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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
AMENDMENT NO. 1
TO
SCHEDULE 13D*
UNDER THE SECURITIES EXCHANGE ACT OF 1934
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ARCO CHEMICAL COMPANY
(NAME OF SUBJECT COMPANY)
LYONDELL ACQUISITION CORPORATION
LYONDELL PETROCHEMICAL COMPANY
(BIDDERS)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
001920-10-7
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(CUSIP NUMBER OF CLASS OF SECURITIES)
KERRY A. GALVIN, ESQ.
LYONDELL ACQUISITION CORPORATION
C/O LYONDELL PETROCHEMICAL COMPANY
1221 MCKINNEY, SUITE 1600
HOUSTON, TEXAS 77010
(713) 652-7300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
STEPHEN A. MASSAD
BAKER & BOTTS, L.L.P.
ONE SHELL PLAZA
910 LOUISIANA
HOUSTON, TEXAS 77002-4995
(713) 229-1234
JUNE 29, 1998
(DATE OF EVENT WHICH REQUIRES FILING AMENDMENT TO SCHEDULE 13D)
* This Statement also constitutes Amendment No. 1 to the Statement on
Schedule 13D of Lyondell Acquisition Corporation and Lyondell
Petrochemical Company dated June 18, 1998 and filed July 2, 1998 with
respect to the shares of Common Stock, par value $1.00 per share, of ARCO
Chemical Company.
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This Amendment No. 2 to Tender Offer Statement on Schedule 14D-1 also
constitutes Amendment No. 1 to the Statement on Schedule 13D dated June 18,
1998 and filed July 2, 1998, with respect to the possible beneficial ownership
of Shares (as defined below) by Lyondell Petrochemical Company, a Delaware
corporation ("Lyondell"), and Lyondell Acquisition Corporation (the
"Purchaser"), pursuant to the Tender and Voting Agreement (as defined in the
Schedule 14D-1 as originally filed). The cover page above and item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.
Lyondell and the Purchaser hereby amend and supplement their Tender Offer
Statement on Schedule 14D-1, filed with the Securities and Exchange Commission
on June 24, 1998, as amended, with respect to the Purchaser's offer to
purchase all of the outstanding shares of common stock, par value $1.00 per
share (the "Shares"), of ARCO Chemical Company, a Delaware corporation (the
"Company"), at $57.75 per Share, net to the seller in cash.
ITEM 10. ADDITIONAL INFORMATION.
(e) On or about June 29, 1998, Mary E. McMullin, a purported shareholder of
the Company, filed a complaint (the "Complaint") in the Court of Chancery in
the State of Delaware against each of the members of the Board of Directors of
the Company (the "Individual Defendants"), the Company, Atlantic Richfield
Company ("ARCO") and Lyondell. The Complaint purportedly is brought on behalf
of a class of all common stockholders of the Company other than the defendants
and their affiliates. The Complaint alleges that ARCO and the Individual
Defendants breached fiduciary duties owed to the Company's public shareholders
in connection with approval of the Agreement and Plan of Merger to which
Lyondell, the Purchaser and the Company are a party, and that Lyondell
knowingly aided and abetted such alleged breaches of fiduciary duty. Among
other things, the Complaint seeks preliminary and permanent injunctive relief
against the consummation of the proposed transaction and unspecified damages.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
(g) Class Action Complaint filed in Mary E. McMullin v. Walter F. Beran et
al., C.A. No. 16493, Court of Chancery in the State of Delaware in and for New
Castle County, on or about June 29, 1998.
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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: July 2, 1998
Lyondell Acquisition Corporation
By: /s/ Kerry A. Galvin
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Name:Kerry A. Galvin
Title:Vice President
Lyondell Petrochemical Company
By: /s/ Kerry A. Galvin
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Name:Kerry A. Galvin
Title:Chief Corporate Counsel and Corporate Secretary
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EXHIBIT (g)
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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|
MARY E. MCMULLIN |
Plaintiff, |
v. |
|
WALTER F. BERAN, ANTHONY G. FERNANDES, | C.A. No. 16493
MARK L. HAZELWOOD, ALAN R. HIRSIG, JOHN |
H. KELLEY, MARIE L. KNOWLES, JAMES A. |
MIDDLETON, STEPHEN R. MUT, FRANK SAVAGE, |
MARVIN B. SCHLANGER, WALTER J. |
TUSINSKI, DONALD R. VOELTE, JR., ARCO |
CHEMICAL COMPANY, ATLANTIC RICHFIELD |
COMPANY and LYONDELL PETROCHEMICAL |
COMPANY, |
|
Defendants. |
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CLASS ACTION COMPLIANT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of ARCO Chemical
Company ("ARCO Chemical" or the "Company") since prior to the transaction herein
complained of and continuously to date.
2. ARCO Chemical is a corporation duly organized and existing under the
laws of the State of Delaware. The Company is a leading worldwide manufacturer
and marketer of propylene oxide and derivatives and other intermediate
chemicals. Its products are used in a wide range of consumer and industrial
goods, including automotive components, cushioning, paints and coatings,
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plastics, home furnishings, engine coolants, and reformulated gasoline. The
Company maintains its headquarters at 3801 West Chester Pike, Newton Square,
Pennsylvania.
3. Defendant Atlantic Richfield Company. ("ARCO") is a Delaware
corporation located at 515 S. Flower Street, Los Angeles, California. ARCO
explores for, develops, and produces crude oil, condensate, natural gas liquids
and natural gas, refines and transports petroleum products and makes chemicals
used in consumer products. ARCO owns or controls 82.3 percent of ARCO Chemical's
outstanding common stock.
4. Defendant Lyondell Petrochemical Company ("Lyondell") is a Delaware
Corporation located at 1221 McKinney Street, Houston, Texas. Lyondell was
controlled by ARCO until September 1997 when ARCO divested its 49% ownership
stake in Lyondell.
5. Defendant Anthony G. Fernandes is Chairman of the Board of Directors
of the Company and is an Executive Vice President and Director of ARCO.
6. Defendant Marie L. Knowles is a Director of the Company and an
Executive Vice President, Chief Financial Officer and a Director of ARCO.
7. Defendant Marvin O. Schlanger is Chief Operating Officer and a
Director of the Company. Previously, he served in a number of senior executive
positions with various ARCO subsidiaries.
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8. Defendant Walter F. Tusinski is Chief Financial Officer and a
Director of the Company. Previously, he held a number of senior executive
positions with various ARCO subsidiaries.
9. Defendant Alan R. Hirsig is President, Chief Executive Officer and
Director of the Company.
10. Defendant John H. Kelley is a Director of the Company and a Senior
Vice President of ARCO.
11. Defendant Mark L. Hazelwood is a Director of the Company and Senior
Vice President of ARCO.
12. Defendant Stephen R. Mut is a Director of the Company and Senior Vice
President of ARCO.
13. Defendant Donald R. Voelte, Jr. is a Director of the Company and
Senior Vice President of ARCO.
14. Defendants Walter F. Beran, James A. Middleton, and Frank Savage are
Directors of the Company.
15. Arco and the Individual Defendants are in a fiduciary relationship
with Plaintiff and the other public stockholders of ARCO Chemical and owe them
the highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
16. Plaintiff brings this action on her own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
common stockholders of the Company (except the defendants herein and any person,
firm, trust, corporation, or other entity related to or affiliated with any of
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the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein.
17. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. As of April 14, 1998, there were approximately 97,276,339 shares
of ARCO Chemical common stock outstanding owned by hundreds, if not thousands,
of record and beneficial holders;
(b) There are questions of law and fact which are common to the class
including, inter alia, the following: (i) whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the members
of the class; and (ii) whether the class is entitled to injunctive relief or
damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and plaintiff
has the same interests as the other members of the class. Plaintiff will fairly
and adequately represent the class.
(d) Defendants have acted in a manner which affects plaintiff and all
members of the class alike, thereby
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making appropriate injunctive relief and/or corresponding declaratory relief
with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class, which would establish incompatible standards
of conduct for defendants, or adjudications with respect to individual members
of the Class which would, as a practical matter, be dispositive of the interests
of other members or substantially impair or impede their ability to protect
their interests.
SUBSTANTIVE ALLEGATIONS
18. On or about May 4, 1998, ARCO announced that it had agreed to acquire
Union Texas Petroleum Holdings ("UTP") for $29 per share or $3.3 billion in
cash. In order to fund the purchase without sacrificing its single-A credit
rating according to Platt's Oilgram News, "ARCO said it will quickly move to
sell $1-bil to $2-bil of non strategic assets. Analysts immediately suspected
that probably meant ARCO's 82.3 stake in ARCO Chemical."
19. On June 3, 1998, Bloomberg reported that ARCO intended to reduce its
stake in ARCO Chemical to 50 percent and to raise $2.15 billion by selling
shares back to ARCO Chemical and to the public. At that time, the two companies
anticipated ARCO would sell about 24 million of its 80 million shares to the
public in a secondary offering and ARCO Chemical would spend up
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to $850 million to buy approximately 15 million shares from ARCO, to reduce
ARCO's stake in the Company to 50 percent. This transaction, which was expected
to be completed in July 1998, would have enabled ARCO to pay off $1.4 billion in
short-term debt from the $3.3 billion buy-out of UTP.
20. The Financial Times reported on June 4, 1998 that ARCO said "other
companies had shown an interest in buying all or part of its chemical assets,
but none had been prepared to pay what it considered a high enough price, and
its "strong preference for cash had excluded potential bidders wanting to offer
only stock." (emphasis added) Similarly, the Houston Chronicle reported that
"Atlantic Richfield officials said companies were interested in buying all or
part of its ARCO Chemical stake, but no one made an offer that was both high
enough and all in cash, as the Los Angeles-based oil company preferred." The
article continued "'We had a strong preference for cash,' said Dennis Schiffel,
vice president of investor relations."
21. On June 18, 1998, ARCO Chemical and Lyondell announced that they had
entered into a definitive merger agreement whereby Lyondell will acquire ARCO
Chemical in a transaction valued at approximately $1.15 billion. Under the terms
of the transaction as presently proposed, Lyondell will commence a cash tender
offer for all of ARCO Chemical's outstanding common shares at a price of $57.75
per share. ARCO
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has agreed to tender all the shares that it owns. The previously announced
secondary offering and share buyback were terminated.
22. Lyondell was a wholly-owned subsidiary of ARCO until 1989, when
ARCO sold it in an initial public offering. ARCO sold its remaining 49.9 percent
stake in Lyondell in September 1997. However, there are numerous business
relationships between and among the Company, ARCO and Lyondell. Effective July
1, 1987, the companies entered into purchase, exchange and processing
agreements, product sales agreements, operational services agreements, and an
administrative services agreement. The purchase, exchange and processing
agreements, are principally for methanol, benzene, ethylene, propylene, and
MTBE. The Company also purchases butane and butane products from ARCO and
Lyondell. The Company sells MBTE and propane to ARCO and Lyondell, including
long-term sales agreements with ARCO and MBTE. Additionally, the operational
services agreements are for various plant services performed by ARCO and
Lyondell at the Company's plants. ARCO also provides the Company with leased
office space, insurance and other financial, legal and administrative services
and the Company provides ARCO with various technical and legal services under
the administrative services agreement.
23. By entering into the agreement with Lyondell, the ARCO Chemical
Board has initiated a process to sell the Company which imposes heightened
fiduciary responsibilities and requires enhanced scrutiny by the Court. However,
the terms of the
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proposed transaction were not the result of an auction process or active market
check; they were arrived at without a full and thorough investigation by the
Individual Defendants; and they are intrinsically unfair and inadequate from the
standpoint of the ARCO Chemical shareholders.
24. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of ARCO
Chemical's highest transactional value.
25. ARCO and the Individual Defendants have violated the fiduciary
duties they owe to the public shareholders of ARCO Chemical. ARCO and the
Individual Defendants have failed to maximize shareholder value by excluding
potential bidders for the Company who did not offer all cash for the Company,
but were willing and able to offer the public shareholders more valuable
consideration in the form of stock. Indeed, defendant Lyondell had early on in
the negotiations submitted an offer to acquire ARCO Chemical for a combination
of cash, together with stock valued at $5 per share more than the cash
component, but was forced to submit an all-cash bid as a condition to further
negotiations. Defendants' failure to consider all potential offers for the
Company, even offers from Lyondell, demonstrate a clear violation of defendants'
duties to maximize shareholder value and failure to exercise due care and
loyalty on behalf of ARCO Chemical's public shareholders.
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26. Defendants' fiduciary obligations under these circumstances require
them to:
(a) Undertake an appropriate evaluation of ARCO Chemical's net
worth as a merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt
to obtain the best value for ARCO Chemical's public shareholders; and
(c) Protect and enhance the interests of ARCO Chemical's public
shareholders and if there is a conflict between the interests of ARCO and the
Company's public shareholders to resolve those conflicts in the best interests
of the Company's public shareholders.
27. ARCO and the Individual Defendants, who are dominated and
controlled by ARCO, have breached their fiduciary duties by placing the
interests of ARCO ahead of those of ARCO Chemical's public shareholders, by
permitting the Company to be acquired by Lyondell without making the requisite
effort to obtain the best offer possible, whether in cash or stock or a
combination thereof. ARCO has placed its need for cash to pay down its short-
term debt and maintain its credit rating ahead of its obligation to the public
shareholders of ARCO Chemical to maximize shareholder value.
28. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of ARCO Chemical's assets and business, and will be prevented from
obtaining fair and adequate
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consideration for their shares of ARCO Chemical common stock.
29. The consideration to be paid to class members in the proposed merger
is unfair and inadequate because, among other things:
(a) The intrinsic value of ARCO Chemical's common stock is
materially in excess of the amount offered for those securities in the merger
giving due consideration to the anticipated operating results, net asset value,
cash flow, and profitability of the Company;
(b) The merger price is not the result of an appropriate
consideration of the value of ARCO Chemical because the ARCO Chemical Board
approved the proposed acquisition without undertaking steps to accurately
ascertain ARCO Chemical's value through open bidding or at least a "market
check mechanism"; and
(c) By entering into the agreement with Lyondell, the Individual
Defendants have allowed the price of ARCO Chemical stock to be capped, thereby
depriving plaintiff and the Class of the opportunity to realize any increase in
the value of ARCO Chemical stock.
30. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
31. Lyondell has knowingly aided and abetted the breaches of fiduciary
duty committed by ARCO and the Individual Defendants in order to permit it to
acquire the assets and business of ARCO Chemicals at the lowest price possible
and to
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help ARCO satisfy its immediate need for cash. Indeed, the proposed transaction
could not take place without the knowing participation of Lyondell.
32. Plaintiff and all other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
a. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the representative of the Class;
b. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under, in concert with, or
for them, from proceeding with, consummating, or closing the proposed
transaction;
c. In the event that the proposed transaction is consummated, rescinding
it and setting it aside, or awarding rescissory damages to the Class;
d. Awarding compensatory damages against defendants, individually and
severally, in an amount to be determined at trial, together with pre-
judgment and post-judgment interest at the maximum rate allowable by
law, arising from the proposed transaction;
e. Awarding plaintiff its costs and disbursements and reasonable
allowances for fees of plaintiff's
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counsel and experts and reimbursement of expenses; and
f. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: [Signature appears here]
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
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