subsequently increased as discussed below). Prior to the March 12,
1998 Board meeting, ABI had proposed a $32.00-34.00 per Share cash offer,
subject to its board's approval, due diligence and documentation, as well as
its ability to obtain financing. In addition, ABI's lawyer had stated in a
letter dated February 25, 1998 that ABI would pay at
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least $0.25 per Share more than any other bona fide proposal, subject to its
board's approval and documentation. However, on March 12, 1998, prior to the
Board meeting, Lehman Brothers was told by ABI's financial advisor that it was
sending a letter to the effect that it had become aware of several items
during its due diligence which it and ABI believed had a negative impact on
the Company's value (such letter was received after the Board meeting). In
addition, such advisor told Lehman Brothers that no time frame had been
established for securing ABI's financing. The Board also determined not to
consider ABI's bids based on the escalation of the bids of others because it
felt that such bids confused the bidding process and would not maximize value
for the Company's stockholder. First, such bids enabled bidders to avoid
having to submit their best offer. Second, the Board noted that if both
bidders submitted bids subject to escalation of the bid of the other, the
auction process would be rendered meaningless.
The Board discussed the status of all of such indications of interest at its
March 12, 1998 Board meeting and decided to recommend Parent's proposal and
approve and cause the Company to enter into the Merger Agreement because the
Board believed that the Offer and the Merger provided a higher cash price and
greater certainty for the Company's stockholders than any of the other
indications of interest.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders tender their Shares pursuant to the Offer,
the Board considered a number of factors, including the following:
(i) the Board's familiarity with, and information provided by the
Company's management as to, the business, financial condition, results of
operations, current business strategy and future prospects of the Company,
the nature of the markets in which the Company operates, the Company's
position in such markets, the historical and current market prices for the
Shares, including the information provided by Lehman Brothers as to the
Company's strategic and other alternatives;
(ii) the terms of the Merger Agreement, including (x) the proposed
structure of the Offer and the Merger involving an immediate cash tender
offer followed by a merger for the same consideration and (y) the fact that
financing is not a condition to the Offer and the Merger, thereby enabling
stockholders to obtain cash for their shares quickly;
(iii) that the per share price contemplated by the Merger Agreement, at
$31.50, represented a significant premium to the trading prices of the
Shares prior to the announcement of the process to seek strategic
alternatives, and, later, prior to the announcement of the execution of the
Merger Agreement, and represented the highest unconditional cash price any
potential acquiror was willing to offer (the term "unconditional" in this
clause (iii) refers to the fact that the Offer was not subject to
financing, due diligence or other matters within Parent's control. The
Offer and the Merger are subject to certain customary conditions to closing
as described in Item 3. "The Merger Agreement--Conditions to the Offer",
and--"Conditions to the Merger".);
(iv) the process engaged in by the Company's management and financial
advisors, which included the February 10, 1998 public announcement and
discussions with a significant number of potential acquirors, as a result
of which the Board had what it believed to be an accurate sense of the
values that could be achieved in a third party transaction;
(v) the presentation of Lehman Brothers at the March 12, 1998 Board
meeting and the opinion of Lehman Brothers to the effect that, as of such
date, and based on the assumptions made, matters considered and limits of
review set forth therein, the consideration to be received by the holders
of the Shares, other than Purchaser, any affiliates of Purchaser and any
holder of Dissenting Shares (the "Holders"), in the Offer and the Merger is
fair to the Holders, from a financial point of view (A COPY OF SUCH LEHMAN
BROTHERS OPINION IS ATTACHED TO THE INITIAL SCHEDULE 14D-9 AND FILED AS
EXHIBIT 8 THERETO, IS INCORPORATED HEREIN BY REFERENCE, AND STOCKHOLDERS
ARE URGED TO READ SUCH OPINION AND THE SUBSEQUENT LEHMAN BROTHERS OPINION
DATED MARCH 30, 1998 (FILED AS EXHIBIT 57 TO THE SCHEDULE 14D-9) CAREFULLY;
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(vi) that the Merger Agreement permitted the Company to furnish nonpublic
information to, and to participate in negotiations with, any third party
that submitted a Superior Proposal prior to the later of (x) 11:59 P.M.
Chicago time March 30, 1998 and (y) the expiration or termination of the
applicable waiting periods under the HSR Act, if the Board determined in
good faith that taking such action was necessary in the exercise of its
fiduciary obligations under applicable law and the Merger Agreement
permitted the Company's Board to terminate the Merger Agreement in certain
circumstances in the exercise of its fiduciary duties;
(vii) the termination provisions of the Merger Agreement, which under
certain circumstances could obligate the Company to pay termination fees to
Parent and reimburse Parent for its actual expenses incurred in connection
with the transaction, and the Board's belief that such fees and expense
reimbursement provisions would not deter a higher offer;
(viii) the desirability of providing liquidity to stockholders;
(ix) strategic considerations, such as the Company's competitive position
and the rapid changes currently occurring in the direct marketing, database
marketing and reference products and services business; and
(x) a consideration of alternatives to the sale of the Company, including
the development of proposals with other parties and continuing to maintain
the Company as a public corporation and not engaging in any extraordinary
transaction (such alternatives were rejected in favor of accepting Parent's
proposal because the Board believed that the Offer and the Merger offered
greater value and certainty to the Company's stockholders).
In considering whether to approve the Merger Agreement and recommend that
all holders tender their Shares pursuant to the Offer, the Board, as stated
above, considered its familiarity with and information on the Company's
business and future prospects, its markets and its Share price history. Based
on this, the Board believed that the business risks of the Company's future
growth and profitability, when combined with the Company's history of
frequently performing at levels lower than security analysts' expectations and
inability to consummate large acquisitions, made it unlikely that the Company
would achieve a market Share value within one to two years equal to the Offer
and that such business risks, particularly competitive risk in the Company's
consolidating industry, could be even greater in the longer term. The Board
therefore concluded that the Company's stockholders would receive greater
value (as well as liquidity) through the Offer and the Merger than through
continuing to own Shares.
The foregoing discussion addresses the material information and factors
considered by the Board in its consideration of the Offer. In view of the
variety of factors and the amount of information considered, the Board did not
find it practicable to provide specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination to recommend that stockholders accept the
Offer was made after consideration of all of the factors taken as a whole. In
addition, individual members of the Board may have given different weights to
different factors.
On March 16, 1998, the Company obtained an irrevocable letter of credit that
satisfies one of the conditions to the obligations of Parent to consummate the
Offer.
On March 17, 1998 ABI sued the Company, certain of its officers and
directors and Parent in Delaware seeking to enjoin the Merger and on March 18,
1998 the Company received ABI's offer of at least $33.00 per Share in cash. On
March 18, 1998, three class action suits were filed in Delaware seeking to
enjoin the Offer and the Merger. On March 20, 1998, a fourth such class action
suit was filed in Delaware. The Board of Directors met on March 19, 1998 and
discussed ABI's lawsuit and offer and concluded that the Merger Agreement
permitted the Company to discuss ABI's offer with ABI and authorized the
Company's representatives and advisors to do so, including exploring ABI's
ability to obtain the necessary cash for its offer. The initiation of
discussions with ABI was reported in a press release on the same day, and the
Board's determination at such meeting to postpone the Company's annual meeting
was also disclosed. On March 23, 1998, counsel to Parent
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delivered a letter to the Company and its counsel reiterating its position
that the Company's actions with respect to ABI constitute a breach of the
Merger Agreement. Discussions with ABI and its lender, including responding to
their additional due diligence requests, commenced and the Company began
responding to discovery requests of ABI in the litigation, conducting its own
discovery and preparing for the March 27 hearing the Delaware Court had
scheduled on ABI's motion for a preliminary injunction.
The Board met again on March 24, 1998 to review the status of the lawsuit
and the discussions with ABI. At such meeting, the directors compared (i) the
transactions contemplated by the Merger Agreement with Parent and (ii) ABI's
offer. The Board concluded that, although ABI's proposed merger agreement did
not contain a financing condition, the consummation of the ABI proposal was
less certain than the Offer and the Merger because ABI's offer depended on it
borrowing large sums and such offer would remain subject to customary
conditions (such as material adverse change) for at least 20 business days,
whereas Parent had cash on hand (the Company was advised that Parent had $840
million in cash on hand at January 27, 1998) for its offer and most of the
conditions in the Merger Agreement would expire on March 30, 1998. As a
result, the Board directed that a letter be sent to ABI setting out what terms
and verifications (such as completion of due diligence) the Board wished to
have as part of the ABI offer, particularly in terms of certainty of
completion. This included a request for a letter of credit or other form of
earnest money payment of $100 million to the Company if the ABI transaction
was not consummated. Parent was not requested to provide a letter of credit
because of the large amount of cash it has. Such letter was sent to ABI on
March 24, 1998 and stated that ABI should indicate its highest price by noon
on March 26. The Board was concerned that if Parent abandoned the Offer and
the ABI offer was accepted but subsequently not consummated, the two highest
bidders would be absent when the Company would be forced to restart the
auction process. The Board requested the amount for the letter of credit at
$100 million based upon its analysis of potential scenarios whereby the
Company's stockholders could receive a lesser amount for their Shares than the
offer price if the auction would need to be restarted.
On March 25, 1998, ABI provided its initial response to such letter, once
again confirming its offer of at least $33.00 per share and restating its
counsel's February 25, 1998 offer on behalf of ABI to pay $0.25 more than the
next highest bona fide bid. Such letter from ABI, among the things, stated
that while ABI did not believe there was a reasonable basis for the requested
$100 million letter of credit, it would be prepared to post such a letter if
other bidders, including Parent, were required to do so. The Company responded
to such letter on the same day in another letter which requested further
clarification regarding ABI's proposal, pointed out that Parent's transaction
was more certain of completion and told ABI (as it had been told before) that
the Board would not consider bids subject to escalation of the bids of others.
On March 26 and March 27, the Chairman of the Company attempted to reach the
Chairman of ABI to make clear to him the importance of certainty to the
Company's Board. When ABI's Chairman could not be reached, such message was
given to ABI's investment bank and counsel. Mid-day on March 26, the Company
received a letter from ABI reiterating its offer of at least $33.00 per share
or $0.25 more than the next bona fide bid and stating that ABI would supply a
letter of credit in the Company's favor within 72 hours after signing a merger
agreement with the Company. Counsel to the Company told ABI's counsel that
such 72 hour delay would not be acceptable because it would create the risk
that such letter of credit would never be obtained, yet the Company would have
had to terminate the Merger Agreement with Parent and lose the certainty it
provided. During such day, as it had since ABI's offer was made, Lehman
Brothers discussed with ABI's investment bank and its lender how to make ABI's
financing commitments more firm. When the Company was advised by Parent's
representatives early in the evening on March 26, 1998 that Parent would be
sending a letter that evening discussing its offer, the Company advised ABI
that it should make its best offer by 9:30 p.m. Chicago time that night. Prior
to such time, the Company received a letter from Parent stating that Parent
was increasing the Offer to $34.50. Shortly thereafter, such letter was
provided to ABI. At about 9:30 p.m., ABI sent the letter restating its
previous offer price and stating that it would post a $35 million letter of
credit at the time of signing a merger agreement and responding to the
Company's proposed conditions for drawing on such letter of credit with
conditions less favorable to the Company. When questioned on the meaning of
such letter in light of Parent's $34.50 offer, ABI's counsel confirmed that
ABI's offer was $34.75 per share. The Company announced the
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increased Parent and ABI offer in a press release on the morning of March 27,
1998. The Company's Board met again on the morning of March 27 and was
informed of the developments since the preceding Board meeting. Also that
morning counsel to ABI called the Company's counsel and said that ABI was
continuing to work with its lender on financing its increased offer and hoped
to provide evidence of such financing and an agreement reflecting such offer
or possibly a higher offer by the evening of March 27.
On the morning of March 27, 1998, the Delaware Chancery Court held a hearing
on ABI's request for a preliminary injunction to enjoin the Merger. The
shareholder plaintiffs withdrew their request for an injunction in view of
Parent's increased offer of March 26. The Delaware Chancery Court denied ABI's
request for an injunction.
On March 28, 1998, the waiting period under the HSR Act expired with respect
to the Offer and the Merger. Due to the expiration of the waiting period, most
of the conditions to the obligation of Parent to consummate the Offer expired
at 11:59 p.m. on March 30, 1998. The Offer is scheduled to close on April 10,
1998.
During the afternoon of March 28, 1998, the Company received a best and
final offer from ABI to acquire all the outstanding Shares for the net price
of $35.00 in cash plus 0.2 shares of ABI Class A Common Stock per Share. The
ABI offer was subject to the same conditions as its previous offer, but, in
addition, it was contingent on ABI's ability to finance the proposed
transaction. As stated in the offer, ABI was "in discussions with [its lender]
regarding the amended transaction structure and [its lender's] willingness to
provide the requisite financing." In addition, if ABI were to obtain its
financing commitments, they would continue to be subject to certain
conditions. ABI also indicated that its capital structure would be changed to
include approximately $40 million of a deferred dividend preferred stock
instrument (commonly known as PIK).
The Board met in the evening of March 28 to discuss the ABI offer as
compared to the Offer. As requested by ABI, the Board agreed to give ABI until
noon on Monday, March 30, 1998 to supply additional information concerning its
offer, including definitive documentation, and to obtain the necessary
financing commitments. During such time, the Board instructed the Company to
continue its discussions with ABI, particularly in regard to the Board's
concerns about the certainty of ABI's offer to holders of Shares, as compared
to the Offer. As described above, due to the Board's concerns about the
certainty of ABI's offer, it had requested a letter of credit or other form of
earnest money payment of $100 million to the Company if the ABI transaction is
not consummated. As of March 29, ABI had stated that it would post a $35
million letter of credit which could be drawn upon under conditions less
favorable than those proposed by the Company. As described above, Parent was
not asked to provide a similar letter of credit because of the large amount of
cash it has (the Company has been advised that Parent has $840 million in cash
on hand at January 27, 1998). On March 28, the Board also unanimously approved
the increased Offer (from $31.50) and recommended that stockholders accept the
Offer and tender their Shares. At such meeting, Lehman Brothers rendered
verbally its opinion that Parent's increased Offer is fair to the stockholders
of the Company from a financial point of view. Such opinion was confirmed in
Lehman Brothers' written opinion delivered on March 29.
On March 29, the Board met to further discuss the ABI offer and the Offer
and approved (i) giving ABI and Parent notice that the auction would end at
noon, Chicago time, on Monday, March 30 and (ii) taking any other action
necessary to end the auction on March 30. Pursuant to such approval, the
Company entered into the Letter Agreement later that day in which Parent
agreed, notwithstanding its position that the Company's actions with respect
to ABI had violated and continued to violate the Merger Agreement (the Company
disagrees with such position), that, if the Company did not give Parent notice
of its intention to withdraw or modify its approval or recommendation of the
Offer or enter into an agreement with respect to a Superior Proposal prior to
8 p.m. Chicago time on March 30, Parent would not terminate the Merger
Agreement because of such claimed violation occurring before 8 p.m. Chicago
time on March 30, 1998 and the Company agreed that it could not after such
time terminate the Merger Agreement by virtue of accepting a Superior Proposal
or withdraw or modify its approval or recommendation of the Offer or the
Merger or enter into any agreement with respect to any Acquisition Proposal.
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Early on the morning of March 30, 1998, ABI's investment bank left Lehman
Brothers a message to the effect that ABI would not be participating in the
sale process because there was no possibility of getting its documentation in
place by noon and that ABI was putting out a press release to that effect.
Later that morning ABI's investment bank called Lehman Brothers and said that
ABI had changed its mind and was working on a $36.00 per Share all cash offer
(rather than its March 28 offer) and asked for an extension beyond noon.
Lehman Brothers reminded ABI's investment bank that such noon time for
submission of bids and information had been set by the Board in response to
ABI's March 28 request and could not be waived by Lehman Brothers. Also on
March 30, the Company was advised that ABI had appealed the March 27 ruling of
the Delaware Court of Chancery to the Delaware Supreme Court.
The Board met in the evening of March 30. The Company did not receive any
new documentation by noon on March 30. After noon and prior to the Board
meeting it received through Lehman Brothers a revised draft merger agreement
which contained a $36.00 per Share price, referenced the same $35 million
letter of credit and conditions discussed above and, for the first time,
proposed a $15 million termination fee plus the payment of expenses. The
Company also received through Lehman Brothers ABI's financing commitments for
its offer. Such commitments arrived over the course of the afternoon, right up
to the time of the Board meeting. The commitments appeared to be similar to
those received in the prior week, including the conditions to such
commitments, but added a new condition relating to termination of the Merger
Agreement. The Board considered ABI's financing commitments to create a
greater risk (than the Offer from Parent) of the acquisition not being
completed because such commitments were conditioned on (i) there not having
occurred any event that has had, or could reasonably be expected to have, a
material adverse effect on the business, properties, prospect, operations or
financial condition of ABI and the Company (taken as a whole), (ii) the
negotiation and completion of definitive financing documentation (including
the financial covenants) and documentation relating to ABI's acquisition of
the Company in form and substance reasonably satisfactory to the financing
sources, (iii) compliance with all applicable laws and regulations, (iv)
receipt by the financing sources of satisfactory evidence that the Merger
Agreement had been terminated in accordance with its terms, (v) there being no
material pending or threatened litigation with respect to the Company, ABI or
ABI's acquisition of the Company, (vi) the financing sources having received
and reasonably approved updated financial projections from those provided to
them by ABI, (vii) the financing sources having received reasonably
satisfactory environmental reviews, (viii) maximum total funded debt not
exceeding $1.1 billion at closing, ABI having revolving credit borrowing
availability of at least $50 million and total fees and expenses of ABI's
acquisition of the Company not exceeding $65 million and (ix) the repayment of
all of ABI's and the Company's indebtedness for borrowed money. As described
above, Parent did not need any external financing in order to consummate the
Offer and the Merger and, accordingly, Parent did not need any financing
commitments that contained these conditions. The Board considered the risk
that some of these conditions may not be satisfied in a timely manner versus
the certainty inherent in the Offer in its determination to accept the Offer.
The Board once again reviewed ABI's offer and compared it to the Offer. The
Board recognized that Parent's increase in the Offer from $31.50 per share to
$34.50 per share was conditioned on the Merger Agreement and the Stock
Purchase Agreements remaining in full force and effect, as stated in Parent's
supplement to its Offer to Purchase which has been mailed to the Company's
stockholders. The Board therefore considered that if the Merger Agreement or
the Stock Purchase Agreements were enjoined by a court, such as through the
Delaware court proceedings of ABI, then the Offer would be reduced to $31.50.
Based upon the March 27, 1998 ruling in the Company's favor of the Delaware
Court of Chancery and advice of the Company's Delaware counsel, the Board
concluded that the risk of the Offer being reduced to $31.50 was low. The
Board unanimously approved the increased $34.50 per Share (subject to certain
conditions) Offer and recommended that the Company's stockholders accept the
Offer and approve the Merger. In reaching this conclusion, the Board focused
on the certainty of the Offer versus the uncertainty of ABI's offer which was
highly leveraged, thereby exposing the stockholders to the risk of losing the
more certain Offer without sufficient assurance that ABI's offer would be
completed. The Board also focused on the timing of the ABI offer which could
not be consummated any earlier than the end of April, whereas the Offer is
scheduled to close on April 10, 1998 and had, because of passage of the HSR
Act period, become largely unconditional. At such meeting, the Board also
received the opinion of Lehman Brothers that Parent's increased offer is fair
to the stockholders of the Company from a financial point of view.
8
<PAGE>
The increased Offer of $34.50 per Share is conditioned upon the Merger
Agreement and Stock Purchase Agreements continuing to be in full force and
effect in accordance with their terms. Accordingly, if a court were to
invalidate any provision of the Merger Agreement or the Stock Purchase
Agreements, the Purchase Price for the Offer and the Merger would be reduced
to $31.50. The ABI lawsuit and related stockholder suits in Delaware are not,
in the Company's view, likely to result in such invalidation because the
Delaware Court of Chancery denied ABI's motion for a preliminary injunction on
March 27, 1998 and the Delaware Supreme Court on April 2, 1998 refused to hear
ABI's appeal from such decision.
Late in the afternoon of March 30, 1998, ABI sent a letter to the Company
(which was not received until the morning of March 31) informing the Company
that, in connection with ABI's acquisition of 50,000 Shares of Company stock
on October 17, 1997, ABI intended to file its notification to the Federal
Trade Commission and the Assistant Attorney General for the Antitrust Division
of the Department of Justice under the HSR Act on March 30, 1998 (which
notification ABI was required to file prior to its acquisition of the stock).
On April 2, 1998, the Delaware Supreme Court denied ABI's application
seeking to appeal the March 27, 1998 decision of the Delaware Chancery Court
denying ABI's request for a preliminary injunction of the Offer and the
Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibit is filed herewith.
Exhibit 60--Press Release dated April 2, 1998.
9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Metromail Corporation
/s/ Thomas J. Quarles
By: _________________________________
Name: Thomas J. Quarles
Title: Senior Vice President,
General Counsel,
Chief Administrative
Officer and Secretary
Dated: April 7, 1998
10
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Exhibit 60
METROMAIL/GUS TRANSACTION CONTINUES UNIMPEDED
Lombard, Ill / April 2, 1998/ Metromail Corporation (NYSE:ML), today announced
that the Delaware Supreme Court denied an application filed by American Business
Insurance (ABI) seeking to appeal the Delaware Chancery Court decision of March
27 denying ABI's request for a preliminary injunction to enjoin the
Metromail/Great Universal Stores P.L.C. (GUS) merger.
Metromail Corporation (www.metromail.com) is a leading provider of direct
marketing, database marketing and reference products and services in the United
States and United Kingdom. Metromail helps its customers identify and reach
targeted audiences, utilizing its comprehensive, proprietary consumer database
encompassing 95 percent of U.S. households, as well as providing database
marketing software and related services. Sales for the year ended December 31,
1997 increased almost 17 percent over the prior year to approximately $328
million. The company has 3,200 employees and is headquartered in Lombard,
Illinois.
For more information, contact:
Julie Springer (Media Relations)
Director, Corporate Communications
Metromail Corporation
(630) 932-2627
