UNITED STATES
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 6, 1995
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INTERSTATE BAKERIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-11165 43-1470322
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(Commission File Number) (IRS Employer Identification No.)
12 East Armour Boulevard, Kansas City, Missouri 64111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 561-6600
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On January 6, 1995, Interstate Bakeries Corporation
("IBC") signed a letter of intent with Ralston Purina Company
("RPC") for IBC to acquire RPC's wholly-owned subsidiary,
Continental Baking Company ("CBC"), for a purchase price of
$330,000,000 in cash and 16,923,077 shares of common stock of IBC
(the "IBC Shares"). The closing of the sale is subject to, among
other things, negotiation of a definitive acquisition agreement and
a shareholder agreement with respect to any of the IBC Shares
retained by RPC following the closing, final approval by the boards
of directors of IBC and RPC, approval of the issuance of the IBC
Shares by the shareholders of IBC and various regulatory
clearances. The approval of the issuance of the IBC Shares by
IBC's shareholders is required pursuant to the rules of the New
York Stock Exchange. The transaction is expected to close in mid-
1995.
A copy of the letter of intent is filed herewith as
Exhibit 1 and a copy of the press release jointly issued by IBC and
RPC announcing the signing of the letter of intent is filed
herewith as Exhibit 2. Both Exhibits are incorporated herein by
this reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
1 Letter of Intent, dated January 6, 1995,
signed by Interstate Bakeries Corporation
and Ralston Purina Company.
2 Press release, dated January 6, 1995,
jointly issued by Interstate Bakeries
Corporation and Ralston Purina Company.
<PAGE>
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.
INTERSTATE BAKERIES CORPORATION
By: /s/ Charles A. Sullivan
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Charles A. Sullivan
Chairman and Chief Executive Officer
Date: January 11, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Description
1 Letter of Intent, dated January 6, 1995,
signed by Interstate Bakeries Corporation and
Ralston Purina Company.
2 Press release, dated January 6, 1995,
jointly issued by Interstate Bakeries Corporation
and Ralston Purina Company
INTERSTATE BAKERIES CORPORATION
12 East Armour Blvd., 64111
P.O. Box 419627, Kansas City, Mo 64141-6627
816/561-6600
January 6, 1995
Ralston Purina Company
VCS Holding Company
Checkerboard Square
St. Louis, Missouri 63164
Attention: Mr. William P. Stiritz
Re: Proposed Purchase of Continental Baking Company by
Interstate Bakeries Corporation
Dear Mr. Stiritz:
Interstate Bakeries Corporation ("IBC") is pleased to set
forth the following proposal to acquire all of the outstanding
capital stock of Continental Baking Company (the "Company") from
VCS Holding Company ("VCS") and Ralston Purina Company ("Ralston")
(VCS and Ralston are collectively referred to as "Sellers"). The
purpose of this letter is to set forth the basis for proceeding
toward the acquisition of the Company by IBC, or its nominee (the
"Acquisition"), and the parties' intention to negotiate in good
faith a definitive agreement (the "Agreement") for such
acquisition.
1. Form of Acquisition; Consideration.
(a) IBC, or its nominee, will acquire the Company
either by purchase of 100% of the outstanding capital stock of
the Company from VCS, or by other appropriate means. As
consideration for the Acquisition, at Closing, as defined
below, IBC (or its nominee) will pay VCS a total purchase
price of (i) Three Hundred Thirty Million Dollars
($330,000,000) cash consideration and (ii) 16,923,077 shares
of IBC common stock, $.01 par value, subject to adjustment in
certain circumstances as provided in subparagraph 1(b)(i)
below (as may be adjusted, the "IBC Equity") (the cash
consideration and the IBC Equity being the "Purchase Price"),
all on the terms and subject to the conditions contained
herein and in the Agreement, as defined below. This proposal
is being made in part based on the balance sheet of the
<PAGE>
Company as of September 24, 1994, a copy of which is attached
as Exhibit 1.
(b)(i) If the IBC Market Price (as defined below) is
below $9.75, then Sellers shall have the right, at their
sole option, to terminate the Agreement unless IBC agrees
to deliver at Closing that number of shares of IBC common
stock which is equal to $165,000,000 divided by the IBC
Market Price.
(ii) If the IBC Market Price is above $16.25, then
IBC shall have the right at their sole option to
terminate the Agreement.
(iii) The "IBC Market Price" shall mean the average
of the closing sales prices on The New York Stock
Exchange of the IBC common stock for the first 20 trading
days of the 30 trading days which end on the day
immediately prior to Closing.
2. Due Diligence; Access. Promptly following execution
of this letter of intent, Sellers will grant IBC and its
representatives, including Chemical Bank, reasonable access to
facilities, personnel, records, contracts and other documents,
including without limitation information related to financial,
accounting, commercial, legal, environmental, regulatory, tax and
employee benefits matters of the Company and Sellers (to the extent
such information of Sellers relates to the Company). Because part
of the Purchase Price consists of the IBC Equity, IBC management
shall meet with representatives of Sellers to permit Sellers to do
reasonable due diligence with respect to IBC.
3. Public Announcements. From and after the date
hereof until the date of the Agreement, the parties shall consult
with each other and shall mutually agree upon the content of any
press release or public announcement relating to the transactions
contemplated herein and will not issue any such press release or
make any such public announcements prior to such consultation and
agreement, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national
securities exchange, in which case the party proposing to issue
such press release or make such public announcement will use all
reasonable efforts to consult in good faith with the other party
before issuing any such press release or making any such public
announcement.
<PAGE>
4. Definitive Agreement. IBC and Sellers will proceed
diligently and in good faith to negotiate, execute and deliver the
Agreement, subject in all respects to the approval of the parties
thereto, to verification of legal and factual issues deemed
relevant to the parties and to receipt of requisite regulatory and
other approvals and consents. The Agreement shall specify a date
of closing (the "Closing Date"), which shall not be later than
July 31, 1995. The Agreement will provide, among other things,
that IBC will assume all known and unknown liabilities of the
Company except for those set forth on Exhibit 2, attached hereto,
and those not assumed pursuant to the terms of the Agreement. The
Agreement will contain such representations and warranties,
agreements and covenants, conditions and indemnification provisions
as are mutually agreeable.
5. Conditions Precedent. The obligations of the
parties under the Agreement shall be subject to various conditions
precedent, including, but not limited to:
(a) Completion of the investigations of the Company
by IBC and of IBC by the Sellers, confirming that the
business, assets, prospects, financial and legal condition of
the Company and IBC, respectively, are satisfactory to the
investigating party;
(b) Compliance by Sellers and IBC with the
requirements of this letter;
(c) Performance by Sellers and IBC of all
covenants, obligations and agreements contained in the
Agreement;
(d) The truth and accuracy of the representations
and warranties of Sellers and IBC contained in the Agreement
as of the date thereof, and as reaffirmed and remade as of the
consummation of the Acquisition (the "Closing");
(e) Approval of the transaction by the requisite
vote of the Boards of Directors of IBC and the Sellers and of
the shareholder(s) of IBC and, if applicable, Sellers;
(f) Obtaining of all required governmental and
third-party consents and approvals;
<PAGE>
(g) Non-occurrence of any event, fact, condition,
change or effect that is or could be materially adverse to the
business, operations, results of operations, condition
(financial or otherwise), assets, prospects or liabilities of
the Company;
(h) Non-occurrence of a banking moratorium or
suspension of trading of securities on the New York Stock
Exchange;
(i) Execution and delivery by Sellers and IBC of
all documents required to be delivered by the Agreement, each
in form and substance acceptable to IBC and Sellers,
respectively; and
(j) The IBC Equity continuing to be listed on The
New York Stock Exchange after the issuance of the IBC Equity
to Sellers, and the effectiveness of the provisions of the
Agreement and all ancillary agreements.
6. Ancillary Agreements. The parties shall negotiate
mutually acceptable ancillary agreements, including a Transition
Services Agreement relating to the data processing facilities and
management employees of Ralston to be contracted to IBC and the
Company for a certain period of time after the Closing Date, Lease
Agreements relating to certain office and research and development
space to be leased by Sellers to IBC and the Company, a Tax Sharing
Agreement, and a Noncompetition Agreement (with respect to the
purchase of a company that is principally in the wholesale baking
business) by Sellers in favor of IBC and the Company. IBC and
Sellers shall enter a Shareholder Agreement containing provisions,
which are mutually acceptable.
7. Interim Operations. From the date hereof until the
date of the Agreement, the Company will conduct its business and
operations in the ordinary course consistent with past practice.
From the date of the Agreement until the Closing, the Company will
conduct its business and operations in accordance with the terms of
the Agreement.
8. No Other Arrangements. From the date hereof, and
until the date of the Agreement or the termination of negotiations,
neither Sellers, the Company nor any of their representatives will
solicit any other offers to acquire the Company. If, at any time
after the date hereof and the earlier of the date of the Agreement
or April 6, 1995, Sellers (i) enter into negotiations for the sale
of the Company to a third party, (ii) cease negotiations with IBC
for the purpose of entering into negotiations for the sale of the
<PAGE>
Company to a third party, or (iii) undertake efforts toward any
recapitalization or reorganization relating to the Company,
including any proposed distribution of the Company's capital stock
or assets to holders of Sellers' capital stock (other than efforts
that are not inconsistent with the transactions contemplated
hereby), then Sellers, jointly and severally, shall be liable for,
and shall promptly pay to IBC, all of its reasonable out-of-pocket
costs, fees and expenses incurred in connection with its possible
purchase of the Company, including but not limited to, all legal,
investment banking and accounting fees.
9. Further Assurances. Sellers and IBC agree to use
their best efforts to obtain any required shareholder approvals and
any requisite third party or governmental approvals and consents.
The parties agree to prepare and file a notification form under the
Hart-Scott-Rodino Act of 1976, as amended, as promptly as
practicable following the execution of this letter.
10. Fees and Expenses. Neither IBC nor the Company will
be obligated for the fees of any finder, business broker or
investment banker, retained by the Sellers or the Company in
connection with the proposed transactions. Except as set forth in
paragraph 8 of this letter, IBC, on the one hand, and Sellers, on
the other hand, shall bear their own fees and expenses in
connection with the proposed transaction, including legal,
investment banking and accounting fees and expenses.
11. No Binding Obligation. IBC considers that time is
of the essence in consummating the proposed transaction.
Accordingly, IBC has instructed its counsel to work with Sellers'
counsel promptly after the execution of this letter of intent, to
prepare the Agreement which shall contain provisions in accord with
the foregoing and to undertake a thorough due diligence review of
the Company. It is, of course, understood (a) that this letter is
intended to be, and shall be construed only as, a letter of intent
summarizing and evidencing the discussions between Sellers and IBC
to the date hereof and not as an offer to purchase or sell the
stock or assets of the Company or an agreement with respect
thereto, and (b) that the respective rights and obligations of
Sellers, the Company, and IBC remain to be defined in the
Agreement, into which this letter of intent and all prior
discussions shall merge; provided, however, that the respective
obligations of Sellers, the Company and IBC under Paragraphs 3, 8,
10 and 11 of this letter of intent shall be binding on them,
respectively, when this letter is fully executed and delivered.
<PAGE>
If the foregoing is in conformity with the understanding
of Sellers, please so indicate by executing and returning the
enclosed copy of this letter. We look forward to proceeding with
this transaction.
Very truly yours,
INTERSTATE BAKERIES CORPORATION
By: /s/ Charles A. Sullivan
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Name: Charles A. Sullivan
Title: Chief Executive Officer
Agreed and Accepted:
RALSTON PURINA COMPANY
By: /s/ William P. Stiritz
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Name: William P. Stiritz
Title: Chief Executive Officer
VCS HOLDING COMPANY
By: /s/ James R. Elsesser
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Name: James R. Elsesser
Title: Chief Executive Officer
<PAGE>
EXHIBIT 1
Pro Forma Balance Sheet Reconciliatin: Consolidated as of 09/24/94
(U.S. Dollars in Millions)
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CBC
09/24/94
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Assets
Cash and Marketable Securities $ 0.0
Receivables, Less Allowances 98.5
Inventories - Raw Materials and Supplies 52.7
Prepaid Expenses 28.7
Plant, Property & Equipment 1,071.5
Accumulated Depreciation (474.5)
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Net Plant, Property & Equipment 597.0
Miscellaneous .2
Goodwill 43.2
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Total Assets $ 820.3
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Liabilities & Equity
Current Maturities of Long-Term Debt $ 0.1
Notes Payable 0.0
Accounts Payable 83.4
Accrued Expenses 98.4
Dividends Payable 0.0
Long-Term Debt 1.3
Deferred Income Taxes 26.7
Self Insurance Casualty Reserve 114.9
Postretirement Reserve (FAS 106) 53.6
Unearned ESOP Compensation 0.0
Equity and Redeemable Preferred Stock 441.9
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Total Liabilities & Equity $ 820.3
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<PAGE>
EXHIBIT 2
o Obligations to present and former employees of the Company
pursuant to the Fixed Benefit Option of the Ralston Purina
Company Deferred Compensation Plan.
o Obligations with respect to the Ralston Purina Company
Guarantee of the 8.25% Guaranteed ESOP Notes issued by the
Ralston Purina Collective Trust for Savings Investment Plans.
o Obligations under any Management Continuity Agreements of
Sellers or the Company.
o Sellers will assume all workers' compensation claims of
production employees of the Company who, as of the Closing
were formerly employed by the Company at inactive or closed
facilities.
News Release
Kansas City, MO - January 6, 1995
INTERSTATE BAKERIES CORP. TO PURCHASE CONTINENTAL BAKING COMPANY
Ralston Purina Company and Interstate Bakeries Corporation,
today jointly announced the signing of a letter of intent for
Interstate to acquire Ralston's wholly-owned subsidiary,
Continental Baking Company, for a total purchase price of
$330,000,000 in cash and 16,923,077 shares of common stock of
Interstate. Other terms of the transaction were not disclosed.
The closing of the sale is subject to, among other things,
negotiation of a definitive acquisition agreement and a
shareholders' agreement with respect to any shares of Interstate
common stock retained by Ralston, final approval by the boards
of directors of Ralston and Interstate, approval by the
shareholders of Interstate, and various regulatory clearances.
The transaction is expected to be completed during the summer of
1995.
Charles A. Sullivan, Chairman and Chief Executive Officer of
Interstate, said: "I am confident our action today represents a
new and exciting beginning for both Interstate and Continental.
Because Continental operates primarily in different geographic
areas than Interstate, its operations will complement those of
Interstate, and Continental's strong brand recognition and
strong operations make it a perfect match for us."
William P. Stiritz, Chairman and Chief Executive Officer of
Ralston, added: "Given the fiercely competitive baking industry
and the problems Continental has faced, we feel that the
proposed sale is in the best interest of our shareholders. We
also believe the merging of Continental and Interstate creates
a new, vibrant company more capable of competing successfully in
this industry and of responding to consumer needs."
The letter of intent is the culmination of an auction process
for the sale of Continental Baking Company which was conducted
for Ralston by CS First Boston.
<PAGE>
Since August of 1993, the operations of Ralston's CBG Group,
which is comprised exclusively of Continental Baking Company,
have been reflected by a separate class of common stock of
Ralston, the Ralston-Continental Baking Group Common Stock
("CBG Stock"), which is publicly traded on the New York Stock
Exchange under the symbol "CBG." Ralston's other class of
common stock, the Ralston-Ralston Purina Group Common Stock
("RPG Stock") reflects the results of operations of Ralston's
other businesses, plus a 45% retained interest in the CBG Group.
Under the terms of Ralston's Restated Articles of Incorporation,
Ralston may (i) exchange all of the outstanding shares of CBG
Stock for shares of RPG Stock, based upon an average ratio of
the market prices of the two classes of stock, or (ii)
distribute to the holders of the outstanding shares of CBG
Stock an amount equal to their proportionate interest in the
"net proceeds" of the sale, either by special dividend or by pro
rata redemption of all or part of the outstanding shares of CBG
Stock.
The "Net Proceeds" are defined in Ralston's Articles as the
gross proceeds of the sale less, among other items, taxes
payable in respect of the sale, transaction expenses, the value
of the preferred stock allocated to the CBG Group and allocated
debt owed to Ralston, totaling approximately $410 million and
other liabilities. Forty-five percent of the net proceeds would
be retained by Ralston as a result of the RPG Group's retained
interest.
If Ralston elects not to exchange the shares of CBG Stock for
RPG Stock, it currently estimates, given the recent trading
prices of the Interstate stock, that if the redemption were to
occur today, the net proceeds would result in a per share
distribution to CBG shareholders which would approximate in
value the recent trading value of the CBG Stock. The valuation
of the net proceeds, however, may vary substantially depending
upon the results of future operations of Continental,
fluctuations in the market value of the Interstate Stock, the
terms of the definitive agreement and the valuation of retained
liabilities and obligations.
St. Louis-based Continental with annual sales of approximately
$2 billion is best known for its "Wonder," "Wonder Lite," "Home
Pride," and "Beefsteak" brands of bread, as well as its
"Hostess" brand of snack cakes, donuts, pies, muffins and
cookies. The "Hostess" line includes the popular "Twinkies,"
"Suzy Q's," "Ding Dongs," "HoHo's," cup cakes, mini-muffins and
fruit pie products. Continental operates 36 bakeries with
approximately 21,000 employees.
<PAGE>
"Continental has some of the strongest brand names in America,"
Sullivan said. "That dovetails well with our company's business
strategy. At Interstate, we are committed to brand-building.
It indeed is the very heart of our business strategy."
Kansas City-based Interstate with annual sales of $1.1 billion,
31 bakeries, and 14,000 employees, also publicly traded and
listed on the New York Stock Exchange (IBC) has a product line
which is marketed under a number of well-known brands, including
"Dolly Madison," "Butternut," "Merita," "Mickey," "Weber's,"
"Millbrook," "Eddy's," "Holsum," "Sweetheart," "Sunbeam,"
"Cotton's Holsum," "Mrs. Karl's," "Mrs. Cubbison's," and "Better
Way." In addition, Interstate is the nation's largest
franchisee of "Roman Meal" and "Sun Maid" bread and currently
owns a license to produce and market "Wonder," "Home Pride," and
"Beefsteak," and other Continental bread brands in Florida.
For information on the Companies, please contact:
Interstate Bakeries Corporation
Charles A. Sullivan, Chairman and Chief Executive Officer
Ray Sandy Sutton, Vice President, General Counsel
and Corporate Secretary
(816) 561-6600
Ralston Purina Company
Keith M. Schopp
(314) 982-2261
