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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION / RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
KLLM Transport Services, Inc.
(Name of Subject Company)
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KLLM Transport Services, Inc.
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
482498102
(CUSIP Number of Class of Securities)
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Leland R. Speed
Chairman of the Special Committee of the Board of Directors
KLLM Transport Services, Inc.
135 Riverview Drive
Richland, Mississippi 39218
(601) 939-2545
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With copies to:
Sidney J. Nurkin, Esq.
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 881-7000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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This Amendment No. 1 amends and supplements the solicitation/recommendation
statement on Schedule 14D-9 filed with the U.S. Securities and Exchange
Commission (the "Commission") on June 2, 2000 (the "Schedule 14D-9"), by KLLM
Transport Services, Inc., a Delaware corporation (the "Company"), in relation to
the tender offer being made by High Road Acquisition Subsidiary Corp., a
Delaware corporation ("Purchaser"), which is a wholly owned subsidiary of High
Road Acquisition Corp., a Delaware corporation ("Parent"), to purchase all of
the outstanding shares of Common Stock not owned by it or its affiliates at a
purchase price of $8.05 per share, net to the seller in cash, without interest
thereon, less applicable withholding taxes, if any, (the "Offer Price") upon the
terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase, dated June 2, 2000 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with the Offer to Purchase, constitutes
the "High Road Offer"). The High Road Offer is described in a Tender Offer
Statement on Schedule TO (as amended or supplemented from time to time, the
"Schedule TO"), filed by Parent and Purchaser with the Securities and Exchange
Commission (the "Commission") on June 2, 2000. The High Road Offer is being
made in accordance with the Plan of Agreement and Merger, dated as of May 25,
2000, among Parent, Purchaser and the Company (the "Merger Agreement"), a copy
of which is incorporated hereto as Exhibit (e)(1).
Item 4. The Solicitation or Recommendation.
(b) (i) Background of the High Road Offer; Contact with Parent.
The information set forth Item 4(b)(i) is hereby amended and supplemented
by inserting after the first sentence in the fourth paragraph on page 4 the
following:
The Confidential Memorandum, which is attached hereto as Exhibit
(a)(8) and incorporated herein by reference, contained a description of the
Company's industry segments, a background of the Company's history, an
explanation of the Company's operations, a summary of the Company's human
resources, a description of legal, environmental and insurance matters, a
financial overview, a list of revenue equipment, a copy of the audited
financial from the Company's annual report and a copy of the Company's Form
10-Q for the quarter ended July 2, 1999. A copy of the Confidential
Memorandum is available for inspection and copying at the Company's
principal executive offices during its regular business hours by any of the
Company's interested stockholders or a representative who has been so
designated in writing.
The information set forth Item 4(b)(i) is hereby amended and supplemented
by deleting the second paragraph on page 18 and inserting the following:
On May 25, 2000, the Board of Directors convened a telephonic meeting
for the purpose of considering the offer by Mr. Low to acquire the Company
for $7.80 per Share. With the exception of Mr. Liles, who recused himself
on the basis that he had a conflict of interest, all members of the Board
were present. Mr. Nurkin summarized the proceedings to date, reviewed the
Board of Director's fiduciary obligations to the unaffiliated stockholders
of the Company and described the non-economic terms and conditions of Mr.
Low's offer.
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Mr. Grayson then presented the opinion of Morgan Keegan as to the
fairness of the proposal, from a financial point of view, to the Company's
public stockholders, a copy of which is incorporated herein by reference as
Exhibit (a)(4) pursuant to Morgan Keegan's written permission. Mr. Grayson
stated that at $7.80 per Share, the transaction represented an enterprise
value of $79 million, which was calculated by adding (i) $32 million
representing the value of equity and (ii) $47 million representing the
Company's net debt as of March 31, 2000. Mr. Grayson stated that this
equates to enterprise value multiples of (i) .33x revenues for the last
twelve months ended March 31, 2000; (ii) 3.9x earnings before interest,
depreciation and taxes ("EBITDA") for the last twelve months ended March
31, 2000; and (iii) 60.0x earnings before interest and taxes ("EBIT") for
the last twelve months ended March 31, 2000, which compared to the
temperature-controlled carrier peer group's median multiples of .2x
revenues, 3.3x EBITDA and 7.3x EBIT. Due to the Company's net loss for the
prior twelve months, it was not possible to calculate a multiple of net
income. The temperature-controlled carrier peer group's median multiple
of net income was 6.6.
Mr. Grayson also described in detail a number of other quantitative
criteria used by Morgan Keegan in evaluating the fairness of the proposed
transaction. He explained that an analysis of other publicly traded
comparable company valuations for temperature-controlled carriers reflected
a range of $.10 to $7.82 per Share and for dry van carriers a range of
$1.23 to $15.84 per Share when the derived multiples were applied to the
Company's financial performance. A mergers and acquisitions analysis,
which derived valuation multiples by comparing the prices paid in publicly
announced transactions to the Company's financial information, resulted in
an implied range of $3.84 to $16.82 per Share when the derived multiples
were applied to the Company. Morgan Keegan also performed a discounted
cash flow analysis, which resulted in an implied range of zero to $1.33 per
Share, and a premium analysis of comparable sized transactions, which
resulted in a range for trucking company transactions of $7.70 to $9.84 per
Share and for other non-technology and non-financial institution
transactions of $7.30 to $9.37 per Share, in each case when the result of
the analysis was applied to the Company.
The Board then discussed the options of rejecting the offer and of
either liquidating or continuing to operate the Company. The Board
considered information provided to it by the Controller of the Company as
to the amount that might be realized upon a liquidation of the Company.
This information was derived from the financial statements of the Company
as filed with the Company's quarterly report on Form 10-Q for the period
ended March 31, 2000, except that the liquidation value of the Company's
truck fleet included in that information was derived from an appraisal of
the orderly liquidation value of that fleet prepared for the Company's
lenders in connection with the initially planned restructuring of the
Company's credit facility to convert that facility from an unsecured credit
facility to an asset-based loan. In considering this information, the
Board took into account the poor market for used trucks, which would be
exacerbated upon the Company's implementation of the liquidation, and the
costs associated with liquidation, including transaction costs, the likely
inability to collect outstanding accounts receivable, fees related to the
early termination of truck leases, operating expenses while the liquidation
occurred
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and the incursion of tax on the disposition of the assets. Mr. Grayson
advised the Board that, at $7.80 per share, the offer represented a
multiple of .64 x net book value per Share (compared to a median multiple
of .6 for the temperature-controlled carrier peer group), and that, in
Morgan Keegan's opinion, liquidation of the Company would not yield a value
to the Company's stockholders greater than $7.80 per Share. Mr. Grayson
emphasized that a sale of the Company would allow the Company's
stockholders to realize the value of their holdings significantly sooner
than if the Company undertook a liquidation of its assets due both to the
short time frame of the structure proposed by the Liles Group and the
extended period of time that an orderly liquidation of the assets would
entail. Moreover, Mr. Grayson explained that the offer price was a definite
amount while undertaking a liquidation would produce an uncertain outcome.
He also stated that, given the poor industry conditions and the Company's
current earnings report and outlook, keeping the Company public and
streamlining its operations in an attempt to increase its profitability
would not bring any immediate value for the Company's stockholders.
While the Board was discussing Mr. Low's offer and prior to its
acceptance by the Board, Ms. Rousseau contacted Mr. Nurkin and informed the
Board of Directors that the Liles Group was preparing an offer for all of
the outstanding Shares and requested that the Board postpone its decision
with respect to Mr. Low's offer for several hours until the Liles Group's
offer could be finalized. The Board agreed to adjourn the meeting. Later
in the day on May 25th, the Liles Group submitted an offer to purchase all
of the outstanding Shares at a price of $8.05 per Share in cash pursuant to
the terms of a proposed merger agreement substantially in the form of the
Merger Agreement described herein.
The meeting of the Board of Directors was reconvened shortly after the
receipt of the Liles Group's offer. Mr. Nurkin reported that this offer
did not contain the conditions or the provisions concerning the
reimbursement of expenses that the Liles Group's prior proposals had
contained and that the conditions and the provisions concerning
reimbursement of expenses contained in this offer were customary for
transactions of this type and size.
Mr. Grayson orally presented an analysis of the Liles Group's offer
similar to the one he had presented earlier with respect to the fairness of
Mr. Low's offer. In this analysis, Mr. Grayson stated that the increase of
$.25 per Share represented by the Liles Group's offer over the $7.80 per
Share offer made by Mr. Low would, in each measurement used by Morgan
Keegan in assessing the fairness of the transaction, result in the Liles
Group's $8.05 per Share offer being more favorable to the Company and, when
compared to the offer by Mr. Low, being fairer, from a financial point of
view, to the unaffiliated stockholders of the Company. Following his
analysis of the Liles Group's offer, Mr. Grayson expressed the opinion of
Morgan Keegan that such offer was fair, from a financial point of view, to
the unaffiliated stockholders of the Company. Because the offer from the
Liles Group was $.25 per Share higher and contained terms and conditions
substantially similar to the offer made by Mr. Low and based on the opinion
of Morgan Keegan and the other factors described herein, the proposal was
unanimously recommended by the Special Committee to the Company's Board of
Directors.
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The Company's Board of Directors, with the exception of Mr. Liles, who
due to his conflict of interest had recused himself from the meeting,
unanimously found that the $8.05 per Share offer from the Liles Group was
fair, from a financial point of view, to the Company's unaffiliated
stockholders and constituted the best and highest offer for the Company,
approved the Liles Group's $8.05 per Share proposal, authorized an
amendment to the Company's Stockholder Rights Plan to except the
transaction from the operation of the plan (a copy of which is incorporated
by reference as Exhibit (e)(5)), adopted resolutions exempting the
transaction and certain related transactions from Section 203 of the DGCL,
and authorized the Company to enter into the Merger Agreement. The Liles
Group then caused Parent and Purchaser to be formed.
Neither Morgan Keegan nor the Company through the Special Committee
determined or recommended the amount of consideration to be paid. The
$8.25 per Share offer was made, the Special Committee and Board believe, in
response to Mr. Low's offer of $7.80 per Share.
The information set forth Item 4(b)(i) is hereby amended and supplemented
by adding the following:
On June 9, 2000, the Low Offer expired without all of the conditions
to the Low Offer having been satisfied. As a result, all Shares tendered
into the Low Offer must be returned. On June 12, 2000, Mr. Low filed an
amendment to his Schedule 13-D, in which he disclosed that he had recreated
a group relating to the beneficial ownership of the Company's capital
stock. In the amended Schedule 13D, Mr. Low stated that, if the
transaction between the Company and the Liles Group is not completed, then
Mr. Low may wish to effect one or more of the following actions described
in paragraphs (a) through (j) of Item 4 of the instructions to this
Schedule without the support of the Board of Directors of the Company,
which action could include a change in the present Board of Directors of
the Company. In that regard, Mr. Low has executed and delivered a written
consent of stockholder, dated June 8, 2000 (the "Consent") which, if
pursued by Mr. Low and if a majority of the Company's stockholders file
similar consents pursuant to a consent solicitation under Delaware law,
would lead to the removal of the current directors of the Company and their
replacement with a new slate of directors. According to Mr. Low's Schedule
13D, the new slate would consist of Robert E. Low, Richard D. Hoedl, Steven
D. Crawford and C. Stephan Wutke, the Chief Executive Officer, the Chief
Financial Officer, the General Counsel and the Vice President of Sales,
respectively, of New Prime. If such a consent solicitation is pursued by
Mr. Low, then, pursuant to Section 213(b) of the Delaware General
Corporation Law, the record date to determine those stockholders of the
Company entitled to express their consent to the actions proposed by Mr.
Low would be June 9, 2000, the date upon which the consent was delivered to
the Company's registered agent in Delaware. The Consent would also amend
the Company's bylaws to delete the requirement that only the Board of
Directors of the Company may fill any vacancy occurring on its Board of
Directors, and to establish the number of persons constituting the Board of
Directors at four. Such action set forth in the Consent, if pursued by Mr.
Low, would not preclude the taking of any of the other actions or the
effecting of any
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of the transactions described in paragraphs (a) through (j) of Item 4 of
the instructions to this Schedule 13D.
On June 20, the Company was informed by the Federal Trade Commission
that early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 had been granted. As a result, the
antitrust condition to the Liles Group's offer has been satisfied.
(ii) Reasons for the Recommendation of the Board of Directors.
The information set forth Item 4(b)(ii) is hereby amended and supplemented
by inserting after the second sentence of reason 2 the following:
The Special Committee did not consider the fact that the Company's
shares traded higher than the offer price within the last quarter as
relevant in determining that the offer price is fair to the Company's
unaffiliated stockholders. The Special Committee and the Board believe
that the recent higher trading prices were the result of speculation as to
the ultimate price that would be paid for the Company.
The information set forth Item 4(b)(ii) is hereby amended and supplemented
by deleting the last sentence of the first paragraph on page 22 and inserting
the following:
However, the Board believes that each of the factors is material
to its determination that the merger is fair to the unaffiliated
stockholders of the Company and has characterized as positive each of the
factors. Consequently, the Board determined to approve the Merger
Agreement and recommend that holders of Shares tender their Shares in the
Offer.
The Board, including the members of the Special Committee,
believes that sufficient procedural safeguards were, and are, present to
ensure fairness of the merger and to permit the Special Committee to
represent effectively the interests of the public stockholders. The Board
believes that procedural fairness existed because:
. The Special Committee consisted on non-employee, independent directors
who acted to represent solely the interests of the unaffiliated
stockholders and which unanimously approved the transaction;
. The Special Committee retained and received advice from its
independent legal advisor, Alston & Bird, as to the Special
Committee's duty to the Company's unaffiliated stockholders;
. The Special Committee and the Board was advised by and received the
opinion of Morgan Keegan as financial advisor as to the fairness of
the transaction, from a financial point of view, to the Company's
unaffiliated stockholders;
. The strategic review and auction process remained open for a
significant time period, and the Special Committee was actively
involved in the deliberations;
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. At the time the Merger Agreement with High Road was approved, the only
alternative offer was $.25 less per Share than the High Road Offer;
and
. The offer price and the other terms of the Merger Agreement resulted
from extensive arm's-length negotiations between representatives of
the Special Committee, on the one hand, and representatives of High
Road, on the other hand.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
(a) Solicitations or Recommendations.
The information set forth Item 5(a) is hereby amended and supplemented
by deleting the second paragraph of Item 5(a) and inserting the following:
Morgan Keegan, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations of estate, corporate and
other purposes. Morgan Keegan was selected to represent the Company and
then the Special Committee upon its formation because of Morgan Keegan's
extensive experience in advising corporations that are seeking strategic
alternatives and in particular its experience in transactions in the
transportation industry and specifically in the trucking industry. During
the course of the auction process, the amount of the consideration to be
paid was always proposed by the bidder making the proposal. In the ordinary
course of business, Morgan Keegan and its affiliates may actively trade or
hold the securities of the Company for their own account or for the
accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Item 8. Additional Information.
(b) Other Material Information.
The information set forth Item 8(b) is hereby amended and supplemented
by inserting the following at the end of the Item:
Fees and Expenses. In addition to the fees and expenses the Company
is obligated to pay Morgan Keegan, which are described in Item 5(a) above
and a closing fee of $937,500 to be incurred at the closing of the loan
agreement with the Bank of America, N.A. and to be paid to the Bank of
America, N.A. by the Company, the following is an estimate of the
additional fees and expenses to be incurred by the Company in connection
with the Offer:
Legal Fees $250,000
Printing and Miscellaneous 40,000
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$290,000
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Item 9. Exhibits.
The information set forth Item 9 is hereby amended and supplemented by
inserting the following:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------------- -------------------------------------------------------------------------
<S> <C>
(a)(8) Confidential Memorandum, prepared by Morgan Keegan & Company, Inc., dated
October 11, 1999.
</TABLE>
Annex B
The information set forth in Annex B is hereby amended and supplemented by
deleting the first column under "Information Concerning Directors and Executive
Officers of the Company - Directors and Executive Officers of the Company" and
inserting the following:
Name and Current
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Business Address
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Jack Liles
Chairman of the Board,
President, and
Chief Executive Officer
P.O. Box 6098
Richland, Mississippi 39218
(601) 939-2545
James Leon Young
Secretary and Director
Young, Williams, Henderson & Fuselier, P.A.
P.O. Box 23059
Jackson, Mississippi 39225
(601) 948-6100
Walter P. Neely
Director
Millsaps College
Else School of Management
102 North Meadows Place
Jackson, Mississippi 39211
Leland R. Speed
Director
188 East Capitol Street, Ste. 300
Jackson, Mississippi 39201
David L. Metzler
Director
6380 Brackbill Blvd.
Mechanicsburg, PA 17055
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Steven L. Dutro
Senior Vice President and
Chief Financial Officer
P.O. Box 6098
Richland, Mississippi 39218
(601) 939-2545
Nancy M. Sawyer
Senior Vice President and
Chief Operating Officer
P.O. Box 6098
Richland, Mississippi 39218
(601) 939-2545
The information set forth in Annex B is hereby amended and supplemented by
inserting the following under "Information Concerning Directors and Executive
Officers of the Company - Director Compensation":
Other Information
During the last five years, none of the Company, its executive officers
or any director has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to any judicial
or administrative proceeding (except for matters that were dismissed
without sanction or settlement) that resulted in a judgment, decree or
final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of
such laws. Each of the Company's directors and executive officers is a
citizen of the United States.
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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: June 22, 2000 KLLM TRANSPORT SERVICES, INC.
By: /s/ Leland R. Speed
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Leland R. Speed, Chairman of the Special
Committee of the Board of Directors
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