SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 19, 1999
AVONDALE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 0-16572 39-1097012
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 50280, New Orleans, Louisiana 70816
(Address of principal executive offices) (Zip Code)
(504) 436-2121
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On January 19, 1999, Avondale Industries, Inc. issued the press
release filed herewith as Exhibit 99.1 announcing that Avondale has
entered into an Agreement and Plan of Merger with Newport News
Shipbuilding Inc., a copy of which is filed herewith as Exhibit 2.1.
Concurrent with the execution and delivery of such agreement, Avondale
and Newport also entered into the stock option agreements filed
herewith as Exhibits 2.2 and 2.3.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated as of January 19, 1999,
among Newport, Ares and Avondale (incorporated by reference
to Exhibit 2.1 to Newport's Form 8-K dated January 22, 1999
(Commission File No. 1-12385)).
2.2 Parent Stock Option Agreement dated as of January 19, 1999,
between Newport and Avondale (incorporated by reference to
Exhibit 2.2 to Newport's Form 8-K dated January 22, 1999
(Commission File No. 1-12385)).
2.3 Company Stock Option Agreement dated as of January 19, 1999,
between Avondale and Newport (incorporated by reference to
Exhibit 2.3 to Newport's Form 8-K dated January 22, 1999
(Commission File No. 1-12385)).
99.1 Press release issued by the Registrant on January 19, 1999.
<PAGE>
SIGNATURES
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.
AVONDALE INDUSTRIES, INC.
By: /S/ THOMAS M. KITCHEN
Thomas M. Kitchen
Vice President and Chief Financial Officer
Dated: January 22, 1999
NEWPORT NEWS SHIPBUILDING AND AVONDALE INDUSTRIES TO MERGE
STRATEGIC COMBINATION TO ENHANCE OPERATING EFFICIENCIES, INCREASE VALUE FOR
THE U.S. NAVY, AND DELIVER HIGHER SHAREHOLDER RETURNS
TRANSACTION IS VALUED AT $470 MILLION AND IS EXPECTED TO BE IMMEDIATELY
ACCRETIVE TO 1999 EARNINGS
MERGER CREATES BROAD-BASED SHIPBUILDING COMPANY CAPABLE OF DESIGNING,
BUILDING, AND MAINTAINING EVERY SHIP IN THE U.S. NAVY FLEET
COMBINED COMPANY EMERGES WITH STRONG BALANCE SHEET AND SIGNIFICANT
FINANCIAL FLEXIBILITY FOR FUTURE GROWTH
NEWPORT NEWS, Va. and NEW ORLEANS, Jan. 19/PRNewswire/ --- The boards of
directors of Newport News Shipbuilding (NYSE: NNS - news) and Avondale
Industries (Nasdaq: AVDL - news) today unanimously approved a definitive
agreement to combine the two companies. The transaction creates a leading,
broad-based shipbuilding company with estimated 1999 revenues of $2.6
billion and nearly 24,000 employees. The combined company will be known as
Newport News Avondale Industries.
"The combination of Newport News and Avondale brings together two highly
skilled and tremendously capable shipbuilding companies," said William P.
Fricks, Chairman and Chief Executive Officer of Newport News. "We believe
the new company holds immense promise, and we expect to deliver measurable
results in the form of higher returns for shareholders, enhanced value for
our customers, and increased long term opportunities for employees."
Albert L. Bossier, Jr., Chairman and Chief Executive Officer of Avondale,
said: "This merger is about building a stronger combined company.
Avondale's experience in the construction of Navy and commercial surface
ships complements Newport News' strengths in aircraft carrier and submarine
construction, refueling, and overhaul. Together, we can design, build, and
maintain every ship in the Navy and Coast Guard fleets."
This stock-for-stock transaction is valued at $35.50 per share to Avondale
shareholders, or $470 million, based on Newport News' January 19, 1999
closing price of $29.6875. Using that price, Avondale shareholders would
receive 1.196 shares of Newport News stock for each share of Avondale
stock. The final exchange ratio is adjustable based on Newport News' share
price at closing as described in the accompanying summary.
The transaction is subject to approval by the shareholders of both
companies, U.S. regulatory reviews, and other customary closing conditions,
with expected completion in the second quarter of 1999. It is anticipated
that the transaction will be accounted for as a pooling-of-interests.
GEOGRAPHIC DIVERSITY
"Importantly," added Fricks, "Newport News Avondale Industries will be the
only shipbuilder in the U.S. with operations on the East, West, and Gulf
coasts. Our geographic diversity enhances the combined company's ability
to deliver high-quality, cost-effective fleet maintenance services to the
U.S. Navy, and arguably makes us the most capable and flexible shipbuilder
in the nation." Newport News acquired San Diego-based Continental Maritime
Industries in December 1997 as the first step in its ongoing strategy to
create a comprehensive inventory of services to the Navy's aircraft carrier
fleet.
"All of our present sites will remain fully operational," Bossier notes.
"The outlook, over time, is for growth in job opportunities and to the
contributions we now make to the economies of our local communities. In
addition, the merger allows Avondale's shareholders to share in the upside
potential generated by this combination."
OPERATIONAL AND FINANCIAL FLEXIBILITY
"Our complementary product lines and core operational capabilities are what
make this partnership work," said Fricks. "We expect to recognize
measurable benefits from sharing best practices in key areas such as marine
design and engineering and in our core production processes.
Additionally, we look forward to sharing technological innovations to help
reduce life cycle costs for Navy programs."
Earlier this year, Avondale established its Maritime Technology Center of
Excellence aimed at developing and applying state-of-the-art techniques to
ship design and construction. Newport News expects to begin construction
in 1999 of the Virginia Advance Shipbuilding and Carrier Integration
Center, a facility intended to exploit innovative technologies in the
construction, integration, and life cycle maintenance of future aircraft
carriers and other ships in the Navy fleet.
The combination also creates significant financial benefits for the new
company. "As a result of both operational and financial synergies the
transaction is expected to be immediately accretive excluding one-time
transaction costs. The more conservative capitalization of the combined
company will allow us to reduce our cost of debt while maintaining healthy
borrowing capacity," said David J. Anderson, Senior Vice President and
Chief Financial Officer of Newport News, "Driven by anticipated annual
free cash flow in excess of $130 million, the combination should provide
significant financial flexibility to pursue additional strategic
opportunities or further reduce debt."
COMPANY STRUCTURE
There will be a five-person executive management committee of the combined
company. Bill Fricks will serve as Chairman and Chief Executive Officer.
Al Bossier will serve as Vice Chairman while also retaining his position as
President and Chief Executive Officer of Avondale. David J. Anderson will
serve as Senior Vice President and Chief Financial Officer. Thomas C.
Schievelbein will be Executive Vice President, as well as Chief Operating
Officer of Newport News. Thomas M. Kitchen will be Executive Vice
President, and will become Chief Operating Officer of Avondale. Bossier
and two current outside directors of Avondale will join the Newport News
Avondale Industries board.
LONG TERM OUTLOOK
"Our funded contract backlog will total nearly $6 billion," said Fricks.
"Total backlog, including options and planned funding, is nearly $8
billion. Significantly, the combined company's backlog represents a broad
spectrum of shipbuilding programs, the majority of which is comprised of
long term U.S. Navy programs."
Newport News' backlog includes over $2.5 billion for aircraft carrier
construction, refueling, and life cycle maintenance extending through 2002.
Submarine construction programs represent nearly $1 billion in funded
backlog, with an additional $1 billion expected to be funded in the next
three years.
Avondale's funded backlog of $2 billion includes design and construction of
two LPD amphibious assault ships, which are the first of a twelve-ship
class to be built for the Navy. Avondale also is constructing a series of
six roll-on/roll-off transport ships for the Military Sealift Command,
three crude oil carriers for ARCO Marine, a subsidiary of Atlantic
Richfield, and is scheduled to deliver the Polar Icebreaker WAGB Healy to
the U.S. Coast Guard in mid-1999.
Lazard Freres & Co. LLC and Credit Suisse First Boston are acting as
financial advisors to Newport News. Avondale is being advised by Salomon
Smith Barney.
Newport News Shipbuilding designs and constructs nuclear powered aircraft
carriers and submarines for the U.S. Navy and provides life cycle
maintenance services for ships in the Navy fleet. The company employs
18,000 people and has annual revenues of approximately $1.8 billion.
Avondale Industries, based in New Orleans, Louisiana, designs, builds, and
overhauls ships for the U.S. Navy, the U.S. Coast Guard, and commercial
customers. The company employs 6,000 people and has annual revenues of
approximately $750 million.
CAUTION WITH REGARD TO FORWARD LOOKING STATEMENTS
Certain statements in this announcement are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
All forward-looking statements involve risks and uncertainties. In this
announcement, forward-looking statements are identified by words and
phrases such as "expect," "expected," "estimated," "believe" "would,"
"anticipated," "outlook," "look forward," "aimed at," "intended," and
"should." In addition, any statements contained herein regarding the
consummation and benefits of the proposed transaction, as well as
expectations with respect to future sales, realization of financial and
operating synergies and efficiencies, and product expansion, are subject to
known and unknown risks, uncertainties, and contingencies, many of which
are beyond the control of the Company, which may cause actual results,
performance, or achievements to differ materially from anticipated results,
performance, or achievements. Factors that might cause forward-looking
statements to differ materially from actual results include, among other
things, overall economic and business conditions, demand for the Company's
goods and services, competitive factors in the industries in which the
Company competes, changes in government regulation, government program
funding, downsizing, or termination, and the timing, impact, and other
uncertainties of future acquisitions or combinations within the industry.
TRANSACTION SUMMARY
Transaction Value: Approximately $470 million (based on NNS' January 19, 1999
closing price of $29.6875).
Exchange Ratio: NNS Share Exchange AVDL Value
Price Ratio per Share
----------------- ----------------- ---------------
< $28.40 1.25 $35.50 or less
$28.40-$30.87 1.25-1.15 $35.50
> $30.87 1.15 $35.50 or more
NNS Share Price: Average closing price for 15-trading day period ending 4
days prior to shareholders' meetings.
Anticipated Closing: Second quarter of 1999
Conditions Include: NNS and AVDL shareholder approval, regulatory reviews, and
other customary closing conditions.
One-Time Expenses: Approximately $40 million including Avondale estimated
change in control agreements and transaction costs.
