SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
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FLORIDA EAST COAST INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
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<PAGE>
An Overview of the
Recapitalization and
Distribution
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Presentation to Shareholders of
Florida East Coast Industries, Inc.
February 24, 2000
<PAGE>
Background
o In October 1999, FECI entered into an agreement with St. Joe to remove St.
Joe as the controlling shareholder of FECI
o In order for the separation to be tax-free to St. Joe and its shareholders,
St. Joe is required to own shares having the right to elect 80% of the FECI
Board immediately before it distributes the stock to its shareholders
o FECI has agreed to effect a recapitalization of its stock into two classes:
Class A (with the right to elect 20% of the Board) and Class B (with the
right to elect 80% of the Board) (the "Recapitalization")
<PAGE>
Background (continued)
o As part of the Recapitalization, St. Joe will own Class B common stock while
the rest of FECI's current shareholders will own Class A common stock
o St. Joe will then distribute all of its Class B common stock to its
shareholders (the "Distribution")
<PAGE>
Background (continued)
o FECI will also adopt corporate governance provisions designed to foster
FECI's growth as an independent company and protect FECI shareholders from
unsolicited takeover proposals that treat Class A and Class B shareholders
differently
- For example, the Amended Articles include a significant limitation on the
voting rights of holders of large blocks of Class B stock
- Also, the FECI Board has agreed to adopt a shareholder rights plan to
prevent unsolicited acquisition of control of FECI through the purchase
of only Class B shares
<PAGE>
Vote and Recommendation
o Required vote: FECI and St. Joe have agreed not to consummate the
Recapitalization and the Distribution unless they receive approval from a
majority of the FECI shareholders unaffiliated with St. Joe
o A Special Committee of the FECI Board, consisting of directors not
affiliated with St. Joe, the DuPont Trust or the Nemours Foundation,
evaluated the Transactions with the help of an outside financial advisor and
outside counsel
o The Special Committee has determined that the Transactions are in the best
interests of FECI and its shareholders and unanimously recommends that FECI
shareholders approve the Transactions
<PAGE>
Benefits of the Transactions
As an independent company, FECI expects to derive numerous benefits from the
Transactions. FECI believes that the Transactions will:
o enable FECI to establish a capital structure independent of St. Joe (e.g.,
incur debt, repurchase equity)
o allow FECI to pursue its independent business interests (e.g., acquisitions,
business and asset sales)
o increase in liquidity and public float of FECI common stock, which enhances
FECI's ability to attract equity research coverage
o facilitate the use of FECI stock for future acquisitions and as a source of
capital
<PAGE>
Benefits of the Transactions
(continued)
o increase FECI's ability to engage in future corporate transactions (e.g.,
establishing a REIT or implementing a spin-off)
o improve the focus of FECI's management by providing a more stable platform
for recruiting and retaining top quality management and increase flexibility
in employee compensation tied to shareholder value creation
o restructure FECI's real estate relationship with St. Joe to increase FECI's
direct control over its portfolio
<PAGE>
Recapitalization
o As a technical matter, the Recapitalization will be effected through a
merger of a subsidiary of St. Joe with and into FECI
o As a result of the merger, each share of FECI common stock currently owned
by St. Joe will be converted into one share of Class B common stock and each
other share of outstanding FECI common stock will be converted into one
share of Class A common stock
<PAGE>
FECI's New Capital Structure
FECI's capital structure will be modified as follows:
o Class A elects 20% and Class B elects 80% of the FECI Board, with cumulative
voting (within each class). On other matters, Class A and Class B shares are
identical and vote together as a single class with one vote per share
- With respect to election or removal of directors, holders of 15% or more
of the outstanding Class B stock may only vote their economic interest
(as discussed below)
o Class A and Class B have identical economics (including per share dividends,
consideration upon a merger and upon liquidation)
o A majority of Class A and Class B holders, voting together as a single
class, can effect a future recapitalization of FECI to eliminate the two
class structure
<PAGE>
Class B Voting Limitation
With respect to the election or removal of directors, a holder of 15% or more of
the Class B stock may only freely vote such number of shares as the "economic
interest" in FECI represented by those shares.
The vote relating to the holder's remaining Class B shares is applied pro rata
in accordance with the votes of all other Class B shareholders.
<PAGE>
Limitation on the Charities' Control over
Election of Directors
o After the Distribution, the Trust and the Foundation will hold approximately
61% of Class B common stock, which represents a 33% economic interest in
FECI
o Because of the Class B Voting Limitation, the Trust and the Foundation will
be able to control the election of only 3 out of 10 directors (which equates
with their 33% economic interest in the company)
Compared to:
o Without the Class B Voting Limitation, the Trust and the Foundation would
have been able to control the election of 5 directors
o Currently, because of its 54% interest in FECI, St. Joe is able to control
the election of 5 out of 9 directors
<PAGE>
Corporate Governance Provisions
The Amended Articles and Amended Bylaws of FECI include certain provisions
designed to deter unsolicited takeover attempts that discriminate between
the Class A and Class B shareholders, including:
o blank-check preferred stock
o no shareholder action by written consent
o shareholder notice requirements for director nominations
o removal of directors only for "cause"
<PAGE>
Rights Plan
In connection with the Transactions, the FECI Board has agreed to adopt a
shareholder Rights Plan designed to protect the interests of Class A
shareholders. The Rights Plan is intended to:
o prevent unsolicited acquisition of control of FECI through the purchase of
only Class B shares
o encourage takeover offers that treat Class A and Class B shareholders
equally
o deter coercive or unfair takeover tactics o encourage bidders to negotiate
with the Board
o encourage bidders to negotiate with the Board
<PAGE>
Rights Plan-- Mechanics
o Customary in form
o Triggered by any person acquiring a percentage of (1) Class B stock or (2)
the total outstanding common stock that is higher than the percentages owned
by the Trust and the Foundation on the date of the Distribution (which will
be no higher than 62% and 39% respectively)
o Once triggered, holders of the Rights will be able to purchase for the
exercise price shares of Class B stock having a market value of twice the
exercise price
o Rights owned by the Acquiring Person will become void
o "Chewable Plan"-- will not apply to offers to purchase all shares of common
stock for equal per share consideration
<PAGE>
Shareholders Agreement
After the Distribution, the Trust and the Foundation will own approximately 61%
of the Class B stock. They have entered into an agreement with FECI, in
which they agreed:
o not to purchase additional shares in St. Joe until the Distribution
o not to sell any shares of FECI for the 6 months following the Distribution
o only to make limited sales after 6 months and until the second anniversary
of the Distribution
o not to acquire additional FECI stock for 3 years after the Distribution
<PAGE>
Real Estate Transactions
FECI (through GCC, its real estate subsidiary) and St. Joe have agreed to
restructure their real estate relationship in connection with their
separation. The have agreed to:
o jointly own and develop certain properties owned or to be acquired in the
future by GCC or St. Joe
o shift the performance of asset management services from St. Joe to GCC
o St. Joe will provide property management services for certain properties
owned by GCC
o St. Joe will become, at market-based rates, the designated developer for
specific properties for which St. Joe has already provided pre-development
financial analysis and development services for a period of 3 years
following the Distribution
<PAGE>
Real Estate Transactions-- Benefits
FECI expects that this restructuring will:
o allow FECI to capitalize on high quality services provided by St. Joe while
increasing GCC's direct control over its portfolio as well as facilitating
market diversification
o increase GCC's flexibility to manage capital risk through third-party equity
or debt investment
o provide GCC with $6 million cash payment
o require that St. Joe meet high standards of performance
