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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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STEEL OF WEST VIRGINIA, INC.
(NAME OF SUBJECT COMPANY)
STEEL OF WEST VIRGINIA, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMPANY COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
858154107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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TIMOTHY R. DUKE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
17TH STREET AND 2ND AVENUE
HUNTINGTON, WEST VIRGINIA 25703
(304) 696-8200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING
STATEMENT)
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WITH A COPY TO:
JAMES D. EPSTEIN, ESQ.
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
PHILADELPHIA, PA 19103
(215) 981-4000
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This Amendment No. 1 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 dated November 17, 1998 (the "Schedule 14D-9"),
filed by Steel of West Virginia, Inc., a Delaware corporation (the "Company"),
in connection with the tender offer by SWVA Acquisition, Inc., a Virginia
corporation (the "Purchaser") and a wholly-owned subsidiary of Roanoke
Electric Steel Corporation, a Virginia corporation (the "Parent"), to purchase
all of the issued and outstanding shares of Company common stock, par value
$.01 per share (the "Common Stock" or the "Shares"), and the associated rights
to purchase Common Stock (the "Rights") issued pursuant to the Rights
Agreement, dated as of March 19, 1997, between the Company and Continental
Stock Transfer and Trust Company, as Rights Agent, as amended on November 10,
1998 (the "Rights Agreement"), at a price per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated November 17, 1998, as supplemented by the
Supplement to Offer to Purchase dated December 3, 1998, and as may hereafter
be amended or supplemented (the "Offer to Purchase"), and in the Letter of
Transmittal (which collectively constitutes the "Offer"). Unless the context
otherwise requires, all references herein to Shares include the associated
Rights.
This Amendment No. 1 should be read in conjunction with the Schedule 14D-9.
Capitalized terms used but not defined herein shall have the meanings set
forth in the Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
The following information is added as a new paragraph at the end of Item 3
of the Schedule 14D-9 and amends and supplements the information set forth
therein:
On November 24, 1998, the waiting period under the HSR Act was terminated
with respect to the Offer and the Merger.
ITEM 4. SOLICITATION AND RECOMMENDATION.
The following information amends and restates the information set forth in
section (b) of Item 4 of the Schedule 14D-9:
(b) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
Set forth below is a chronology of events and a description of contacts
between representatives of the Company and the Parent. The description of
certain meetings of the Parent's Board of Directors has been supplied by the
Parent.
Over the past few years, the Board has actively studied the current and
future state of the Company's business, strategic position, and long-term
prospects, including a review of its strategic alternatives to increase
shareholder value.
In early January, 1997, CPT Holdings, Inc. ("CPT") advised Robert L.
Bunting, Jr., then Chief Executive Officer and Chairman of the Company, that
it was making an unsolicited offer to acquire the Company for a price of $9.00
per Share. After a full review and consideration of the proposal, the Board
determined that the offer was inadequate, and that it was not in the best
interests of the Company or its stockholders to proceed with an acquisition of
the Company by CPT.
On January 14, 1997, Mr. Bunting and Timothy R. Duke, the then President and
Chief Operating Officer of the Company (and currently its Chief Executive
Officer and President), met with Donald G. Smith, the President, Chief
Executive Officer and Chairman of the Parent, at the offices of the Parent.
The purpose of the meeting was to discuss the possibility of the Parent being
a "white knight" in the event that CPT proceeded to attempt a hostile takeover
of the Company.
The Parent retained the services of Ewing Monroe Bemiss & Co. ("Ewing
Monroe") to evaluate the possibility of the Parent acquiring the Company and
to advise the Board of Directors of the Parent in this regard. After
consideration of the factors affecting the Company and the Parent at that
time, and in light of the advice of Ewing Monroe, the Board of Directors of
the Parent determined to pursue discussions with the Company for the possible
acquisition of the Company.
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At the meeting of the Board held on March 5, 1997, Mr. Duke advised the
Board that the Parent advised him that it might have an interest in acquiring
the Company at a price to be negotiated, but in no event greater than $11.00
per Share.
In April 1997, based on information from the Parent, Mr. Duke understood
that due to the possible entry of new competitors into the Company's markets,
the Parent's revised valuation was in the neighborhood of $10.00 per Share.
Later in April 1997, Mr. Duke informed Mr. Smith that the Board concluded that
it was not in the best interests of the Company's stockholders to enter into a
transaction with the Parent given the Parent's suggested valuation. There were
no further contacts between the Company and the Parent until June 1998, other
than with regard to the Company's purchasing of billets from the Parent.
At a meeting of the Board held on June 5, 1998, the Board reviewed the
operations of the Huntington facility, including the progress of the Company's
modernization program, industry trends, potential competitors, various
possible strategic alliances, and, in light of the Company's stock trading
price at the time the possibility of an unsolicited, inadequate offer to
stockholders which could also disrupt the Company's operations and employment
levels, and leave the Company unable to serve its customers. The Board
authorized Mr. Duke to contact Mr. Smith to ascertain whether the Parent might
have an interest in a strategic alliance.
On June 11, 1998, Mr. Duke and Mr. Smith discussed the possible advantages
of a strategic alliance between the Company and the Parent, including that the
combined entity would have greater financial strength, that the Company's
Huntington facility would have a ready source of billets from the Parent's
facility, and that the Parent would have a "built-in" customer for its
billets. At the same time, Mr. Smith expressed a concern regarding any
strategic alliance with the Company due to the possible entry of new
competitors into the Company's markets.
The Parent again consulted Ewing Monroe to evaluate a possible transaction
with the Company and to advise its Board of Directors in this regard.
On July 20, 1998, the Parent and the Company entered into the Parent
Confidentiality Agreement preceding the Parent's review of certain information
concerning the Company. Following the execution of this agreement, Mr. Duke
and Daniel N. Pickens, a director of the Company and a First Vice President of
Janney, kept the directors informed regularly regarding discussions with the
Parent and the Parent's representatives.
On July 28, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. A. Hugh
Ewing III, President of Ewing Monroe, Ms. Mary Adams Bacon, a Managing
Director of Ewing Monroe, and other representatives of the Parent. At the
meeting the parties discussed the Company's business, the Parent's business,
industry trends, potential competitors, and general parameters and concerns
regarding possible terms and conditions of any transaction between the Company
and the Parent.
At a meeting of the Parent's Board of Directors on August 14, 1998, Mr.
Ewing and Ms. Bacon made a detailed presentation regarding a possible
transaction between the Company and the Parent. After considerable discussion,
the Parent's Board of Directors determined to consider the issue further at
its regularly scheduled meeting on August 18, 1998. At the meeting on August
18, the Parent's Board of Directors again met with Mr. Ewing and Ms. Bacon and
again discussed the transaction under consideration. After a further detailed
presentation by management and discussion, including consideration of the
possible benefits to the Parent of a combination of the business of the
Company and the Parent, the Parent's Board of Directors authorized management
to negotiate the terms and conditions for the possible acquisition of the
Company.
At a meeting on August 19, 1998, the Board reviewed and analyzed the
discussion of July 28, together with the updated information on the operations
of the Huntington facility, including the progress of the Company's
modernization program, competitive trends in the industry and the Company's
stock price and performance. At the meeting, the Board further discussed the
identity and key characteristics of other potential strategic partners. After
considerable discussion, the Board authorized Mr. Duke and Mr. Pickens to
continue discussions with the Parent.
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On August 24, 1998, Mr. Duke and Mr. Pickens met again with Mr. Smith, Mr.
Ewing and Ms. Bacon to review historical and projected performance of the
Company and the Parent, strategic opportunities, valuation parameters and
terms and conditions of a possible transaction. During the course of these
discussions, the representatives of the Company and the Parent discussed
certain financial information about the Company which was not publicly
available. The information discussed consisted of the following forecasts of
the Company's results of operations for the years 1998, 1999 and 2000: Net
Sales: $145.4 million, $172.0 million and $176.3 million, respectively;
Earnings Before Interest and Taxes: $13.0 million, $17.3 million and $17.4
million, respectively; Net Income: $6.1 million, $8.2 million and $8.3
million, respectively; and Earnings per Share: $1.02, $1.37 and $1.39,
respectively. The foregoing forecasts were prepared by the Company solely for
internal use and not for publication or with a view to complying with the
published guidelines of the Commission regarding projections or with the AICPA
Guide for Prospective Financial Statements and are included in the Offer to
Purchase only because they were furnished to Parent. In the course of these
discussions, representatives of the Company advised the Parent that the
forecasts were prepared assuming that (i) both cost of sales and operating
expenses, each as a percentage of sales, would be relatively flat during the
three-year period, (ii) there would be growth in the number of tons sold in
1998 and 1999, as well as price increases in these two years, but that both
the number of tons sold and the prices at which they were sold would be
relatively flat in 2000, and (iii) the average number of fully-diluted shares
would be flat during the three-year period. Additionally, the forecasts
necessarily reflected numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are inherently uncertain or beyond the Company's control. One cannot
predict whether assumptions made in preparing the forecasts will be accurate,
and actual results may be materially higher or lower than those contained in
the forecasts. The inclusion of this information should not be regarded as an
indication that Parent, the Company or anyone who received this information
considered it a reliable predictor of future events, and this information
should not be relied on as such. Neither the Parent nor the Company makes any
representation as to the validity, reasonableness, accuracy or completeness of
the forecasts described above and the Company has made no representation to
Parent regarding the forecasts described above.
On September 9, 1998, the Board met to discuss a possible transaction with
Parent. The Board reviewed materials prepared by management and by Janney
regarding the Company's historical performance, projected financial results,
industry trends, stock price history, stock market data, and potential
competition. The Board also reviewed the meeting held with the Parent's
representatives on August 24, 1998 and authorized further discussion with the
Parent.
On September 11, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr.
Ewing and Ms. Bacon to discuss a possible transaction. At this meeting, Mr.
Smith indicated that the Parent was only prepared to proceed with a
transaction in which it acquired 100% of the Shares for $11.00 cash. After
considerable discussion, Mr. Smith agreed to recommend to the Parent's Board
of Directors that the Parent pay a price of $11.50 per Share in cash to
acquire the Company. Mr. Smith's willingness to recommend that price to the
Parent's Board of Directors was conditioned upon various other issues,
including protective devices such as break-up fees, Company options and
stockholder lock-ups, completion of due diligence and the negotiation of
definitive agreements. At a recess in the meeting, Mr. Duke, Mr. Pickens,
Albert W. Eastburn, the Chairman of the Company, and Stephen A. Albert, a
director of the Company and a member of Sierchio & Albert, P.C., general
counsel to the Company, discussed the proposed sale of the Company via a
conference call and concluded that Mr. Duke and Mr. Pickens should continue
further discussions with the Parent. Negotiations between the Company and the
Parent continued through the day.
On September 14, 1998, via a conference call, counsel to the Company and
counsel to the Parent discussed a possible transaction, including structure,
due diligence, and the preparation of documents.
The Parent's Board of Directors met again on September 15, 1998, and
discussed the September 11, 1998 meeting described above. The Parent's Board
of Directors authorized the commencement of extensive due diligence activities
by the Parent's counsel and consultants and, subject to the results thereof
and satisfaction of further conditions of management, the continued
negotiation of a possible agreement.
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On September 17, 1998, the Board held a telephonic meeting at which it
reviewed the Company's historical and projected results, industry trends,
stock market trends, and competitive factors. The Board also analyzed and
discussed the proposed purchase price in light of these factors, the Company's
stock price, performance and trading volume, and other possible strategic
alternatives. The Board approved the Company's retention of Janney as the
Company's investment banker with regard to the transaction, and the Company's
retention of legal counsel with regard to the transaction. Thereafter, legal
counsel advised the Board with respect to certain legal matters, including the
Board's fiduciary obligations in connection with any possible sale of the
Company. The Board authorized the Company to continue negotiations with
Parent.
On September 29, 1998, the Board held a meeting at which Mr. Duke, Janney
and legal counsel reviewed the status of negotiations with the Parent. Legal
counsel again advised the Board with respect to certain legal matters and
reviewed the principal aspects of the Merger Agreement, including protective
devices such as breakup fees, Company options and stockholder lock-ups.
Representatives of Janney delivered its oral opinion to the Board as to the
fairness of the $11.50 cash consideration to be paid to the holders of the
outstanding Shares. The Board then analyzed and discussed the offer, the
Merger Agreement and the transactions contemplated thereby in light of the
Company's historical performance, projected financial results, industry
trends, potential competitors, stock price history and data, other strategic
alternatives and various other matters that it considered relevant.
Thereafter, the Board unanimously resolved to recommend acceptance of the
offer and approval and adoption of the Merger Agreement by the Company's
stockholders.
On October 6, 1998, Parent's Board of Directors met again with
representatives of Ewing Monroe to consider the proposed transaction. Based
upon the Parent's due diligence investigation, as well as current competitive
conditions in the industry and the decline in the Company's stock price, all
of which were reviewed and addressed by Mr. Ewing and Ms. Bacon, the Parent's
Board of Directors determined not to proceed with consideration of a final
written agreement at that time, but did authorize Mr. Smith and other
representatives of the Parent to continue due diligence investigations, as
well as discussions and negotiations with representatives of the Company, and
determined to meet and consider the matter further after additional due
diligence and consideration of the financial aspects of the transaction.
During the following three weeks, discussions continued between the parties
and the Parent proceeded with its continuing due diligence investigation. The
Parent's Board of Directors met again on October 20, 1998, and considered the
status of the ongoing due diligence review and the differential between the
trading price of the Company's stock and $11.50. The Board determined to
reconvene to make a final decision on whether or not to proceed after
management had further discussions with the Company's representatives and
concluded other outstanding issues to management's satisfaction.
On October 26, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. Ewing
and Ms. Bacon. The parties discussed the results of the Parent's due diligence
investigations, including Parent's assessment of the Company's steel
manufacturing processes, properties, environmental and related issues,
historical financial data (including data released in the Company's Form-10Q
for the three months ended September 30, 1998), and the concerns of the Parent
raised by recently identified trends in the steel industry, including
declining steel prices and increased foreign competition, due in part to an
influx of Asian steel into the U.S. market. In addition, the price of the
Company's stock had declined by approximately $4.00 per share since the
beginning of negotiations in July 1998. The Company's stock was trading at
$9.625 per Share on July 25, 1998, and by October 23, 1998, the price per
Share had declined to $5.50. The parties also discussed overall declining
stock prices of similar corporations throughout the steel industry generally.
Although no agreement was reached regarding the possible terms and conditions
of a revised transaction at that time, Mr. Smith proposed a revised offer
price of $10.00 per Share. The parties discussed the decrease in the proposed
offer price in light of the foregoing factors, and finally narrowed their
discussion of price to a range of $10.50 to $11.00 per Share. Following the
meeting, Mr. Duke reported the results of the meeting to the other Board
members, and a meeting of the Board was scheduled for November 2, 1998.
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On November 2, 1998, the Board met to review the proposed transaction in
light of all relevant data, including, in particular, industry trends,
potential new competition, the operations of the Huntington facility,
including the progress of the Company's modernization program, historical and
projected results, the Company's stock price history and performance, together
with other stock market data and trends, other strategic alternatives
available to the Company and the due diligence performed by the Parent. The
Board then discussed and analyzed the data, and concluded that a sale of the
Company to the Parent at a price of $10.75 per share would achieve for
stockholders a value that they would not likely be able to realize in the
foreseeable future and, accordingly, would be in the best interests of
stockholders. Janney delivered its oral opinion to the Board as to the
fairness of a $10.75 price per Share to the stockholders of the Company from a
financial point of view. The Board then unanimously resolved to recommend
acceptance of an offer of $10.75 per share, should the Parent make such an
offer, and directed Mr. Pickens to approach Mr. Ewing regarding the Parent's
willingness to enter into such a revised transaction who, in turn, talked to
Mr. Smith. Later that day, Mr. Smith indicated that he was prepared to
recommend an offer price of $10.75 per share to the Parent's Board of
Directors.
On November 9, 1998, the Board of Directors of the Parent met and considered
the offer price of $10.75, and the report of management regarding the further
negotiations with the Company. Ewing Monroe delivered its fairness opinion to
the Parent's Board of Directors which stated that the Offer Price of $10.75
was, in light of all relevant factors, fair to the Parent from a financial
point of view. The Parent's Board of Directors reviewed the fairness opinion,
the factors discussed at the October 26 1998 meeting, and the financing
commitment letters. Following such discussion, the Parent's Board of Directors
unanimously approved the proposed transaction and directed the officers to
conclude the negotiations concerning various relevant documents and, upon
finalizing such documents, to execute the Merger Agreement. On November 10,
1998, after finalization of the various open issues, including completion of
the Commitment Letter, the Merger Agreement, the Stock Option Agreement, the
Amendment to the Rights Agreement, the Stock Tender Agreements and related
agreements (the "Transaction Documents") were executed and delivered, and the
transaction was announced publicly after the closing of trading on November
10, 1998.
In approving the Offer, the Merger, the Transaction Documents and the
transactions contemplated thereby, the Board considered a number of factors,
including:
1. The Board's view that a sale of the Company at this time is in the
best interest of the Company and its stockholders in light of: (a) the
Company's operating performance; (b) the Company's historical financial
results; (c) the likelihood of new competitors in the Company's markets,
both foreign and domestic; and, (d) the recent market price and performance
of the Common Stock;
2. That the $10.75 per share cash offer price represents a premium of
approximately 68.6% over the closing price for the Shares of $6.375 on the
Nasdaq National Market on November 10, 1998, the last trading date prior to
the public announcement of the execution of the Merger Agreement, and a
value for the Shares that the stockholders are unlikely to otherwise be
able to realize in the foreseeable future;
3. The opinion of Janney presented to the Board on November 2, 1998, and
confirmed in writing on November 10, 1998, to the effect that the
consideration to be paid to the Company's stockholders in the Offer and the
Merger is fair to the stockholders of the Company from a financial point of
view; in considering such opinion, the Board was aware that, upon
completion of the Merger, Janney becomes entitled to certain fees described
in Item 5 below in connection with its engagement by the Company;
4. The presentation of Janney in connection with such opinion as to
various financial and other considerations deemed relevant to the Board's
evaluation of the Offer and the Merger, including (i) the terms and
conditions of the Merger Agreement; (ii) the business, financial condition,
results of operations and prospects of the Company; (iii) the financial
terms of certain business combinations that Janney deemed relevant; (iv)
selected financial and stock market data for certain other publicly traded
companies that Janney deemed relevant; (v) the recent trading history of
the Common Stock; and (vi) other financial studies and analyses that Janney
deemed appropriate;
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5. The terms and conditions of the Merger Agreement, which the Board
views as favorable to the Company's stockholders, including that the
Company's stockholders will realize the entire value of the purchase price
without the risk of post-closing indemnification obligations;
6. The Board's ability to withdraw or modify its approval or
recommendation of the Offer, the Merger and any of the other transactions
contemplated by the Merger Agreement if necessary for the Company Board to
comply with its fiduciary duties, and to terminate the Merger Agreement
under certain circumstances; and
7. The Purchaser's execution of the financing commitment and its
agreement to conclude the transaction expeditiously and without any
financing contingency.
The foregoing discussion of factors considered and given weight by the
Company Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Offer and the
Merger, the Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determinations and recommendations. In addition, individual
members of the Board may have given different weights to different factors in
reaching their own respective determinations.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations
or recommendations to the Company's stockholders with respect to the Offer or
the Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10--Form of Letter to the Stockholders of the Company dated December
3, 1998.
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SIGNATURE
After reasonable inquiry to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: December 3, 1999 STEEL OF WEST VIRGINIA, INC.
/s/ Timothy R. Duke
By: _________________________________
Timothy R. Duke
President and Chief Executive
Officer
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Exhibit 10
Form of Letter to the Stockholders of the Company dated December 3, 1998.
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Steel of West Virginia Logo
December 3, 1998
To Our Stockholders:
By now you should have received documents relating to the proposed
acquisition of Steel of West Virginia, Inc. by Roanoke Electric Steel
Corporation. The attached materials provide additional background to your Board
of Directors' determination that Roanoke's tender offer and merger are fair to
and in the best interests of the stockholders of SWVA.
Your Board of Directors continues to unanimously recommend that you accept
the offer and tender your shares.
On behalf of your Board of
Directors,
[Signature of Timothy Duke]
President and Chief Executive
Officer
[Steel of West Virginia Address Logo]
