SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
SCHEDULE 14D-9*
Solicitation/Recommendation Statement Pursuant to
Section 14(D)(4) of the Securities Exchange Act of 1934
AMENDMENT NO. 2
PROLER INTERNATIONAL CORP.
(Name of Subject Company)
PROLER INTERNATIONAL CORP.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Including Associated Rights)
(Title of Class of Securities)
743396-10-3
(CUSIP Number of Class of Securities)
BRUCE W. WILKINSON
CHIEF EXECUTIVE OFFICER
PROLER INTERNATIONAL CORP.
4265 SAN FELIPE
SUITE 900
HOUSTON, TEXAS 77027
(713) 627-3737
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person(s) filing statement)
COPIES TO:
GEOFFREY K. WALKER
KATHLEEN M. KOPP
MAYOR, DAY, CALDWELL & KEETON, L.L.P.
700 LOUISIANA
HOUSTON, TEXAS 77002
(713) 225-7000
*This Solicitation/Recommendation Statement on Schedule 14D-9 relates to an
offer for all outstanding shares of common stock of Proler International Corp.
by a wholly-owned subsidiary of Schnitzer Steel Industries, Inc.
<PAGE>
This Amendment No. 2 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission (the "Commission") by Proler International
Corp., a Delaware corporation (the "Company"), on September 20, 1996, (as
heretofore amended, the "Schedule 14D-9") and relates to the tender offer made
by PIC Acquisition Corporation, a Delaware corporation wholly owned by Schnitzer
Steel Industries, Inc., an Oregon corporation ("Schnitzer"), disclosed in a
Tender Offer Statement on Schedule 14D-1 filed with the Commission on September
20, 1996, to purchase all of the outstanding shares of the Company's common
stock, par value $1.00 per share (the "Common Stock"), together with the
associated stock rights (the "Rights") issued pursuant to a Rights Agreement
dated as of February 28, 1996, as amended effective September 15, 1996, between
the Company and KeyCorp Shareholder Services, Inc., at a purchase price of $7.50
per share of Common Stock and associated Right (each such share and associated
Right, a "Share"), net to the seller in cash, on the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated September 20,
1996 and the related Letter of Transmittal. The purpose of this Amendment No. 2
is to amend Items 8 and 9 of the Schedule 14D-9, as set forth below. Terms
defined in the Schedule 14D-9 are used in this Amendment No. 2 with the same
meanings as provided in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Item 8 of the Schedule 14D-9 is amended to add the following to section
(a) thereof:
On September 26, 1996, the Company removed the New York Action to the
United States District Court for the Southern District of New York. As a result,
the New York state court hearing previously scheduled for October 2, 1996 was
rendered inapplicable and the scheduled expiration date of the Temporary Order
issued by the state judge became October 10, 1996.
On September 27, 1996, the Company learned that, on September 26, 1996,
Hugo Neu Corporation, a New York corporation ("HNC"), transmitted a notice to
the Company calling for arbitration of certain alleged disputes relating to the
three joint ventures in which the Company and HNC are both owners (the
"Arbitration Notice"). A copy of a press release issued by the Company in
connection with the Arbitration Notice is attached hereto as Exhibit 9 and
incorporated herein by reference. A copy of the Arbitration Notice is attached
hereto as Exhibit 10 and incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DOCUMENT
- ----------- --------
Exhibit 9 - Press Release issued by Proler International Corp. dated
September 30, 1996.
Exhibit 10 - Letter of Hugo Neu Corporation to Proler International Corp. dated
September 26, 1996 calling for arbitration of certain
alleged disputes.
2
<PAGE>
SIGNATURE
After reasonable 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.
PROLER INTERNATIONAL CORP.
By: BRUCE W. WILKINSON
/s/ BRUCE W. WILKINSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: September 30, 1996
EXHIBIT 9
News from
Proler International Corp.
CONTACT:
Michael F. Loy
Vice President - Finance
(713) 963-5904
PROLER INTERNATIONAL CORP. ANNOUNCES THAT
HUGO NEU CORPORATION SEEKS ARBITRATION
Houston, Texas (September 30, 1996) - Proler International Corp. (NYSE:PS)
announced today that it has received a notice from Hugo Neu Corporation calling
for arbitration of certain alleged disputes relating to three joint ventures in
which Proler and Hugo Neu are both owners. The arbitration notice apparently
seeks to block Proler's merger with Schnitzer Steel Industries, Inc. pursuant to
the previously announced merger agreement under which Schnitzer has made a
tender offer for all outstanding shares of Proler at $7.50 in cash per share.
Proler stated that Hugo Neu Corporation is apparently complaining that Schnitzer
is a "competitor" of the joint ventures, and on that basis is apparently seeking
to prohibit any business combination between Proler and Schnitzer, to prohibit
Proler's consulting with Schnitzer about joint venture matters or furnishing
Schnitzer with access to and information about the joint ventures, and
unspecified damages allegedly in excess of $50 million.
Proler believes Hugo Neu Corporation's arbitration claims are entirely
without merit. "The purported arbitration action by Hugo Neu Corporation appears
to be nothing more than another attempt to undermine our merger agreement with
Schnitzer," commented Bruce W. Wilkinson, Proler's president. "Proler intends to
continue to move aggressively to protect the Schnitzer deal and the value it
affords our stockholders," said Wilkinson. Proler sued Hugo Neu Corporation in
Harris County, Texas, on September 25, 1996, asserting that Hugo Neu is
tortiously interfering with Proler's merger agreement with Schnitzer.
Proler is an environmental services company involved in the recovery and
recycling of scrap metals and industrial wastes to produce high-quality,
commercial products. Its shares are traded on the New York Stock Exchange under
the symbol PS.
EXHIBIT 10
[HUGO NEU CORPORATION LETTERHEAD]
September 26, 1996
Proler International Corp.
Attention: Mr. Bruce W. Wilkinson
4265 San Felipe, Suite 900
Houston, Texas 77027
Dear Mr. Wilkinson:
Reference is made to the Joint Venture Agreement made and entered
into as of October 13, 1965, by and between Hugo Neu Steel Products, Inc., and
Proleride Transport Systems, Inc. (the "PNE Agreement"); the Joint Venture
Agreement made and entered into as of March 22, 1966, by and between Hugo Neu
Corporation, Proler Steel Corporation, and Schiavone Bonomo Corporation (the
"PSN Agreement"); and the Joint Venture Agreement made and entered into as of
January 5, 1962, by and between Hugo Neu Corporation and Proler Steel
Corporation (the "HNP Agreement").
This letter constitutes notice in writing from Hugo Neu Corporation
("Hugo Neu"), a party to all three of the Agreements referenced in the preceding
paragraph (collectively, the "Joint Venture Agreements"), calling for
arbitration pursuant to paragraph 16 of the PNE Agreement, paragraph 17 of the
PSN Agreement, and paragraph 16 of the HNP Agreement. Hugo Neu demands
arbitration of the following disputes arising out of the Agreements and/or the
<PAGE>
Proler International Corp. 2
operations of the three joints ventures established by the Agreements (Hugo
Neu-Proler Company ("HNP"), Prolerized New England Company ("PNE"), and
Prolerized Schiabo-Neu Company ("PSN")):
1. Proler International Corp. ("Proler") has announced that it has
signed an agreement for the acquisition of Proler by Schnitzer Steel Industries,
Inc. ("Schnitzer") through a cash tender offer and merger. Schnitzer competes
with HNP, PNE, and PSN (collectively, the "Joint Ventures"). If Schnitzer
acquires Proler, and thereby acquires Proler's interests in the Joint Ventures,
Schnitzer may seek to make decisions with respect to, the Joint Ventures (which
it would then beneficially own only in part) to prevent the Joint Ventures from
competing effectively with other companies in which Schnitzer owns greater
proportionate interests.
This conflict is made more serious by provisions in the Joint
Venture Agreements providing that all matters and questions pertaining to the
affairs of the Joint Venture shall be determined by the unanimous consent of the
parties. Under those provisions, Schnitzer -- should it merge with Proler --
might seek to block business activities or plans by the Joint Ventures that
would maintain or increase their ability to compete with other businesses
already owned by Schnitzer or acquired in the future by Schnitzer.
Hugo Neu therefore contends that, in light of these and other
circumstances, the proposed business combination between Proler and Schnitzer
would be inconsistent with the Joint Venture Agreements, Proler's duty of good
faith
<PAGE>
Proler International Corp. 3
and fair dealing thereunder, and Proler's fiduciary duties to Hugo Neu. That is
particularly so because, so far as Hugo Neu is aware, Proler has made no
effective arrangements to ensure that if Schnitzer acquires Proler, the business
interests and expectations of the Joint Ventures and of Hugo Neu, as a joint
venturer, will be appropriately protected. Hugo Neu requests relief from the
arbitration panel prohibiting any business combination between Proler and
Schnitzer that, for the reasons summarized above, imperils the business
interests and expectations of the Joint Ventures and Hugo Neu. Hugo Neu also
seeks compensatory and punitive damages in excess of $50 million.
2. In the merger agreement between Proler and Schnitzer, Proler
promised that it would not take certain steps concerning the Joint Ventures
without Schnitzer's approval, and promised that it would not take certain other
steps respecting the Joint Ventures without prior consultation with Schnitzer.
Under the Joint Venture Agreements, Proler's duty of good faith and
fair dealing thereunder, and Proler's fiduciary duties to Hugo Neu as a partner,
Proler is obligated to make decisions concerning the Joint Ventures based solely
upon the best interests of the Joint Ventures. Proler, however, has purported to
give Schnitzer, a COMPETITOR of the Joint Ventures, substantial control and
influence over major aspects of the management of the Joint Ventures.
The merger agreement between Proler and Schnitzer is subject to at
least nine conditions, including antitrust review by the United States
Department of Justice. Hugo Neu believes that the antitrust problems presented
by the proposed
<PAGE>
Proler International Corp. 4
merger are substantial. The merger thus may never occur, and even if it does
occur, a substantial period of time may pass before the event. During that
period, management of the Joint Ventures is likely to be substantially impeded
by the management authority that Proler has purported to delegate to Schnitzer.
Proler therefore requests relief from the arbitration panel barring Schnitzer
from any role in either Proler's conduct as a joint venturer in the Joint
Venture, or the management of the Joint Ventures themselves. Hugo Neu also seeks
compensatory and punitive damages in excess of $50 million.
3. In the merger agreement, Proler purported to grant Schnitzer
access to each of the Joint Ventures' "physical assets, facilities, financial
information, production records, contracts and other corporate records and
documents as Schnitzer deems necessary to conduct its due diligence . . . ." In
that agreement, Proler also purported to grant Schnitzer "reasonable access . .
. to all [of the Joint Ventures'] premises, properties, and facilities," and to
allow Schnitzer "to meet with each [Joint Venture's] management personnel,
employees, and any outside consultants of the [Joint Ventures], including
without limitation auditors and accountants, investment and other bankers, tax
and financial advisors, and environmental consultants."
The Schedule 14D-9 filed by Proler with the SEC refers to "the
extensive 'due diligence' already conducted by Schnitzer regarding [Proler]." As
Proler carries on its principal business primarily through the Joint Ventures,
apparently Schnitzer has ALREADY conducted an extensive due diligence
investigation into the Joint Ventures. In other words, Schnitzer, a competitor
<PAGE>
Proler International Corp. 5
of the Joint Ventures, has evidently been given access to Joint Ventures' most
sensitive confidential and proprietary information. And Proler has refused,
despite repeated requests, to identify to Hugo Neu the confidential information
concerning the Joint Ventures disclosed by Proler to Schnitzer.
For reasons we have previously communicated to you, Hugo Neu regards
the so-called "Confidentiality Agreement" entered into between Proler and
Schnitzer as entirely inadequate to protect the interests of the Joint Ventures
and Hugo Neu. Proler has refused to make the changes in the Confidentiality
Agreement that Hugo Neu requested.
The disclosure of non-public information concerning the Joint
Ventures to a competitor is clearly a matter pertaining to the affairs of the
Joint Ventures, and therefore requires the unanimous consent of the joint
venturers. Proler, however, in breach of the Joint Venture Agreements, its duty
of good faith and fair dealing thereunder, and its fiduciary duties to Hugo Neu,
unilaterally decided to disclose such information to Schnitzer.
Accordingly, Hugo Neu seeks relief from the arbitration panel
prohibiting Proler, without the prior written consent of Hugo Neu, from causing
or attempting to cause the disclosure of non-public information concerning any
or all of the Joint Ventures to Schnitzer; from permitting Schnitzer to have
access to the physical assets, facilities, financial information, production
records, contracts, or other non-public corporate records and documents of any
or all of the Joint Ventures; and from causing or attempting to cause the
management personnel of any or all of
<PAGE>
Proler International Corp. 6
the Joint Ventures, or any or all of the Joint Ventures' employees and outside
consultants, including auditors and accountants, investment and other bankers,
tax and financial advisors and environmental consultants, to meet with
Schnitzer. Hugo Neu also seeks compensatory and punitive damages in excess of
$50 million arising from disclosures by Proler to Schnitzer of non-public
information concerning the Joint Ventures.
4. Hugo Neu seeks an award of interest, costs, and expenses,
including attorneys' fees, in connection with the arbitration and any related
litigations.
Hugo Neu reserves the right to amend and supplement this letter and
its claims as more information becomes available to it.
Please arrange for your counsel to call our counsel, Martin
Flumenbaum at Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064 (direct dial: 212-373-3191; telecopy
212-373-2226) to discuss administrative arrangements and procedures for the
arbitration.
Very truly yours,
HUGO NEU CORPORATION
By /s/ ANDREW O. FEUERSTEIN
Andrew O. Feuerstein
Senior Vice President and
General Counsel
BY CERTIFIED MAIL AND BY TELECOPY
cc: (by certified mail and by telecopy):
Schiavone Bonomo Corporation
