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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20546
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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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ATC GROUP SERVICES INC.
(NAME OF SUBJECT COMPANY)
ATC GROUP SERVICES INC.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS OF SECURITIES)
00206710
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MORRY F. RUBIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATC GROUP SERVICES INC.
104 EAST 25TH STREET, 10TH FLOOR
NEW YORK, NEW YORK 10010
(212) 353-8280
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPY TO:
LAWRENCE A. LAROSE, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
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ATC Group Services Inc. ("ATC" or the "Company") hereby amends and
supplements its Solicitation/Recommendation Statement on Schedule 14D-9
originally filed on December 4, 1997 with respect to the tender offer by
Acquisition Corp. to purchase all of the outstanding shares of common stock,
par value $.01 per share, of the Company upon the terms and subject to the
conditions set forth in Acquisition Corp.'s Offer to Purchase, dated December
4, 1997, and related Letter of Transmittal. Capitalized terms not defined
herein shall have the meanings assigned to such terms in the Schedule 14D-9
filed on December 4, 1997.
ITEM 3. IDENTITY AND BACKGROUND.
(b) The final paragraph of Item 3, entitled "Certain Understandings," is
hereby deleted in its entirety and replaced with the following:
Certain Understandings. The Company has been advised that the WPG Fund and
the WPG Overseas Fund intend to offer certain members of the management of the
Company, which, once determined, will include Nicholas J. Malino and
Christopher P. Vincze, an opportunity to acquire an equity interest in the
Parent or the Surviving Corporation. While general discussions have been held
with Messrs. Malino and Vincze, and it is expected that executive and
operating management will be offered equity ownership in an aggregate amount
of approximately $2.5 million, no decisions have been made at this time,
either as to the identity of the persons who may be offered the opportunity to
invest in Parent or in the Surviving Corporation or as to the precise nature
of any equity interest such members of the Company's management may be
offered. If and to the extent members of the Company's management are given
the opportunity to, and do, invest in such equity the interests of the WPG
Fund and the WPG Overseas Fund in Parent or in the Surviving Corporation would
be reduced on a pro rata basis.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(b) (i) Background of the Offer.
The first, second, third and fourth paragraphs of Item 4(b)(i) are hereby
deleted in their entirety and replaced with the following:
In April 1997, Nicholas J. Malino and Christopher P. Vincze, each of whom
is a Senior Vice President of the Company, solely in their individual
capacities and without the approval or disapproval of the Company's Board
of Directors, began to solicit the interest and advice of investment
banking firms in a possible transaction involving the Company. Messrs.
Malino and Vincze decided to pursue a transaction because they desired a
greater equity interest in the Company and greater input in the management
of the Company's business. Between April and July, 1997, Messrs. Malino and
Vincze met with representatives of approximately six investment banking
firms. After meeting with such firms, rather than retaining an investment
banking firm, Messrs. Malino and Vincze determined to solicit directly the
interest of equity partners in a possible transaction.
Between late July and September, Messrs. Malino and Vincze met with
representatives of approximately seven leverage buyout firms, including the
WPG Fund. Except as described below, discussions with the leverage buyout
firms contacted by Messrs. Malino and Vincze never advanced beyond
preliminary expressions of interest. During late July and August, Messrs.
Malino and Vincze had several meetings with representatives of two leverage
buyout firms each of which eventually showed some interest in making a
proposal for a transaction involving the Company. Messrs. Malino and
Vincze, in their individual capacities and without the approval or
disapproval of the Company's Board of Directors, did not encourage either
of such firms to pursue a transaction because they did not believe the
price offered by either firm would be sufficient for the buyout team to
acquire control of the Company and, with respect to one of the firms, the
proposal did not meet the expectations of Messrs. Malino and Vincze for
greater input in the management of the Company's business. Although the WPG
Fund had not made its offer at the time Messrs. Malino and Vincze received
these two proposals, each of the prices offered by the two firms was less
than the $12 price offered by the WPG Fund.
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On August 5, 1997, the management of the WPG Fund received an inquiry,
through Chadbourne & Parke LLP, counsel to the WPG Fund, as to the interest
of the WPG Fund in meeting with Messrs. Malino and Vincze. The WPG Fund
expressed a willingness to meet with Messrs. Malino and Vincze, in their
individual capacities.
Messrs. Malino and Vincze decided to encourage a transaction between the
Company and the WPG Fund, as opposed to the other leverage buyout firms
they had met with, because the WPG Fund appeared to be the firm most
prepared to bid aggressively for the Company and meet the expectations of
Messrs. Malino and Vincze for greater input in the management of the
Company's business. In addition, the WPG Fund offered Messrs. Malino and
Vincze senior management positions and an opportunity to purchase an equity
interest in the Company following the potential transaction.
On September 3, 1997, Mr. Malino, in his individual capacity and not as
an officer of the Company and without the approval or disapproval of the
Company's Board of Directors, contacted the management of the WPG Fund to
engage in preliminary discussions. Mr. Malino, in such capacity, and
management of the WPG Fund met on September 8, 1997 and on a number of days
subsequent thereto to discuss the Company's operations, strategy and
prospects. During this period and up until the execution of the Merger
Agreement, the WPG Fund conducted due diligence investigations. As it
conducted its due diligence investigation, the management of the WPG Fund
determined that the Company fit the WPG Fund's investment criteria and
would be a good investment. The WPG Fund indicated, however, that it would
not proceed with a transaction unless it was confident that the Company's
major stockholders and Board of Directors would support it.
On September 19, 1997, Mr. Malino and management of the WPG Fund met with
two stockholders of the Company, George Rubin and Morry F. Rubin (the
"Rubins"), who, in the aggregate own approximately 24 percent of the Shares
on a fully diluted basis, and who are the Chairman of the Board of
Directors of the Company and the President, Chief Executive Officer and a
director of the Company, respectively, in their capacity as stockholders of
the Company. At the September 19, 1997 meeting, the Rubins (in their
capacity as stockholders) and management of the WPG Fund met to negotiate
the terms of a possible stockholders agreement pursuant to which, for a
period of time ending upon the earlier of the date of the consummation of
the merger and the date that would be one year from the date of such
stockholders agreement, (i) the Rubins would grant Parent an irrevocable
proxy to vote that number of the Rubins' Shares that equals 14.99 percent
of the outstanding Shares of the Company (the "Proxy Shares") in favor of
the potential transaction contemplated by the WPG Fund, (ii) the Rubins
would give Parent the right to receive all consideration above $12 per
Share received by the Rubins with respect to all of the Rubins' Shares and
options or other rights to acquire Shares in the event that the Company is
acquired by a party other than the WPG Fund or its affiliates at a price
above $12 per Share, (iii) the Rubins would enter into severance agreements
on and as of the date of the Merger (which severance agreements are more
fully described in Item 3 (b)) and (iv) Parent would negotiate a merger
agreement in good faith and use its commercially reasonable efforts to
consummate the Merger on mutually acceptable terms. See description of the
Stockholders Agreement in Item 3(b) above. Messrs. Malino and Vincze, in
their individual capacities and not as officers of the Company and without
the approval or disapproval of the Company's Board of Directors, were
present at the September 19, 1997 meeting but did not participate in the
discussions between the Rubins and the WPG Fund.
From September 22, 1997 through October 16, 1997, a number of other
meetings and telephone contacts took place that involved various
combinations of Messrs. Malino and Vincze, the Rubins and the management of
the WPG Fund. During this period Messrs. Malino and Vincze acted in their
individual capacities and without the approval or disapproval of the
Company's Board of Directors and their role was solely to provide the WPG
Fund with information with respect to the Company. At no time did Messrs.
Malino or Vincze negotiate or attempt to negotiate on behalf of the Company
nor were they authorized to do so.
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The Rubins, in their capacity as stockholders, decided that the $12 price
offered by the WPG Fund was appropriate and, in light of the fact that they
desired to pursue other investment opportunities, agreed to support, as
stockholders, the WPG Fund's offer.
The fifth paragraph of Item 4(b)(i) is hereby amended by adding the
following to the end thereof:
Prior to October 17, 1997, no inquiry, proposal or offer regarding a
potential transaction had been made to the Company's Board of Directors or
to any person in such person's capacity as an officer of the Company. Prior
to October 17, 1997, with respect to the contacts and proposals described
above, Messrs. Malino and Vincze and the Rubins acted in their individual
capacities without the approval or disapproval of the Company's Board of
Directors and did not discuss, negotiate or propose any transaction on
behalf of the Company.
Item 4(b)(i) is hereby amended by adding the following new paragraph
following the sixth paragraph and preceding the seventh paragraph thereof:
Approximately two weeks passed from the time of the public announcement
that a $12 bid had been made to the Board of Directors of the Company until
the commencement of negotiations on the form of the proposed merger
agreement. During that time, despite the fact that there were no "lock-ups"
on the Company, the Company did not receive any proposals for an
alternative transaction.
The seventh paragraph of Item 4(b)(i) is hereby amended by deleting the
reference to "Management Team" in the last sentence thereof and replacing such
reference with the following: "Messrs. Malino and Vincze."
The eighth paragraph of Item 4(b)(i) is hereby amended by adding the
following to the end thereof:
The Special Committee negotiated to eliminate the customary covenant
prohibiting discussions with potential acquirors to allow the Company to
speak with anyone making an "Acquisition Proposal" with respect to the
Company.
The final sentence of the ninth paragraph of Item 4(b)(i) is hereby deleted
in its entirety and replaced with the following:
At the November 26 meeting, the Special Committee received the opinion of
Lehman Brothers to the effect that, as of the date of such opinion and
based upon and subject to the matters set forth in such opinion, the
consideration to be received by the Company's stockholders pursuant to the
Offer and the Merger Agreement is fair to such stockholders from a
financial point of view. The Special Committee noted that approximately
five weeks had passed while the pendency of a $12 transaction was public
with no executed merger agreement. The Special Committee also took into
account (i) the relaxation of the customary "no shop" clause, (ii) its
judgment that shopping the Company could be highly detrimental to the
morale of the Company's managers and could possibly cause their departure
from the Company and (iii) the fact that the Rubins (whose holdings equaled
approximately 24% of the Company's outstanding shares on a fully diluted
basis), also were supportive of the transaction. The Special Committee,
with the assistance of Lehman Brothers, also reviewed the recent trading
prices for the Shares. The Special Committee noted that the WPG Fund's
offer did not include a premium over either the trading price for the
Shares on October 16, 1997, the last full trading day before public
announcement of the WPG Fund's offer, or the average trading price of the
Shares during the trading days between October 9, 1997 and October 16,
1997. However, when compared to the average trading price of the Shares
from January 2, 1997 through October 16, 1997, the WPG Fund's offer
included a premium of 20.8%. For these reasons, the Special Committee
resolved to recommend to the full Board of Directors that the Company enter
into a transaction with affiliates of the WPG Fund on the terms set forth
in the Merger Agreement and did not recommend that the Company seek out
other potential acquirers.
Item 4(b)(i) is hereby amended by adding the following to the end thereof:
Following execution of the Merger Agreement, the Company received a
letter from one of its competitors stating that if the transaction
contemplated by the Merger Agreement is not consummated, such
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competitor, which the Company believes is approximately one-eighth the size
of the Company by revenue, would be willing to acquire the Company at
approximately the same price as set forth in the Merger Agreement. By its
explicit terms, the letter is not an offer for the Company that competes
with the WPG Fund's offer or even an inquiry that could reasonably lead to
a competitive offer. The Company has advised the Special Committee and its
legal and financial advisors of the receipt of such letter.
As discussed in Item 3(b) above, the Rubins have entered into a
Stockholders Agreement with Parent pursuant to which the Rubins have among
other things, (i) granted Parent a proxy to vote 14.99% of the outstanding
Shares in favor of the Merger and the other transactions contemplated by
the Merger Agreement, (ii) agreed not to cooperate in any way with any
person concerning any offer or proposal which is reasonably likely to lead
to a proposal to acquire the Company and (iii) if a transaction involving
the Company with a person other than the WPG Fund is consummated at a value
greater than $12 per share, pay to Parent an amount equal to the total
shares held by the Rubins multiplied by the excess of the value of such
other transaction over $12 per share. Under the Consulting and Non-Compete
Agreements if the transaction with the WPG Fund is consummated the Rubins
each will be paid $1,550,000 upon their resignation from the Company and
$276,715 each of the six calendar quarters thereafter. The Stockholders
Agreement and the Consulting and Non-Compete Agreements, therefore, may
cause the Rubins to have a conflict of interest with respect to
consummating a transaction with a party other than the WPG Fund.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The last two sentences of Item 8 are hereby deleted and replaced with the
following:
On December 18, 1997, counsel for the defendants were served with an
amended Peters Complaint that essentially makes the same allegations and
seeks the same relief as the original complaint. Also on December 18,
counsel for the defendants were served with a Notice of Dismissal without
prejudice of the Richter action. The discovery process has begun in the
Peters action. The Company believes the allegations contained in both
Complaints are meritless and, to the extent the actions proceed, intends to
defend both actions vigorously.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
ATC Group Services Inc.
/s/ Morry F. Rubin
By: _________________________________
Morry F. Rubin
President & Chief Executive
Officer
Dated: January 15, 1998
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