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As submitted to the Securities and Exchange Commission on August 7, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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
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BURNS INTERNATIONAL SERVICES CORPORATION
(Name of Subject Company)
BURNS INTERNATIONAL SERVICES CORPORATION
(Name of Person Filing Statement)
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Common Stock, par value $0.01 per share
(including the associated preferred stock purchase rights)
(Title of Class of Securities)
122374101
(CUSIP Number of Class of Securities)
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Robert E.T. Lackey
General Counsel
Burns International Services Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
(312) 322-8500
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
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COPY TO:
Peter R. Douglas
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
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[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company is Burns International Services Corporation,
a Delaware corporation (the "Company"), and the address of the principal
executive offices of the Company is 200 South Michigan Avenue, Chicago,
Illinois 60604. The telephone number of the Company at its principal executive
offices is (312) 322-8500.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the common stock, par value $0.01 per share, of the Company (the
"Common Stock"), including the associated rights (the "Rights") to purchase
Series A Participating Cumulative Preferred Stock issued under the Rights
Agreement (the "Original Rights Agreement") dated as of October 29, 1999
between the Company and The Bank of New York, as Rights Agent, as amended by
the Amendment thereto dated as of August 3, 2000 (as amended, the "Rights
Agreement"). As of August 2, 2000, there were 19,948,884 shares of Common Stock
outstanding.
Item 2. Identity and Background of Filing Person.
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the tender offer by Securitas Acquisition
Corporation ("Purchaser"), a Delaware corporation and an indirect, wholly-owned
subsidiary of Securitas AB, a joint stock company organized under the laws of
Sweden ("Parent"), to purchase all of the outstanding shares of Common Stock,
including the associated Rights (the shares of Common Stock, together with any
associated Rights, are referred to in this Statement as the "Shares"), at a
purchase price of $21.50 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated August 7, 2000 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). The 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
August 7, 2000.
The Offer is being made in accordance with the Agreement and Plan of Merger
dated as of August 3, 2000 among Parent, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions, following completion of the Offer, and in
accordance with the Delaware General Corporation Law (the "DGCL"), Purchaser
will be merged with and into the Company (the "Merger"). Following the
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly-owned subsidiary
of Parent. At the effective time of the Merger (the "Effective Time"), each
issued and outstanding Share (other than Shares owned by Parent, Purchaser, any
of their respective subsidiaries, or the Company or any of its subsidiaries,
which will be cancelled, and Shares, if any, held by stockholders who did not
vote in favor of the Merger Agreement and who comply with all of the relevant
provisions of Section 262 of the DGCL relating to dissenters' rights of
appraisal) will be converted into the right to receive $21.50 in cash or any
greater amount per Share paid pursuant to the Offer (the "Merger
Consideration").
The Schedule TO states that the principal executive offices of Purchaser and
Parent are located at Lindhagensplan 70, P.O. Box 12307, SE-102 28 Stockholm,
Sweden (telephone number: +46-8-657-74-00). All information in this Statement
or incorporated by reference herein concerning Purchaser or Parent, or their
affiliates, or actions or events in respect of any of them, was provided by
Purchaser or Parent, and the Company assumes no responsibility therefor.
Item 3. Past Contacts, Negotiations and Agreements.
Certain agreements, arrangements or understandings between the Company or
its affiliates and certain of its directors and executive officers are, except
as noted below, described in the Information Statement pursuant
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to Rule 14f-1 under the Securities Exchange Act of 1934 (the "Information
Statement") that is attached as Annex B to this Statement and is incorporated
herein by reference. Except as described in this Statement (including in the
Exhibits hereto and in Annex B hereto) or incorporated herein by reference, to
the knowledge of the Company, as of the date of this Statement, there exists no
material agreement, arrangement or understanding or any actual or potential
conflict of interest between the Company or its affiliates and (i) the Company,
its executive officers, directors or affiliates or (ii) Parent, Purchaser or
their respective executive officers, directors or affiliates.
The Merger Agreement
The summary of the Merger Agreement and the description of the conditions to
the Offer contained in Sections 11 and 14, respectively, of the Offer to
Purchase that is filed as Exhibit (a)(1) to the Schedule TO and which is being
mailed to stockholders of the Company together with this Statement, are
incorporated herein by reference. Such summary and description are qualified in
their entirety by reference to the Merger Agreement, which has been filed as
Exhibit (e)(1) hereto and is incorporated herein by reference.
Effects of the Offer and the Merger Under Company Stock Plans
The Merger Agreement provides that, upon consummation of the Merger, each
outstanding option to purchase Shares (the "Options") granted under any of the
Company's stock option plans, and any and all other outstanding options, stock
warrants and stock rights granted pursuant to such stock option plans or
otherwise, and in each case, whether or not then exercisable or vested, shall
be canceled. In consideration of such cancellation, the Company shall pay to
each such holder of an Option an amount in respect thereof equal to the product
of (i) the excess, if any, of the Offer Price over the exercise price thereof
and (ii) the number of Shares subject thereto (such payment to be net of
applicable withholding taxes). The Company may elect at any time prior to the
consummation of the Offer to have the foregoing actions take effect, with
respect to some or all the Options, upon consummation of the Offer, in which
case the Company shall provide written notice of such action to Parent. If the
Company so elects and if, upon consummation of the Offer, Purchaser shall have
acquired at least 50 percent of the outstanding Shares, Parent shall as
promptly as practicable following such consummation provide the Company with
the funds necessary to satisfy its obligations as described above.
Effects of the Offer and the Merger Under Agreements Between the Company and
its Directors and Executive Officers
Certain members of the Company's management and the Company's Board of
Directors (the "Board" or the "Board of Directors") have interests in the
transactions contemplated by the Merger Agreement that are in addition to their
interests as Company shareholders generally.
The purchase of Shares pursuant to the Offer will constitute a "change in
control" as such term is defined in the Company's employment agreements with
John A. Edwardson and John D. O'Brien and the Company's change in control
employment agreements (the "Change in Control Agreements") with Messrs. Robert
E.T. Lackey, James F. Froisland and James F. McNulty and Ms. Nancy E. Kittle.
If Mr. Edwardson's employment is terminated by the Company for reasons other
than for death, "disability" or "cause," or by Mr. Edwardson for "good reason"
(which includes, among other things, termination of employment within a 30 day
period following the three month period after a change in control), Mr.
Edwardson would receive severance and noncompete pay as follows: (i) an amount
equal to the unpaid annual base salary and supplemental benefit compensation
through the date of termination, plus a prorated bonus award at the targeted
level through the date of termination, plus an amount equal to any accrued but
unpaid bonus related to any prior year, and (ii) an amount equal to the sum of
the annual base salary, bonus and supplemental benefit compensation for the
period from the date of termination to the end of the then contract employment
period, less $1,000,000.
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If Mr. O'Brien's employment is terminated by the Company other than for
death, "disability," "retirement" or "cause," or by Mr. O'Brien for "good
reason" (which includes, among other things, termination of employment within a
30 day period following the first anniversary of a change in control), Mr.
O'Brien would receive severance and noncompete pay equal to twice his annual
base salary, annual bonus (at the expected level) and supplemental benefit
compensation payable during the 12 month period following the date of
termination at the rate in effect at the date of termination. Mr. O'Brien would
also be paid any portion of his annual base salary not paid as of the date of
termination, a prorated annual bonus for the year of termination (at the
expected level), and certain accrued and unpaid bonus, deferred compensation
and benefit amounts.
The Change in Control Agreements provide that, in the event of termination
of employment upon a change in control or within twenty-four months thereafter,
Messrs. Lackey, Froisland and McNulty and Ms. Kittle will be entitled to their
respective annual salary, a prorated bonus award at targeted level and other
supplemental benefits paid through the date of termination, plus a lump sum
payment equal to two times the sum of the respective employee's annual base
salary, annual bonus award at targeted level and supplemental benefits
contributions. On August 2, 2000, the Board amended each of the Change in
Control Agreements such that Parent must decide by December 29, 2000 whether or
not it will terminate the executive's employment with the Company.
Messrs. Edwardson, O'Brien, Lackey, McNulty and Froisland and Ms. Kittle are
also entitled under their agreements to certain gross up payments in the event
the executive is subject to excise tax on his or her termination or related
payments.
The foregoing description is qualified in its entirety by reference to such
agreements, which are described in the Information Statement, copies of which
are attached as Exhibits (e)(6), (e)(7), (e)(8), (e)(9), (e)(10), (e)(11),
(e)(12), (e)(13), (e)(14), (e)(15) and (e)(16) hereto, respectively, and are
incorporated herein by reference.
In connection with and subject to the consummation of the transactions
contemplated by the Merger Agreement, the Board of Directors has approved the
payment of additional retention and performance bonuses to the following
executive officers in the amounts indicated: Mr. Lackey ($500,000); Mr. McNulty
($550,000); Mr. Froisland ($325,000); and Ms. Kittle ($325,000).
Stockholders' Agreement
In connection with the Merger Agreement, Parent, Purchaser and the directors
and certain executive officers of the Company (the "Stockholders") have entered
into a Stockholders' Agreement dated as of August 3, 2000 (the "Stockholders'
Agreement") pursuant to which each of the Stockholders has, among other things,
(i) agreed to tender his or her Shares in the Offer, (ii) granted to Parent a
proxy with respect to the voting of such Shares and (iii) granted to Parent an
option to purchase such Shares. The Stockholders' Agreement, a copy of which
has been filed as Exhibit (e)(2) hereto, is more fully summarized in Section 11
of the Offer to Purchase and is incorporated herein by reference.
Stock Option Agreement
In connection with the Merger Agreement, Parent and the Company have entered
into a Stock Option Agreement dated as of August 3, 2000 (the "Stock Option
Agreement") pursuant to which the Company has, among other things, granted to
Parent an option (the "Company Option") to purchase up to the number of Shares
which represents 19.9% of all shares of Common Stock which are issued and
outstanding immediately prior to the exercise of the Company Option, upon the
terms and subject to the conditions set forth in the Stock Option Agreement, at
a cash purchase price equal to $21.50 per Share. The Stock Option Agreement, a
copy of which has been filed as Exhibit (e)(3) hereto, is more fully summarized
in Section 11 of the Offer to Purchase and is incorporated herein by reference.
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Confidentiality Agreement
On September 28, 1998, the Company and Parent signed a Confidentiality
Agreement (the "Confidentiality Agreement") providing that, subject to the
terms of the Confidentiality Agreement, Parent and its affiliates will keep
confidential certain non-public information provided by the Company. The
Confidentiality Agreement, a copy of which has been filed as Exhibit (e)(5)
hereto, is more fully summarized in Section 11 of the Offer to Purchase and is
incorporated herein by reference.
Indemnification
Pursuant to the Merger Agreement, the Company has agreed, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, to indemnify and hold harmless, and, after the Effective
Time, Parent and the Surviving Corporation will, for a period of six years
following the Effective Time, to the fullest extent permitted under applicable
law, indemnify and hold harmless, each director, officer, employee, fiduciary
and agent of the Company or any of its subsidiaries and their respective
affiliates including, without limitation, officers and directors serving as
such on the date of the Merger Agreement (collectively, the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to any of the transactions
contemplated thereby, including without limitation liabilities arising under
federal securities laws in connection with the Offer or the Merger. For six
years after the Effective Time, the Surviving Corporation will maintain or
obtain officers' and directors' liability insurance (which may be a part of
Parent's insurance policy) covering the Indemnified Parties who are currently
covered by the Company's officers and directors liability insurance policy on
terms not less favorable than those in effect on the date of the Merger
Agreement in terms of coverage and amounts; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
exceed the per annum rate of premium paid by the Company for such insurance as
of the date of the Merger Agreement, then the Surviving Corporation will
provide the maximum coverage that will then be available at an annual premium
equal to such per annum rate as of the date of the Merger Agreement. The
Surviving Corporation will continue in effect the indemnification provisions
currently provided by the Restated Certificate of Incorporation, as amended,
and By-Laws of the Company for a period of not less than six years following
the Effective Time.
Item 4. The Solicitation or Recommendation.
Recommendation of the Board of Directors
On August 2, 2000, the Board of Directors held a meeting with members of the
Company's senior management to consider the proposed transaction and review its
material terms. After a presentation by the Company's legal advisors, members
of the Board discussed the material provisions of the Merger Agreement, Stock
Option Agreement and Stockholders' Agreement. Mr. Brian Cooper, treasurer of
the Company, then gave a presentation on management's valuation of the proposed
transaction. Representatives of Credit Suisse First Boston Corporation ("CSFB")
then presented its analysis of the consideration to be received in the proposed
transaction and delivered a written opinion dated August 2, 2000 (subsequently
confirmed by delivery of a written opinion dated August 3, 2000) to the effect
that, as of such date and subject to certain matters stated in such opinion,
the consideration to be received by the stockholders of the Company (other than
the Parent and its affiliates) in the Offer and the Merger is fair to such
stockholders from a financial point of view. A copy of the written opinion
dated August 3, 2000 delivered by CSFB to the Board of Directors, setting forth
the procedures followed, the matters considered and the assumptions made by
CSFB in arriving at its opinion, is attached hereto as Annex A and incorporated
herein by reference. Stockholders are urged to read the opinion of CSFB in its
entirety. The opinion of CSFB was for the information of the Board of Directors
in connection with its consideration of the Offer and the Merger and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on the proposed Merger or whether or not such stockholder should
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tender shares pursuant to the Offer. The Board of Directors was aware that CSFB
is entitled to certain fees described in Item 5 in connection with its opinion.
After discussion, the members of the Board present at the meeting voted
unanimously (i) to determine that the terms of the Offer and the Merger were
fair to, and in the best interests of, the Company's stockholders, (ii) to
approve the Merger Agreement, the Stock Option Agreement and the amendment to
the Original Rights Agreement (the "Rights Agreement Amendment") and to
authorize the execution and delivery thereof and (iii) to recommend that the
stockholders of the Company tender their Shares pursuant to the Offer and
approve the Merger Agreement. The Company's recommendation is contained in its
letter to stockholders dated August 7, 2000. A copy of such letter, which
accompanies this Statement, is attached hereto as Exhibit (a)(1) and is
incorporated herein by reference.
The Company, Parent and Purchaser executed the Merger Agreement and the
parties thereto executed the Stock Option Agreement, Stockholders' Agreement
and Rights Agreement Amendment on August 3, 2000. Press releases announcing the
proposed transaction were publicly issued in both Sweden and the United States
on August 3, 2000.
Background of the Offer; Contacts with Parent
From time to time during the last several years, the Company has evaluated
its position and prospects in the contract guard and related security service
industry and has considered various possible strategies for increasing
stockholder value, including entering into strategic alliances or combinations
with potential partners.
Management of the Company and Parent had initial preliminary discussions in
1998 when Parent was exploring the possibility of entering the U.S. market for
security services.
In September of 1998, Joseph Adorjan, John O'Brien and Timothy Wood met in
Chicago with Thomas Berglund, President and Chief Executive Officer, and Hakan
Winberg, Executive Vice President and Chief Financial Officer, of Parent to
discuss the operations of the Company and a possible acquisition by Parent. Mr.
Adorjan and Mr. Wood are former executives of the Company and Mr. O'Brien is
Senior Vice President of the Company.
On September 28, 1998, the parties entered into a confidentiality agreement
which, among other things, provides for the delivery and protection of
confidential and non-public information of the Company in order to allow the
representatives of Parent to evaluate the possible acquisition of the Company.
In October of 1998, Mr. Adorjan, Mr. O'Brien and Mr. Wood visited Stockholm
to continue discussions regarding a possible acquisition of the Company;
however, the parties decided that such an acquisition was not advisable at that
time and agreed to suspend further discussions.
On August 4, 1999, John A. Edwardson, Chairman, President and Chief
Executive Officer of the Company, Mr. O'Brien, and James F. McNulty, Vice
President of the Company, had a meeting with Don W. Walker, President and Chief
Executive Officer of Pinkerton Holdings, Inc. (a wholly-owned subsidiary of
Parent), the purpose of which was to introduce Mr. Walker to Mr. Edwardson, Mr.
O'Brien and Mr. McNulty. The parties had a general discussion about the
security guard industry.
On September 27, 1999, Mr. Edwardson, Mr. Berglund, Mr. Winberg and Mr.
Walker met at the American Society for Industrial Security convention in Las
Vegas, NV. During this meeting, Mr. Edwardson and Mr. Berglund were introduced
to each other. Mr. Edwardson asked Mr. Berglund to discuss how Parent
approached the security guard industry and how the approaches to such industry
differed in Europe and the United States.
On May 22, 2000, Mr. Edwardson and Mr. Walker met at the Company's corporate
headquarters in Chicago, Illinois. At this meeting they discussed generally
issues of staff recruiting and retention and overtime costs, and discussed
legislation providing access to governmental records for national criminal
background checks, national training standards and best industry practices.
During this discussion, the possibility of further industry consolidation was
discussed.
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On June 6, 2000, Mr. Edwardson and Mr. Walker spoke by telephone and
discussed general industry consolidation and the potential for future
discussions regarding a merger between the two entities.
On June 15, 2000, Mr. Edwardson, Mr. Walker and Mr. Berglund had a meeting
at which Mr. Edwardson discussed his goals and objectives for, and the
performance of, the Company. They also discussed the long term opportunity for
growth of the Company as well as the Company's plans to increase shareholder
value.
On June 20, 2000, Mr. Edwardson and Mr. Walker met, and on July 21, Mr.
Edwardson, Mr. Walker and Robert Lackey, Vice President, General Counsel and
Secretary of the Company, met, and reviewed the Company's objectives for the
current year as well as its year to date performance. The discussion also
covered the organization of the Company, its structure and key management. They
also discussed the possible synergies which could be created with the
combination of the Company and Parent's corporate and administrative staffs.
On July 5, 2000, Mr. Edwardson, Mr. Lackey, Mr. Walker, Mr. Berglund and Mr.
Winberg, discussed certain aspects of the valuation of the Company.
On July 7, 2000, Mr. Edwardson and Mr. Walker spoke again by telephone
regarding the general level of interest of Parent's board of directors in the
transaction, and to set up a schedule for due diligence and a timetable for
negotiation of possible merger documents.
On July 13, 2000, Mr. Lackey and Frederick W. London, Corporate Secretary of
Pinkerton Holdings, Inc., met in Chicago to discuss the due diligence process.
On July 17, 2000, Mr. Lackey met with Mr. London in Chicago, together with
other representatives and advisors of the Company and Parent, in order to
commence the due diligence process. On July 18, 2000, Mr. Edwardson, Mr.
Lackey, Mr. Walker, Mr. London, and Richard Ferens, Vice President Finance and
Treasurer of Pinkerton Holdings, Inc., met with other representatives and
advisors of Parent and the Company. The parties also continued to speak about
various transition issues and planning in the event a combination transaction
were pursued. The due diligence process continued thereafter.
At a meeting of the Board of Directors of the Company on July 17, 2000,
there was a discussion of developments concerning Parent.
On July 24, 2000, the Company retained CSFB to undertake an analysis to
enable it to render an opinion to the Board of Directors as to the fairness to
the stockholders of the Company of the terms of a merger with Parent.
On July 26, 2000, Mr. Berglund, Mr. Winberg and Mr. Walker met with Mr.
Edwardson and Mr. Lackey and other representatives and advisors of Parent and
the Company to discuss the results of the due diligence process and to continue
their discussions relating to a possible transaction.
From July 17 through August 3, 2000, representatives of Parent and Company,
together with their respective legal counsel, communicated by telephone to
discuss and negotiate various aspects of the transaction. During this time,
drafts of the Merger Agreement, the Stock Option Agreement and the
Stockholders' Agreement were distributed, reviewed and discussed, and
representatives of Parent continued the due diligence investigation of the
Company. During this due diligence process, the Plan Projections (as defined
below) were disclosed to Parent's representatives (see "Additional Information"
below).
On August 2, 2000, the Board held a meeting to consider the proposed
acquisition. During this meeting, members of the Company's senior management,
along with the Company's legal and financial advisors,
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reviewed with the Board the business and prospects of the Company, the proposed
terms of the Merger Agreement and related documents and the Board's fiduciary
duties. Additionally, CFSB presented its opinion as to the fairness of the
consideration to be received in the Offer and the Merger. The members of the
Board present at the meeting unanimously approved the Offer, the Merger, the
Merger Agreement, the Stock Option Agreement and the Rights Agreement
Amendment. In addition, the Board approved the payment of additional retention
and performance bonuses to certain executive officers (see "Effects of the
Offer and the Merger Under Agreements Between the Company and its Directors and
Executive Officers" above).
On August 3, 2000, the Board of Directors of Parent approved the
transaction, and following the meeting, Parent, Purchaser and the Company
executed and delivered the Merger Agreement, and the parties thereto executed
the Stockholders' Agreement, the Stock Option Agreement and the Rights
Agreement Amendment. The transaction was announced in Stockholm and in New York
prior to the opening of trading in the Shares on the New York Stock Exchange
("NYSE") on August 3, 2000.
On August 7, 2000, Purchaser commenced the Offer.
Reasons for the Recommendation of the Board of Directors
As discussed above, at its meeting held on August 2, 2000, the Board (i)
approved the Offer and the Merger, (ii) determined that the terms of the Offer
and the Merger were fair to, and in the best interests of, the Company's
stockholders and (iii) determined to recommend that the stockholders of the
Company accept the Offer and tender their Shares to Purchaser pursuant to the
Offer. In making its decision, the Board considered the factors listed below,
each of which, in the view of the Board, supported such determinations. The
following discussion of factors considered by the Board is not intended to be
exhaustive but summarizes the material factors considered.
(i) Transaction Financial Terms/Premium to Market Price. The fact that
the Offer Price represents a premium of 62% over the closing price of the
Common Stock ($13.25) on the NYSE on August 2, 2000 (the day prior to
announcement of the Offer and the Merger). The $21.50 Offer Price and
Merger Consideration exceed the highest trading price of the Shares during
the twelve-month period preceding the announcement of the Merger Agreement
($20.06) and constitute a 65% premium over the 30 day average closing price
of the Shares prior to such Board meeting.
(ii) Cash Consideration. The fact that the Offer Price is payable in
cash, thereby eliminating any uncertainties in valuing consideration.
(iii) Company Operating and Financial Condition; Strategic
Alternatives. The current and historical financial condition and results of
operations of the Company, as well as the knowledge of the members of the
Board of various risks and uncertainties associated with a decision to
continue to operate the Company as an independent entity, including, but
not limited to, trends toward consolidation and increased competition in
the industries in which the Company's businesses operate.
(iv) Conditions to Consummation. The fact that the Minimum Condition (as
defined in the Merger Agreement) requires that at least a majority of the
outstanding Shares on a fully-diluted basis are validly tendered pursuant
to the Offer and not withdrawn. The Board also considered the likelihood of
obtaining required regulatory approvals, and the terms of the Merger
Agreement regarding the obligations of each party to pursue such regulatory
approvals. Pursuant to the Merger Agreement, each of Parent and Purchaser
has agreed that, if necessary in order to terminate the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), by February 28, 2001, it will divest operations of
the Company or the U.S. operations of Parent up to $150 million. In
addition, the Merger is not subject to a financing condition.
(v) Terms and Conditions of the Transactions. The terms and conditions
of the Offer, the Merger and the Merger Agreement, including provisions
that no change may be made without the prior written
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consent of the Company that (a) waives the Minimum Condition, (b) changes
the form of consideration to be paid, (c) decreases the Offer Price or the
number of Shares sought in the Offer, or (d) adds conditions to the Offer.
(vi) Board Recommendation Flexibility. The fact that, subject to certain
conditions, the Merger Agreement does not preclude the Board from
withdrawing or modifying its recommendation to stockholders if it
determines in good faith, based on the advice of outside counsel, that such
action is required to discharge the Board's fiduciary duties to the
Company's stockholders.
(vii) Provisions for Third-Party Negotiations. The provision of the
Merger Agreement permitting the Company, subject to certain conditions, to
negotiate with third parties that make unsolicited bona fide written
Superior Proposals (as defined in the Merger Agreement) if the Board
determines in good faith, based on the advice of outside counsel, that such
action is required to discharge the Board's fiduciary duties to the
Company's stockholders. The Board considered that the terms of the Merger
Agreement permit the Company to terminate the Merger Agreement and accept a
Superior Proposal under certain conditions, including that the Company pays
Parent a $10 million termination fee plus an expense allowance of $2.5
million. Upon such termination, Parent may exercise the Company Option
under the Stock Option Agreement; however, the aggregate amount Parent may
realize upon termination of the Merger Agreement (including the termination
fee, expenses and amounts received pursuant to the Stock Option Agreement)
is limited to $18 million. The Board considered the possible effect of
these provisions of the Merger Agreement and the Stock Option Agreement on
third parties who might be interested in exploring an acquisition of the
Company. In this regard, the Board recognized that the provisions of the
Merger Agreement and the Stock Option Agreement relating to termination
fees, expenses, the Company Option and solicitation of takeover proposals
were insisted upon by Parent as a condition to entering into the Merger
Agreement. The Board also considered the preliminary contacts that the
Company had had with third parties regarding a potential transaction
involving the Company and discussed with management and CSFB the likelihood
that a third party would be prepared to pay a higher price for the Shares
than the Offer Price in a transaction that could be completed on a timely
basis.
(viii) Fairness of Price. The Board's belief, based upon presentations
by Company management and CSFB, that the Offer Price was fair in light of
the financial condition, results of operations, business and prospects of
the Company as a separate company.
(ix) CSFB Fairness Opinion. The opinion of CSFB dated August 2, 2000
that, as of the date of such opinion and based on and subject to certain
assumptions and qualifications stated in the opinion, the consideration to
be received by the stockholders of the Company (other than Parent and its
affiliates) in the Offer and the Merger is fair to such stockholders from a
financial point of view, and the financial analysis presented to the Board
by CSFB with respect thereto.
(x) Likelihood of Consummation. The likelihood that the Offer and the
Merger will be consummated in light of the facts that (i) the Offer and the
Merger are not subject to any financing condition, (ii) the other
conditions to the Offer and the Merger are limited in nature, (iii) Parent
has entered into financing agreements to obtain the funds necessary to
consummate the Offer and Merger and (iv) each of Parent and Purchaser has
agreed that, if necessary in order to terminate the applicable waiting
period under the HSR Act by February 28, 2001, it will divest operations of
the Company or the U.S. operations of Parent up to $150 million.
(xi) Timing of Completion. The fact that the structure of the
acquisition of the Company by Parent as provided for in the Merger
Agreement involves a cash tender offer for all outstanding Shares, to be
commenced within seven business days of the public announcement of the
Merger Agreement, to be followed as promptly as practicable by a merger for
the same consideration, thereby enabling the Company's stockholders to
obtain cash for their Shares at the earliest possible time.
The description set forth above of the factors considered by the Board is
not intended to be exhaustive, but summarizes the primary factors considered.
The members of the Board evaluated the Offer and the Merger in light of their
knowledge of the business, financial condition and prospects of the Company,
and based upon the
8
<PAGE>
advice of financial and legal advisors. In light of the number and variety of
factors that the Board considered in connection with their evaluation of the
Offer and the Merger, the Board found it impracticable to assign relative or
specific weights to the foregoing factors and, accordingly, did not attempt to
do so. Individual members of the Board may have given weight to different
factors and may have viewed certain factors more positively or negatively than
others.
Intent to Tender
Pursuant to the Stockholders' Agreement, each executive officer, director
and affiliate of the Company has agreed, among other things, to tender all
Shares held of record or beneficially owned by such person in the Offer.
Item 5. Person/Assets Retained, Employed, Compensated or Used.
In connection with the Merger, the Company retained CSFB to undertake an
analysis to enable it to render an opinion to the Board of Directors as to the
fairness to the stockholders of the Company (other than Parent and its
affiliates) of the consideration to be received in the Offer and the Merger
pursuant to the Merger Agreement. Pursuant to an engagement letter dated July
24, 2000, entered into between the Company and CSFB (the "Engagement Letter"),
the Company agreed to pay CSFB a fee of $1,000,000, with $100,000 payable upon
execution of the Engagement Letter and $900,000 payable upon delivery of the
CSFB opinion. In addition, the Company has agreed to reimburse CSFB for its
reasonable out-of-pocket expenses, including the fees and expenses of its legal
counsel, resulting from its engagement. In addition, the Company has agreed to
indemnify CSFB against certain liabilities arising in connection with its
engagement.
CSFB has in the past provided investment banking services for the Company
for which it has received customary compensation. In the ordinary course of
business, CSFB and its affiliates may actively trade the debt and equity
securities of both the Company and Parent for its and its affiliates' own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any person to make
solicitations or recommendations in connection with the Offer or the Merger.
Item 6. Interest in Securities of the Subject Company.
No transactions in Shares have been effected during the past 60 days by the
Company or, to the knowledge of the Company, by any executive officer,
director, affiliate or subsidiary of the Company, other than the issuance of
Shares to certain directors under the Company's Directors Stock Appreciation
Rights Plan, amended effective as of January 27, 1993, as amended by the First
Amendment effective as of June 30, 2000. Pursuant to such First Amendment, the
stock appreciation rights of Alexis P. Michas, Albert J. Fitzgibbons III and
James J. Burke were stock settled on July 31, 2000. On such date, Messrs.
Michas, Fitzgibbons III and Burke received 9,352, 15,588 and 9,352 Shares,
respectively.
Pursuant to the Stockholders' Agreement, each executive officer, director
and affiliate of the Company has, among other things, granted to Parent an
option to purchase his or her Shares.
Item 7. Purposes of the Transaction and Plans or Proposals.
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to: (i) a tender offer or other acquisition of the Company's securities by the
Company, any subsidiary of the Company or any other person; (ii) any
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the
9
<PAGE>
Company; (iii) any purchase, sale or transfer of a material amount of assets of
the Company or any subsidiary of the Company; or (iv) any material change in
the present dividend rate or policy, or indebtedness or capitalization of the
Company.
Except as described in this Statement, there is no transaction, board
resolution, agreement in principle or signed contract that has been entered
into in response to the Offer that relates to one or more of the matters
referred to in the preceding paragraph.
Item 8. Additional Information.
Information provided pursuant to Rule 14f-1 under the Exchange Act. The
Information Statement attached as Annex B to this Statement is being furnished
to the Company's stockholders in connection with the designation by Purchaser
of persons to the Board other than at a meeting of the Company's stockholders,
and such information is incorporated herein by reference.
Section 203 of the Delaware General Corporation Law. As a Delaware
corporation, the Company is subject to Section 203 ("Section 203") of the DGCL.
Under Section 203, certain "business combinations" between a Delaware
corporation whose stock is publicly traded or held of record by more than 2,000
stockholders and an "interested stockholder" are prohibited for a three-year
period following the time that such a stockholder became an interested
stockholder unless, among other things, the transaction in which the
stockholder became an interested stockholder or the business combination was
approved by the Board of Directors of the corporation before the other party to
the business combination became an interested stockholder. The term "business
combination" generally includes mergers or consolidations between a Delaware
corporation and an "interested stockholder". The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns 15% or more of a Delaware corporation's voting stock.
In accordance with the Merger Agreement and Section 203, the Board approved
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement and therefore, the restrictions of Section 203 are inapplicable to
the Offer, the Merger and the related transactions.
Certain Financial Projections (Unaudited). In the course of discussions
between representatives of the Company and Parent and Purchaser (Parent and
Purchaser together, the "Recipients"), the Company provided the Recipients'
representatives with certain projections of the future operating performance of
the Company and its subsidiaries prepared by the Company's management for
fiscal year 2000 (the "Plan Projections"). Relevant portions of such
information have been set forth below for the limited purpose of giving
stockholders access to projections by the Company's management that were
available for review by the Recipients in connection with the Offer.
The projected financial information set forth below necessarily reflects
numerous assumptions with respect to general business and economic conditions
and other matters, many of which are inherently uncertain or beyond the
Company's or Recipients' control, and does not take into account any changes in
the Company's operations or capital structure which may result from the Offer
and the Merger. It is not possible to predict whether the assumptions made in
preparing the projected financial information will be valid, and actual results
may prove to be materially higher or lower than those contained in the
projections. The inclusion of this information should not be regarded as an
indication that the Company or any other person who received this information
considered it a reliable predictor of future events, and this information
should not be relied on as such. None of the Company, the Recipients or any of
their respective representatives assumes any responsibility for the validity,
reasonableness, accuracy or completeness of the projected financial
information, and the Company has made no representations to the Recipients
regarding such information.
10
<PAGE>
2000 FORECAST
($ Millions)
<TABLE>
<CAPTION>
Full Year
2000
----------
<S> <C>
Total Revenue.................................................... $1,474.437
Total Business Unit Operating Income............................. $ 89.716
Earnings Before Interest, Taxes and Purchase Accounting.......... $ 65.164
Net Income....................................................... $ 26.553
Earnings Per Share............................................... $ 1.322
</TABLE>
Cautionary Statement Concerning Forward-looking Statements. Certain matters
discussed herein, including without limitation, the Plan Projections, are
forward-looking statements that involve risks and uncertainties. Such
information has been included in this Statement for the limited purpose of
giving stockholders access to projections by the Company's management that were
made available to the Recipients. Such information was prepared by the
Company's management for internal use and not with a view to publication. The
foregoing Plan Projections were based on assumptions concerning the Company's
operations and business prospects in 2000, including the assumption that the
Company would continue to operate under the same ownership structure as then
existed. The Plan Projections were also based on other revenue, expense and
operating assumptions. Information of this type is based on estimates and
assumptions that are inherently subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the Company's control. Such uncertainties and contingencies
include, but are not limited to: changes in the economic conditions in which
the Company operates, greater than anticipated competition or price pressures,
new product offerings, better or worse than expected customer growth resulting
in the need to expand operations and make capital investments, and the impact
of investments required to enter new markets. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those set forth above. In
addition, the Plan Projections were not prepared with a view to public
disclosure or compliance with the published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public
Accountants regarding projections and forecasts, and are included in this
Statement only because such information was made available to the Recipients by
the Company. Neither the Recipients' nor the Company's independent accountants
have examined or applied any agreed upon procedures to this information and the
Company has made no representations to the Recipients regarding such
information. Neither the Recipients nor the Company intends to provide any
updated information with respect to any forward-looking statements.
Amendment to the Rights Agreement. Each Right issued pursuant to the Rights
Agreement entitles the registered holder thereof to purchase one one-hundredth
of a share of Series A Participating Cumulative Preferred Stock, par value
$0.01 per share, of the Company at a purchase price of $55.00, subject to
adjustment (the "Purchase Price"). On the earlier of (i) the tenth day
following a public announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of 15% or more of the
outstanding Shares (an "Acquiring Person") or (ii) the tenth day (or such later
date as determined by the Board) following the commencement of a tender or
exchange offer by any person if the consummation of such offer would result in
that person becoming an Acquiring Person (the earlier of such dates being the
"Distribution Date"), the Rights become exercisable and trade separately from
the Common Stock. After any person has become an Acquiring Person, each holder
of a Right (other than the Acquiring Person) will thereafter have the right to
acquire shares of Common Stock having a market value of twice the Purchase
Price. The Rights may be redeemed by the Company at a price of $0.01 per Right.
The Company and the Rights Agent under the Rights Agreement amended the
Original Rights Agreement as of August 3, 2000 to provide that (i) neither the
Merger Agreement, the Stock Option Agreement or the Stockholders' Agreement,
nor any of the transactions contemplated thereby, will result in the occurrence
of a Distribution Date or otherwise cause the Rights to become exercisable by
the holders thereof and (ii) the Rights
11
<PAGE>
shall automatically terminate on and as of the Effective Time, and be void and
of no further force or effect. A copy of the Rights Agreement Amendment is
attached as Exhibit (a)(6) hereto and is incorporated herein by reference.
Certain Legal Matters. Except as otherwise disclosed herein, the Company is
not aware of any licenses or other regulatory permits which appear to be
material to the business of the Company and which might be adversely affected
by the acquisition of Shares by Purchaser pursuant to the Offer or of any
approval or other action by any governmental, administrative or regulatory
agency or authority which would be required for the acquisition or ownership of
Shares by Purchaser pursuant to the Offer. Purchaser's obligation under the
Offer to accept for payment and pay for Shares is subject to certain conditions
which are set forth in Section 14 of the Offer to Purchase and are incorporated
herein by reference.
The transactions contemplated by the Offer and Merger are or may be subject
to a number of applicable laws and regulations, including but not limited to
the HSR Act and the rules that have been promulgated thereunder by the Federal
Trade Commission, certain foreign laws and regulations, certain regulations of
the Federal Reserve Board, certain state takeover laws and regulations and
Section 721 of Title VII of the United States Defense Production Act of 1950,
as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of
1988. Information concerning these matters is set forth in Section 15 of the
Offer to Purchase and is incorporated herein by reference.
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<PAGE>
Item 9. Exhibits.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
(a)(1) Letter to Stockholders of the Company dated August 7, 2000.*
(a)(2) Opinion of Credit Suisse First Boston Corporation dated August
3, 2000 (included as Annex A to the Statement).*
(a)(3) Press Release issued by the Company on August 3, 2000
(incorporated herein by reference to the press release filed
under cover of Schedule 14D-9C by the Company on August 3,
2000).
(a)(4) The Offer to Purchase dated August 7, 2000 (incorporated herein
by reference to Exhibit (a)(1) to the Schedule TO of Parent and
Purchaser filed on August 7, 2000).
(a)(5) Letter of Transmittal (incorporated herein by reference to
Exhibit (a)(2) to the Schedule TO of Parent and Purchaser filed
on August 7, 2000).
(a)(6) Amendment to Rights Agreement, dated as of August 3, 2000
(incorporated herein by reference to Exhibit 4.1 to the
Company's Form 8-K filed on August 3, 2000).
(a)(7) Rights Agreement dated as of October 29, 1999 between the
Company and The Bank of New York, as Rights Agent (incorporated
herein by reference to Exhibit 1 to the Company's Form 8-A filed
on November 5, 1999).
(e)(1) Agreement and Plan of Merger dated as of August 3, 2000 among
Parent, Purchaser and the Company (incorporated herein by
reference to Exhibit 2.1 to the Company's Form 8-K filed on
August 3, 2000).
(e)(2) Stockholders' Agreement dated as of August 3, 2000 among Parent,
Purchaser and certain stockholders of the Company (incorporated
herein by reference to Exhibit 2.3 to the Company's Form 8-K
filed on August 3, 2000).
(e)(3) Stock Option Agreement between the Company and Parent dated as
of August 3, 2000 (incorporated herein by reference to Exhibit
2.2 to the Company's Form 8-K filed on August 3, 2000).
(e)(4) The Information Statement of the Company dated August 7, 2000
(included as Annex B to the Statement).*
(e)(5) Confidentiality Agreement between Company and Parent dated as of
September 28, 1998 (incorporated herein by reference to Exhibit
(d)(4) to the Schedule TO of Parent and Purchaser filed on
August 7, 2000).
(e)(6) Employment Agreement between the Company and John D. O'Brien,
dated as of September 5, 1997 (incorporated herein by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997).
(e)(7) Amended and Restated Employment Agreement between the Company
and John Edwardson, dated as of March 26, 1999 (incorporated
herein by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999).
(e)(8) Amendment No. 1 dated as of August 2, 2000 to the Amended and
Restated Employment Agreement dated as of March 26, 1999 between
the Company and Mr. Edwardson.
(e)(9) Change in Control Agreement between the Company and Robert E.T.
Lackey, dated as of July 13, 1999 (incorporated herein by
reference to Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
(e)(10) First Amendment dated as of August 2, 2000 to the Change in
Control Agreement dated as of July 13, 1999 between the Company
and Mr. Lackey.
(e)(11) Change in Control Agreement between the Company and James M.
Froisland, dated as of February 1, 2000 (incorporated herein by
reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999).
(e)(12) First Amendment dated as of August 2, 2000 to the Change in
Control Agreement dated as of February 1, 2000 between the
Company and Mr. Froisland.
(e)(13) Change in Control Agreement between the Company and James F.
McNulty, dated as of July 13, 1999 (incorporated herein by
reference to Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999).
(e)(14) First Amendment dated as of August 2, 2000 to the Change in
Control Agreement dated as of July 13, 1999 between the Company
and Mr. McNulty.
(e)(15) Change in Control Agreement between the Company and Nancy E.
Kittle, dated as of July 13, 1999 (incorporated herein by
reference to Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999).
(e)(16) First Amendment dated as of August 2, 2000 to the Change in
Control Agreement dated as of July 13, 1999 between the Company
and Ms. Kittle.
(g) None.
</TABLE>
--------
* Included with the Statement mailed to stockholders.
14
<PAGE>
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.
Burns International Services
Corporation
/s/ Robert E.T. Lackey
By: _________________________________
Name: Robert E.T. Lackey
Title: Vice President and General
Counsel
Dated: August 7, 2000
15
