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As filed with the Securities and Exchange Commission on December 26, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: December 23, 1996
(Date of earliest event reported)
BANYAN MORTGAGE INVESTMENT FUND
(Exact name of Registrant as specified in its charter)
Delaware 1-9885 36-3465359
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
150 South Wacker Drive, Suite 2900
Chicago, Illinois 60606
(Address of Principal Executive Offices)
(312) 553-9800
(Registrant's telephone number including area code)
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ITEM 5. OTHER EVENTS
Banyan Mortgage Investment Fund (the "Company") announced today that it has
received another "Acquisition Proposal" from Apollo Real Estate Advisors L.P.
(the "Proposal"). A copy of the Proposal is included as an exhibit to this
Report. In its Proposal, Apollo confirms that on the basis of its due
diligence effort, it has been unable to confirm a value for the Company's
assets pursuant to which Apollo might acquire the outstanding shares of the
Company's common stock contemplated in its letter dated November 15, 1996. In
that letter, Apollo proposed, subject to certain conditions, purchasing all of
the Company's outstanding stock for $0.46875 per share.
Under its new Proposal, Apollo is proposing to: (i) purchase from the
Company up to $5.0 million of newly created Class "B" Common Shares, which the
Company would have to seek stockholder approval to issue; and (ii) make
available up to $50 million in capital which the Company could use to fund, at
the Company's subsidiary level, acquisitions of "profitable businesses on a
tax-sheltered basis going forward." The Class "B" Shares would provide Apollo
with up to a 25% economic interest in the Company and would be entitled to: (x)
ten votes per share; (y) the right to elect a majority of the Company's board;
and (z) per share 1:1 economic parity with the existing shares of the Company's
common stock. The Proposal also contemplates a conveyance by the Company of
substantially all of its assets to RGI Holdings ("RGI") in return for RGI
assuming 100% of the Company's liabilities, including all indebtedness owed
under the Morgens Loan and SoGen Loan held by RGI. The only assets which would
not be conveyed would be: (a) selected commercially entitled property situated
on the Southbridge/Wayside parcel; and (b) the Laguna Seca parcel; provided,
however, that RGI would be granted a participating interest equal to 50% of the
net sales proceeds that the Company may realize from sale of the Laguna Seca
parcel. In addition, the Proposal contemplates that simultaneously with the
closing of the asset conveyances to RGI and issuance of the Class "B" Shares,
Apollo would pay RGI $500,000 in cash for a three-year option to purchase six
million shares of the Company's common stock presently owned by RGI for $1.00
per share.
The Proposal is subject to numerous other terms and conditions and, by its
very nature, would require RGI Holdings, Inc. and RGI/US to cooperate in the
transaction. The Company has scheduled a board meeting for December 26, 1996
to consider and further discuss the Proposal.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION NAD EXHIBITS
EXHIBITS:
(99) Letter from Apollo Real Estate Advisors L.P. to the Company dated
December 23, 1996.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANYAN MORTGAGE INVESTMENT FUND
(Registrant)
By: /s/ Joel L. Teglia
------------------------------
Joel L. Teglia
Its: Vice President, Chief
Financial and Accounting Officer
Date: December 26, 1996
<PAGE> 1
EXHIBIT 99
[APOLLO LETTERHEAD]
December 23, 1996
Leonard G. Levine
President
Banyan Mortgage Investment Fund
150 South Wacker Drive, Suite 200
Chicago, Illinois 60606
Dear Mr. Levine:
On November 15, 1996, we sent a letter setting forth an offer (the "Offer")
to acquire Banyan Mortgage Investment Fund ("Banyan") on the terms and subject
to the due diligence and other conditions provided for in such letter. On the
basis of our due diligence effort, we were unable to confirm a value for
Banyan's assets pursuant to which Apollo might acquire the outstanding Banyan
shares as contemplated in the Offer, and hereby withdraw such offer in favor of
our new offer discussed below.
Apollo's investigation did note, however, the existence in Banyan of (i) a $298
million Tax Loss Carryforward after an anticipated $30 million in estimated
1996 losses and (ii) a Built-In Tax Loss of approximately $90 million
(collectively, the "Available Tax Loss Carryforwards"). These Available Tax
Loss Carryforwards represent an extremely valuable asset to the shareholders of
Banyan which, if managed properly, could be worth many times the value today of
Banyan's assets or stock. We noted that Banyan's Board of Directors, in
recommending the merger with RGI, disclosed in the proxy to Banyan's
shareholders that the consummation of the merger with RGI would result in those
tax loss benefits being "limited". Apollo's analysis indicates, however, that
upon the consummation of the merger with RGI, that such limitation would result
in a substantial and permanent loss of those tax benefits.
On the basis of our due diligence review and our awareness of the tax
inefficiency to Banyan shareholders of the presently proposed RGI Merger
Transaction, Apollo is pleased to submit a new proposal which is summarized
hereinbelow (the "New Offer") in substitution for the Offer.
Apollo believes the New Offer is far superior in its economic consequences to
Banyan shareholders to the original Offer (and the RGI Merger Proposal) because
(i) it shelters Banyan's shareholders from numerous development risks which
Apollo's due diligence identified, and (ii) delivers to Banyan shareholders the
opportunity to benefit from the utilization, in Apollo's view, of Banyan's most
valuable asset, its Available Tax Loss Carryforwards. The New Offer is as
follows:
1. The RGI Asset Purchase: In return for Banyan conveying to RGI all of
its assets but the Excluded Assets identified below (the "Asset
Conveyance"), RGI will assume 100% of the liabilities of Banyan,
including the RGI Debt and any other obligations RGI may assert as
being owed by Banyan to it. The Excluded Assets shall be: (1)
selected commercially entitled property situated on the Southbridge/
Wayside parcel and (2) the Laguna Seca parcel; provided, however, RGI
shall, with respect to the Laguna Seca parcel, receive as part of the
Asset Conveyance a 50% pay proceeds interest in the net sale proceeds
(after litigation expenses and liability, if any) resulting from the
sale by Banyan of such Leguna Seca parcel at such time as any such
sale is consummated.
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December 23, 1996 (Page 2)
2 The Apollo Recapitalization of Banyan: Simultaneously with the
closing of the Asset Purchase: (i) Apollo (either directly or via an
affiliate) will purchase from Banyan, up to $5 million in newly created
and issued Class 'B' Common Shares of Banyan (the "Class 'B' Shares")
as set forth below and (ii) Apollo will make available on the terms and
conditions set forth below up to $50 million in capital which Banyan
could use to fund, at the Banyan subsidiary level, acquisitions
pursuant to the Acquisition Strategy discussed below (the "Post Closing
Capital"). The Class 'B' Shares will provide Apollo with up to a 25%
economic interest in Banyan after taking into consideration: (i) the
issuance of such Class 'B' Shares and (ii) the fact that the Class 'B'
Shares shall have a 1:1 economic equivalency with Banyan's existing
Common Shares. In connection with this New Offer, in the event that
the pre-closing condition provided in paragraph d(i) hereinbelow cannot
be satisfied, Apollo will still proceed with the New Offer provided
that, in reducing the number of Class 'B' shares purchased from Banyan
on the Closing Date, RGI will increase the number of shares subject to
the option set forth in No. 3 below in an amount equal to the number of
new 13D/RGI shares acquired from the date hereof to the Closing Date.
3. The Apollo Purchase from RGI of An Option on Banyan Shares:
Simultaneously with the closing of the proposed transactions, Apollo
will pay RGI $500,000 in cash for a three year option (the "Option") to
purchase from RGI 6 million of its presently owned Banyan shares at a
price of $1.00 per share.
The conditions of this New Offer are:
a) simultaneous closing of the three above referenced proposed
transactions;
b) from the date hereof until closing, (i) RGI shall have
purchased no more shares than it presently owns; and, (ii)
subsequent to closing, RGI agrees not to acquire any additional
Banyan shares.
c) the amendment of Banyan's Charter and By-Laws to provide for:
i) creation of the Class 'B' Shares on terms entitling
such shares to: (x) 10 votes per share, (y) the right
to elect a majority of the Board of Directors of
Banyan and (z) per share 1:1 economic parity with the
existing common stock of Banyan; and,
ii) a provision limiting the percentage of shares of
Banyan's outstanding common stock to be owned by any
shareholder (other than RGI) subsequent to the Closing
Date to not more than 4.9%.
d) tax representations and/or opinions (the "Tax Matters")
satisfactory to Apollo that:
i) for the three year period prior to the Closing Date,
other than RGI and Gabrielle, Hueglin & Cashman, there
were no holders (either individually or in a group)
during such period of more than 4.9% of Banyan's
existing equity; and,
ii) as of the Closing Date and as adjusted for the effects
of the Asset Purchase, (x) Banyan shall have not less
than $380 million in available and untainted Available
Tax Loss Carryforwards and (y) not more than 15% of
such Available Tax Loss Carryforwards are scheduled to
expire due solely to the passage of time prior to the
fifth anniversary of the Closing Date.
e) customary documentation (including absence of material adverse
change and undisclosed liabilities) and all required consents
and approvals, including those of RGI and Banyan's shareholders.
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December 23, 1996 (Page 3)
It is Apollo's belief that this New Offer is far superior to its original Offer
for the following reasons:
- The New Offer is tax efficient for Banyan versus the original
Offer (and versus the RGI Merger proposal); it is intended to
preserve the Available Tax Loss Carryforwards, which would,
based on our analysis, amount to approximately $6.00 per share
in face amount as adjusted for the Banyan Recapitalization and
the issuance of the Class 'B' shares.
- The New Offer will establish a debt-free Banyan with the
following attributes:
- a portfolio of commercial land assets; and.
- most importantly, Banyan, under the control of Apollo,
becomes an exciting and efficient "publicly-traded"
vehicle (the economics of which will be participated in
by RGI and Banyan's other shareholders subject to
Apollo's Class B interest and its subsidiary level
interests discussed below) to acquire profitable
businesses on a tax-sheltered basis going forward (the
"Acquisition Strategy") and sufficient initial cash
liquidity in Banyan to exploit that opportunity.
Apollo believes that, as a result of Apollo's Closing Date capital contribution
to Banyan via the Banyan Recapitalization, Apollo will be incented to use
significant efforts to identify, negotiate and assist in the financing of
transactions consistent with the Acquisition Strategy; in this regard, Apollo's
Post-Closing Capital availability to subsidiary entities of Banyan to fund
post-closing acquisitions would be on terms that: (1) are acceptable to Apollo
such that it receives suitable economics on its funding of any such direct
subsidiary investments and (2) leave Banyan with residual economics without a
capital contribution in connection with any such acquisitions.
We would hope that you would agree that, over time, given Apollo's acknowledged
track record as an investor, and the commitment by it of its considerable
resources to manage Banyan as a tax efficient, publicly-traded vehicle within
which to acquire profitable businesses, that Banyan's shareholders have the
potential to benefit to a much greater extent than could be possible in any
acquisition by Apollo of Banyan shares today which results in the loss to
Banyan of its Available Tax Loss Carryforwards. Furthermore, it is obvious
that, in the event Apollo is not successful in the Acquisition Strategy, it
stands little chance of benefiting from its Class 'B' share investment on the
closing date. Thus the interests of Banyan's existing shareholders and Apollo
should be aligned.
As such, it is Apollo's belief that this New Offer is far superior to its
original Offer (and the RGI Merger proposal) because it does not result in
either (1) the take-out of Banyan's shareholders at a fixed price or (2)
subjecting Banyan's shareholders to certain of the risk factors cited in the
merger proxy in connection with the RGI Merger proposal.
Finally, Apollo believes the New Offer has considerably more value from RGI's
point-of-view than that associated with either the original Offer of Apollo or
the RGI Merger proposal.
We recognize that the New Offer is a departure from our original Offer.
Nevertheless, it results for two reasons: (1) as stated earlier, our due
diligence findings failed, for a number of reasons, to sustain the values
needed to support the up-front cash required from Apollo to consummate the
Offer and (2) the tax advantages and related Acquisition Strategy associated
with the New Offer hold the prospect for far superior economic returns to all
parties than otherwise would have been forthcoming under the original Offer.
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December 23, 1996 (Page 4)
In this latter regard, I would also point out that we believe that the New
Offer is fair to Banyan's shareholders based upon the following calculations:
- Present and Proforma Share Capitalization of Banyan.
<TABLE>
<CAPTION>
Present Proforma
----------------- ---------------------------
Shares % Shares %
------ ----- --------- -----
<S> <C> <C> <C> <C>
Current Outstanding Shares 47.3 mm 100.0% 47.3 mm 75.0%
New Apollo Class 'B' Shares -- -- 15.8 25.0
---- ----- ---- -----
47.3 mm 100.0% 63.1 mm 100.0%
==== ===== ==== =====
</TABLE>
- Closing Date Values Per Share. As proposed herein
Apollo may pay as much as $0.3165 per newly issued
Class 'B' Share. In the two weeks preceding Apollo's November
15, 1996 Offer Letter. Banyan's share price averaged
approximately $0.25 per share, thereby resulting in the New
Offer providing a premium of 27% over the value of Banyan
shares prior to Apollo's surfacing its interest in Banyan. We
note that such $0.25 share price of Banyan was a price
reflecting the marketplace valuation by investors in Banyan of
the RGI Merger Proposal, which had earlier been announced.
- Future Share Value. Coupling the implied Closing Date Value
together with the aforementioned Acquisition Strategy creates
an opportunity for Banyan's Shareholders to be investment
partners with Apollo in a debt-free entity.
I would like to meet with you and RGI's representatives to review this New
Offer. Apollo has done sufficient work in respect of the attendant tax matters
and the Acquisition Strategy potential of this New Offer to suggest to me that
such a meeting could be very fruitful. Please contact me at your earliest
convenience.
Sincerely,
/s/ W. Edward Scheetz
W. Edward Scheetz
cc: Kenneth L. Uptain
RGI U.S. Holdings, Inc.
