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UNITED STATES
SECURITIES AND EXCHANGE
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
Amendment No. 1
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CENTRAL NEWSPAPERS, INC.
(Name of Subject Company)
CENTRAL NEWSPAPERS, INC.
(Name of Person(s) Filing Statement)
Class A Common Stock, no par value (CUSIP 154647101)
and
Class B Common Stock, no par value
(Title of Class of Securities)
Eric S. Tooker
Vice President, Secretary and General Counsel
Central Newspapers, Inc.
200 E. Van Buren Street
Phoenix, Arizona 85004
(602) 444-1115
(Name,address and telephone number of person authorized to
receive notice and communications on behalf of the
person(s) filing statement)
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With a copy to
George R. Bason, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
[ ] Check the box if the filing relates solely to preliminary communications
made the commencement of a tender offer.
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Central Newspapers, Inc., a Delaware corporation, hereby amends and
supplements its Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), initially filed with the Securities and Exchange Commission
(the "Commission") on July 3, 2000. The Schedule 14D-9 relates to the tender
offer by Pacific and Southern Indiana Corp., an Indiana corporation and a
wholly owned subsidiary of Gannett Co, Inc., a Delaware corporation, disclosed
in a Tender Offer Statement on Schedule TO, dated July 3, 2000 and filed with
the Commission, to purchase any and all of the outstanding shares of Class A
Common Stock, no par value, and Class B Common Stock, no par value, of the
Company pursuant to the conditions set forth in the Offer to Purchase dated
July 3, 2000 and the related Letter of Transmittal. Capitalized terms used but
not defined herein have the meanings assigned to them in the Schedule 14D-9.
Item 2. Identity and Background of Filing Person
(a) The second paragraph of Item 2 on page 1 of the Schedule 14D-9 is
amended to read in its entirety as follows:
This statement relates to the tender offer being made by Pacific
and Southern Indiana Corp., an Indiana corporation ("Purchaser") and
a wholly owned subsidiary of Gannett Co., Inc., a Delaware
corporation ("Parent"), disclosed in a Tender Offer Statement on
Schedule TO (the "Schedule TO"), dated July 3, 2000 and filed with
the Securities and Exchange Commission (the "Commission"), to
purchase any and all of the outstanding shares of Class A Stock, at a
price of $64.00 per share, and any and all of the outstanding shares
of Class B Stock, at a price of $6.40 per share, in each case in cash
and without interest (subject to reduction for any applicable
withholding taxes and stock transfer taxes) pursuant to the
conditions set forth in the Offer to Purchase, dated July 3, 2000
(the "Offer to Purchase") and the related Letter of Transmittal
(which, together with the Offer to Purchase and any amendments or
supplements thereto, constitute the "Offer") included in the Schedule
TO. According to the Offer to Purchase, tendering shareholders will
not be obligated to pay brokerage fees or commissions in connection
with the Offer. A copy of the Offer to Purchase and the related
Letter of Transmittal have been filed as Exhibit 1 and Exhibit 2
hereto, respectively, and each is incorporated herein by reference.
Copies of the Offer to Purchase and the Letter of Transmittal are
being furnished to the Company's stockholders concurrently with this
Schedule 14D-9.
(b) The second sentence of the fifth paragraph of Item 2 on page 1 of the
Schedule 14D-9 is amended to read in its entirety as follows:
All information in this Schedule 14D-9 or incorporated by
reference herein concerning Purchaser or Parent, or their affiliates,
or actions or events in respect of any of them, was provided by
Purchaser or Parent. The Company has not verified the accuracy or
completeness of any such information.
Item 3. Past Contacts, Transactions, Negotiations and Agreements
(a) The fifth paragraph of Item 3 on page 2 of the Schedule 14D-9 is
amended to read in its entirety as follows:
Company Action Relating to Executive Officers. The Company has
entered into agreements with each of Louis A. Weil III, Thomas F.
MacGillivray, and Eric S. Tooker providing each of these executives
with certain retention incentives and severance protections. These
agreements are filed as Exhibits 8 through 10 hereto. Under these
agreements, upon the consummation of a change in control of the
Company (which would occur upon the completion of the Offer) all
stock options held by each of the executives will become fully vested
and each executive will be entitled to a bonus ($2 million for Mr.
Weil and $1 million for each of Mr. MacGillivray and Mr. Tooker). In
addition, if, following the change in control, an executive suffers a
termination or constructive termination of employment (as is expected
to occur) or if an executive resigns from his employment one year
after the change in control, such executive will be entitled to
severance pay equivalent to three times the sum of each executive's
annual base salary and 1999 annual bonus, his full 2000 annual bonus,
and continued coverage under the Company benefit
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plans for three years. The maximum aggregate dollar amount of such
severance pay which may be payable to these executive officers is
approximately $11,795,000.
(b) The sixth paragraph of Item 3 on page 2 of the Schedule 14D-9 is
amended to read in its entirety as follows:
The Company has entered into agreements with eleven other
officers of the Company providing that upon the consummation of a
change in control of the Company (which would occur upon the
completion of the Offer) all stock options held by such officers will
become fully vested. In addition, if, following the change in control
(which would occur upon the completion of the Offer), an officer
suffers a termination or constructive termination of employment, such
officer will be entitled to severance pay equal to two times the sum
of such officer's annual base salary and 1999 annual bonus, his or
her full 2000 annual bonus, and continued coverage under the
Company's benefit plans for two years. The maximum aggregate dollar
amount of such severance pay which may be payable to these officers
is approximately $7,972,000. A copy of the form of these agreements
is filed as Exhibit 11 hereto.
(c) Item 3 of the Schedule 14D-9 is also amended by adding the following
new paragraph immediately after the sixth paragraph:
The aggregate value of stock options held by Messrs. Weil,
MacGillivray and Tooker and the other officers referred to above
which will become fully vested upon a change of control of the
Company is approximately $14,320,600 (based on the offer price of $64
per share of Class A Stock).
Item 4. The Solicitation or Recommendation
(a) Section (b) of Item 4 on pages 3 to 5 of the Schedule 14D-9 is amended
to read in its entirety as follows:
(b) Background Of the Offer
In recent years, management of the Company has noted with
concern both an increasingly difficult and changing environment in
the newspaper industry and a recent trend toward consolidation. The
Company's management believed that while the Company's sizeable
operations made it difficult to operate as a purely local
organization, its size and scale were not sufficiently large to
enable the Company to benefit from economies of scale available to
larger competitors in the industry. As a result, in early 2000,
senior management of the Company concluded that it might become
increasingly difficult for the Company to remain competitive and
profitable on a stand-alone basis and determined to examine the
alternatives available to the Company with a view to maximizing
shareholder value. To assist it in this undertaking, senior
management met with representatives of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") to discuss strategic alternatives
available to the Company. The alternatives discussed included a more
aggressive approach to acquisitions, a leveraged buyout of the
Company, and a possible sale of the Company.
On March 23, 2000, senior management of the Company met with two
of the income beneficiaries of the Trust to discuss the restrictions
in the instrument creating the Trust on a sale by the Trust of its
Class B Stock in the Company. The Trust agreement prohibited the sale
by the Trust of its Class B Stock unless the trustees unanimously
determined that the prohibition seriously threatened a substantially
complete loss of the value of the Trust's shares of Company Stock,
and obtained written consent to the voiding of the prohibition from
two-thirds of the adult beneficiaries entitled to income from the
Trust. Management also discussed with the two beneficiaries various
ways the Company could more fully realize shareholder value.
On April 25 and 26, 2000, senior management of the Company and
the three trustees of the Trust participated in planning meetings
that included a detailed discussion of the Company's future business
prospects and various strategic alternatives, including those
referred to above. The participants also
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discussed again the restriction under the Trust documents on the sale
by the Trust of its shares of Class B Stock. Senior management of the
Company and the trustees agreed to consider actively strategic
alternatives for the Company. The Company then engaged DLJ to advise
it regarding strategic alternatives. The Trust engaged Goldman Sachs
& Co. ("Goldman Sachs") on May 1, 2000 as its financial advisor in
connection with a possible sale of all or a portion of the Company.
During late April and early May 2000, the Company and the Trust
engaged in preliminary discussions with a third party regarding that
party's possible interest in an acquisition of the Company. The
Company entered into a nondisclosure agreement with the third party
and such party conducted preliminary due diligence. The parties and
their respective financial advisors had discussions with respect to
the value of the Company but these discussions were terminated after
the parties failed to reach agreement on this issue.
On May 12, 2000, senior management of the Company and the
trustees of the Trust met with representatives of DLJ and Goldman
Sachs, as well as counsel for the Company and separate counsel for
the Trust, to discuss further a possible sale of the Company. Senior
management of the Company and the trustees agreed to proceed to
investigate the possibility of a targeted sale process if the
trustees determined that the restriction on the Trust selling its
Class B Stock should be voided and the required beneficiaries'
consents were obtained.
On May 16, 2000, at the annual meeting of the Company's Board of
Directors, senior management discussed the proposed sale process and
received permission from the Board to proceed with the exploration of
options with respect to such sale.
On May 22, 2000, the trustees of the Trust received a
presentation from the Company's management regarding the future
prospects of the Company, received financial advice from Goldman
Sachs, and received legal advice from the Trust's counsel. The
Company understands that, having considered the information presented
and advice given, the trustees unanimously determined that, over
time, a substantially complete loss of value of the Trust property
was seriously threatened by the prohibition on the sale of Class B
Stock. Accordingly, the Company understands that, having considered
the information presented and advice given, the trustees determined
that the Trust and the Company should cooperate in order to determine
whether a sale of the Company on acceptable terms would be possible.
Subsequently, the trustees received the required consent of the adult
income beneficiaries of the Trust to the lifting of the restriction,
and the restriction became void.
Shortly thereafter, senior management of the Company notified
DLJ of the trustees' determination and authorized DLJ to begin
contacting potential buyers. On June 8, 2000, the Company issued a
press release confirming that it had retained a financial advisor and
was in preliminary discussions regarding a possible sale or other
business combination involving the Company. Senior management of the
Company and DLJ then prepared a confidential information memorandum
concerning the Company and DLJ contacted approximately six potential
purchasers. Each of these potential purchasers then executed a
nondisclosure agreement and was sent a confidential information
memorandum. Over the course of the next several weeks, five of these
potential buyers visited the due diligence data room established by
the Company and its advisors, and four of them discussed the business
and prospects of the Company with senior management. The potential
buyers were invited to submit a written acquisition proposal and a
mark-up of a draft Merger Agreement and a draft Voting Agreement that
the Company and the trustees of the Trust had indicated they would be
willing to sign.
On June 23, 2000 some of the potential buyers who conducted due
diligence submitted bids. Parent submitted an all cash bid for Class
A Stock at $63.00 per share and Class B Stock at $6.30 per share. On
June 24, 2000, senior management of the Company met telephonically
with DLJ and the Company's counsel, and the trustees met
telephonically with senior management of the Company, Goldman Sachs
and the Trust's counsel, to review the proposals and indicate their
views to the Company. On June 24 and 25,
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based on those discussions, the Company's counsel and representatives
of DLJ had discussions with representatives of Parent and its counsel
regarding the proposed contract terms and transaction structure. On
June 25, 2000, DLJ advised Parent that the Company would be willing
to pursue negotiations with it on an exclusive basis if Parent were
prepared to increase its bid. Parent then advised DLJ that it would
increase its bid for Class A Stock to $64.00 per share and Class B
Stock to $6.40 per share, subject to acceptable resolution of
remaining open issues.
On June 25, 2000, the Board held a telephonic meeting at which
senior management, DLJ, and the Company's outside counsel reviewed
with the Board the process and status of discussions with Parent and
the principal terms under discussion. The Trust's counsel and Goldman
Sachs participated in this meeting. After concluding that the bid
submitted by Parent was the most attractive to the Company,
particularly because the consideration offered was clearly superior
to that offered in any other bid, the Board authorized management and
the Company's financial and legal advisors to proceed with
negotiation of a definitive agreement with Parent.
On June 27, 2000, certain executives of Parent and certain
trustees and beneficiaries of the Trust met in Indianapolis to
discuss the operations of Parent and the Company, as well as the
proposed transaction.
On June 28, 2000, the Board met to consider approval of the
Merger Agreement. DLJ delivered its written opinion to the effect
that, as of the date of the written opinion, and based on and subject
to the assumptions, limitations and qualifications set forth in the
written opinion, the consideration to be received by the Company's
shareholders was fair from a financial point of view. Davis Polk &
Wardwell, counsel for the Company, reviewed with the Board the
material provisions of the Merger Agreement. Following these
presentations, the Board of Directors of the Company unanimously
approved adoption of the Merger Agreement and agreed, subject to
Section 7.04 of the Merger Agreement, to recommend that the Offer be
accepted, and, if a meeting of stockholders is required by law, that
the Merger Agreement be adopted by the Company's shareholders.
The Company understands that immediately following the Board of
Directors' meeting, the trustees of the Trust met, received
presentations from the Trust's counsel and Goldman Sachs regarding
the material terms of the Voting Agreement and the Merger Agreement
and the transactions contemplated thereby, and unanimously approved
the execution of the Voting Agreement and the transactions
contemplated by the Merger Agreement.
Immediately thereafter, the Company, Parent and Purchaser
executed the Merger Agreement, and Parent, Purchaser and the Trust
executed the Voting Agreement. Parent and the Company then issued a
joint press release announcing the execution of the Merger Agreement
and the transactions contemplated thereby.
On July 3, 2000, Parent and the Purchaser commenced the Offer.
(b) Factors (4), (5) and (9) set forth in Section (c) of Item 4 on pages 5
and 6 of the Schedule 14D-9 are amended to read in their entirety as follows:
(4) The price offered by Parent for each share of Class A Stock
represents a premium to historical and recent market prices for the
shares of such stock. The offer price represents a 7% premium to the
market price of Class A Stock as of June 26, 2000 and a premium of
103% to the market price as of June 7, 2000, the day prior to the
Company's June 8, 2000 announcement. The market price increased
significantly immediately after such announcement.
(5) The fact that, during the course of the targeted auction process
conducted by the Company and its advisors, the Company had discussed
a possible transaction with several potential bidders and the
consideration offered by Parent was clearly superior to that offered
by any other interested party.
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(9) The belief of the Board of Directors that the transactions were
fair to, and in the best interests of, holders of Class A Stock and
holders of Class B Stock.
(c) Section (c) in Item 4 is also amended by inserting a new penultimate
paragraph on page 6 of the Schedule 14D-9 to read as follows:
The Board of Directors considered all of the above factors as a
whole, and, overall, considered the factors to be favorable to and to
support its determination. However, the general view of the Board of
Directors was that factors (2) and (12) were part of a general mix of
available information without being clearly favorable or unfavorable,
that factors (10) and (11) were uncertainties, risks or drawbacks
relating to the transaction, and that the other reasons and factors
described above were generally considered favorable.
(d) The last paragraph of Section (c) in Item 4 on page 6 of the Schedule
14D-9 is amended to read in its entirety as follows:
The full text of DLJ's written opinion discussed above, which
sets forth, among other things, the assumptions made, matters
considered and limitations in the review undertaken by DLJ in
connection with the opinion, is attached hereto as Annex A and is
incorporated herein by reference. DLJ's opinion is directed to the
Board of Directors, addresses only the fairness of the consideration,
from a financial point of view, to be received in the Offer and the
Merger by holders of the Company Stock and does not constitute a
recommendation to any stockholder to approve the Merger, or to tender
his or her shares pursuant to the Offer. DLJ's opinion addresses the
fairness of the aggregate consideration to be received by the holders
of the Company Stock and does not address the relative value of each
class of Company Stock. Holders of shares are urged to read the
opinion carefully and in its entirety. The references to the opinion
of DLJ in this Schedule 14D-9 are qualified in their entirety by
reference to the full text of such opinion.
Item 5. Persons Retained, Employed or to Be Compensated
The second paragraph of Item 5 on page 7 of the Schedule 14D-9 is amended
to read in its entirety as follows:
Also pursuant to the Letter Agreement, the Company agreed to pay
DLJ (a) a fee of $3,000,000, which was payable at the time DLJ
notified the Board of Directors that it was prepared to deliver the
opinion referred to above, and (b) additional cash compensation
payable at consummation of the transaction equal to 0.5% of the
aggregate value of outstanding common stock of the Company (treating
any shares issuable upon exercise of options, warrants or other
rights of conversion as outstanding), plus the amount of any debt
assumed, acquired, remaining outstanding, retired or defeased or
preferred stock redeemed or remaining outstanding in connection with
the transaction, less the amount paid by the Company pursuant to
clause (a) above. In addition, the Company agreed to reimburse DLJ,
upon DLJ's request from time to time, for all out-of-pocket expenses,
including the reasonable fees and expenses of counsel, incurred by
DLJ in connection with its engagement and to indemnify DLJ and
certain related persons against certain liabilities in connection
with its engagement, including liabilities under U.S. federal
securities laws. DLJ has performed investment banking services for
the Company in the past and has been compensated for such services.
Item 8. Additional Information to be Furnished
(a) The third paragraph of Item 8 on page 8 of the Schedule 14D-9
(immediately prior to the chart entitled "2000 Business Plan") is amended to
read in its entirety as follows:
The projected financial information set forth below necessarily
reflects numerous assumptions with respect to general business and
economic conditions and other matters, many of which are inherently
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uncertain or beyond the Company's or the Recipients' control, and
does not take into account any changes in the Company's operations or
capital structure which may result from the Offer and the Merger.
Among other factors, the projected financial information assumes:
revenue growth from continuing operations of 6.4%, an operating
margin of 22.5%, expense growth from continuing operations of 6.4%, a
tax rate of 39% and capital expenditures of $60 million in 2000. It
was also assumed that economic activity in the Company's primary
markets would continue to grow at present rates and that newsprint
prices would increase by $50 per metric ton on October 1, 2000. It is
not possible to predict whether the assumptions made in preparing the
projected financial information will be valid, and actual results may
prove to be materially higher or lower than those contained in the
projections. The inclusion of this information should not be regarded
as an indication that Company or any other person who received this
information considered it a reliable predictor of future events, and
this information should not be relied on as such.
(b) The fourth paragraph of Item 8 on page 8 and 9 of the Schedule 14D-9
(immediately after to the chart entitled "2000 Business Plan") is amended to
read in its entirety as follows:
(c) Cautionary Statement Concerning Forward-Looking Statements.
Certain matters discussed herein, including without limitation, the
Plan Projections, are forward-looking statements that involve risks
and uncertainties. Such information has been included in this
Schedule 14D-9 for the limited purpose of giving stockholders access
to projections by the Company's management that were made available
to the Recipients. Such information was prepared by the Company's
management for internal use and not with a view to publication. The
foregoing Plan Projections were based on assumptions concerning the
Company's operations and business prospects in 2000, including the
assumption that the Company would continue to operate under the same
ownership structure as then existed. The Plan Projections were also
based on other revenue, expense and operating assumptions. Certain of
these assumptions are set forth in the immediately preceding
paragraph. Information of this type is based on estimates and
assumptions that are inherently subject to significant economic and
competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the Company's
control. Such uncertainties and contingencies include, but are not
limited to: changes in the economic conditions in which the Company
operates, greater than anticipated competition or price pressures,
new product offerings, better or worse than expected customer growth
resulting in the need to expand operations and make capital
investments, and the impact of investments required to enter new
markets. Accordingly, there can be no assurance that the projected
results would be realized or that actual results would not be
significantly higher or lower than those set forth above. In
addition, the Plan Projections were not prepared with a view to
public disclosure or compliance with the published guidelines of the
SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections and forecasts, and
are included in this Schedule 14D-9 only because such information was
made available to the Recipients by the Company. Neither the
Recipients' nor the Company's independent accountants have examined
or applied any agreed upon procedures to this information and the
Company has made no representations to the Recipients regarding such
information. Neither the Recipients nor the Company intends to
provide any updated information with respect to any forward-looking
statements.
Item 9. Material to Be Filed as Exhibits
Item 9 of the Schedule 14D-9 is amended to include the following
additional exhibits:
Exhibit 8: Executive Change of Control Agreement with Eric S.
Tooker dated May 23, 2000.
Exhibit 9: Executive Change of Control Agreement with Louis A. Weil,
III dated May 23, 2000.
Exhibit 10: Executive Change of Control Agreement with Thomas K.
MacGillivray dated May 23, 2000.
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Exhibit 11: Form of Executive Change of Control Agreement entered
into with eleven other officers of the Company.
Schedule I. Information Statement Pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder
(a) The fourth paragraph on page 11 of Schedule I to the Schedule
14D-9 is amended to read in its entirety as follows:
The information contained in this Information Statement
concerning Parent and Purchaser has been furnished to the
Company by Parent or Purchaser. The Company has not
independently verified the accuracy or completeness of such
information.
(b) Footnote (16) on page 14 of Schedule I to the Schedule 14D-9 is
amended to read in its entirety as follows:
Ariel Capital Management, Inc. holds all such shares for
client accounts, none of which individually represents more than
5% of the outstanding Class A Stock, and disclaims beneficial
ownership of such shares. Ariel Capital Management, Inc., in its
capacity as investment advisor, has sole voting power, and sole
dispositive power, with respect to 4,619,519 and 4,960,219
shares, respectively. The information contained in this section
was obtained from a Schedule 13G dated May 31, 2000 filed by
Ariel Capital Management, Inc. with the Securities and Exchange
Commission. The Company has not independently verified the
accuracy or completeness of the information reported.
(c) The second complete paragraph on page 14 of Schedule I to the
Schedule 14D-9 is amended to read in its entirety as follows:
The information contained in this Information Statement
concerning Purchaser or Parent has been furnished to the Company
by Purchaser and Parent. The Company has not independently
verified the accuracy or completeness of this information. The
Board of Directors of the Company currently consists of seven
members. The Parent has informed the Company that the Purchaser
Designees will be any of the directors and executive officers of
Parent listed on Schedule 1 of Purchaser's Offer to Purchase
under the captions "Directors of Parent" and "Directors of
Purchaser". A copy of the Offer to Purchase is being mailed to
the Company's stockholders together with the attached Schedule
14D-9 and this Information Statement. Such information in such
schedule and related information in Section 8 of the Offer to
Purchase is incorporated herein by reference.
(d) The section entitled "Company Performance" on page 25 of Schedule
I to the Schedule 14D-9 is amended by adding the following new paragraph
immediately after the first paragraph in such section:
The Class B Common Stock is not listed on any national or
regional securities exchange or reported on a national quotation
system. To the Company's knowledge, there is no established
trading market for the Class B Common Stock.
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
CENTRAL NEWSPAPERS, INC.
/s/ Louis A. Weil, III
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Name: Louis A. Weil, III
Title: Chairman, President and Chief
Executive Officer
Dated: July 21, 2000
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