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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(Amendment No. 1)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
Tescorp, Inc.
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(Name of Subject Company)
Tescorp, Inc.
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(Name of Person(s) Filing Statement)
Common Stock, par value $.02 per share
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(Title of Class of Securities)
881584106
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((CUSIP) Number of Class of Securities
Jack S. Gray, Jr.
President and Chief Operating Officer
Tescorp, Inc.
327 Congress Avenue, Suite 200
Austin, Texas 78701
(512) 476-2995
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(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person(s) filing statement)
Copies to:
Stephen T. Burdumy, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 569-4646
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This Amendment No. 1 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9, dated December 10,
1997 (the "Schedule 14D-9"), of Tescorp, Inc., a Texas corporation (the
"Company"), filed in connection with the tender offer made by Tescorp
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary
of Supercanal Holding S.A., an Argentine corporation, to purchase all
outstanding shares of the Company's common stock, par value $.02 per share.
ITEM 3.
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"March 31" is hereby deleted from the section of Item 3 entitled
"CONDITIONS TO THE MERGER" and replaced in its entirety by the following:
"April 30".
"March 31" is hereby deleted from the section of Item 3 entitled
"TERMINATION OF THE MERGER AGREEMENT" and replaced in its entirety by the
following: "April 30".
ITEM 4.
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Item 4 is hereby amended and restated in its entirety as follows:
"(a) Recommendation
This recommendation is based upon a thorough analysis of numerous
factors including but not limited to (i) the tender price proposed by
Acquisition relative to the trading price of the Common Shares immediately
prior to the announcement of the Tender Offers, (ii) an examination of
prices paid for similar companies prior to and at the time of the Tender
Offers, (iii) the estimated financial benefits to stockholders of
alternative financial strategies, (iv) changes in industry conditions and
(v) third party opinions regarding the fairness of the transaction
proposed by Acquisition.
(b) Background and Reasons for the Recommendation.
The initial discussions of a possible combination involving Supercanal
and the Company took place at a meeting in October 1996 between senior
officers of the Company and representatives of Integra Financial Services
LLC ("Integra"), an advisor to Supercanal. These initial discussions, and
additional discussions through March 1997, focused on the high degree of
consolidation in the Argentine cable television industry which was taking
place, and the advisability of combining the operations of Supercanal and
the Company in view of that consolidation.
In April 1997, there were discussions about merging the Company into
Supercanal. Pursuant to the proposed terms, the Company's stockholders
would receive shares of stock in Supercanal. Extensive discussions were
held and draft
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agreements were prepared. However, the Merger would have required approval
of the stockholders of both companies. A stockholder of Supercanal, which
had the ability to preclude Supercanal from carrying out the Merger,
stated it would not approve a Merger. Accordingly, discussions of a Merger
were dropped.
Early in August 1997, discussions of a combination involving Supercanal
and the Company were revived. Supercanal was represented in these
discussions by Integra, Smith Barney & Co., Inc. ("Smith Barney") and ING
Baring (U.S.) Securities, Inc. ("ING Securities"). The Company was
represented in these discussions by its senior officers and by Arnhold and
S. Bleichroeder & Co. ("Bleichroeder"). By mid-August, each of Supercanal
and the Company was represented by counsel who began preparing draft
agreements.
From mid-August to mid-September, there were nearly daily discussions
of such a combination. Initially, the discussions focused on a purchase by
Supercanal from the Company of what would be approximately 45% of its
outstanding Common Stock and 30% of its outstanding Series 1995 8%
Preferred Stock for approximately $39 million, followed by a Merger of the
Company into a Supercanal subsidiary pursuant to which the Company's
stockholders were to receive $4.53 per Common Share and $144.96 per 8%
Preferred Share. However, at Supercanal's suggestion, it was decided the
transaction would take place in three steps, with the Tender Offers taking
place between the initial stock purchase and the Merger.
A principal issue during these discussions was the Company's desire to
receive assurance that Supercanal would not become unable to complete such
transactions either (i) because it would not have adequate funds or (ii)
because its stockholders would not permit the transactions to proceed.
Regarding the first concern, ING Baring (US) Capital Corporation ("ING
Capital") delivered a letter to the Company stating that ING Capital had
obtained internal credit approval for a senior secured credit facility in
an aggregate principal amount sufficient to conclude the transactions
contemplated by the Stock Purchase and Merger Agreement (the "Original
Merger Agreement"), dated as of September 16, 1997, between the
Acquisition and the Company, but that disbursement of the facility is
subject to the negotiation, execution and delivery of definitive
documentation satisfactory to ING Capital and its counsel, which would
contain, among other things, customary covenants, conditions precedent and
security arrangements (including financial covenants on a pro forma basis
concerning the combined operations of Supercanal and the Company). With
regard to the second concern, the stockholders of Supercanal all stated
they approved of the transaction.
On September 16, 1997, Supercanal and the Company signed the Original
Merger Agreement in which they agreed that (i) a subsidiary of Supercanal
(Acquisition) would purchase 10,790,000 shares of the Company Common Stock
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(which would be approximately 45% of the outstanding Common Stock) for
$35,930,700 ($3.33 per share) and would purchase 6,750,000 shares of 8%
Preferred Stock (which would be 30% of the outstanding 8% Preferred Stock)
for $6,075,000 ($100 per share), (ii) shortly after completion of that
stock purchase, Acquisition would make Tender Offers for all the
outstanding Common Stock and 8% Preferred Stock for $4.50 per share and
$144 per share plus an amount equal to accrued dividends, respectively,
and (iii) if the Tender Offers resulted in Acquisition owning at least
two-thirds of the outstanding Common Stock and two-thirds of the
outstanding 8% Preferred Stock (which would enable the Supercanal
subsidiary to approve the Merger between the Company and itself even if
no other Stockholders voted in favor of the Merger), the Company and
Acquisition would be merged in a transaction in which Supercanal would
become the sole stockholder of the merged company and each holder who had
not tendered his or her Shares would receive $4.50 per Common Share and
$144, plus accrued dividends, per 8% Preferred Share, unless he or she
sought to obtain appraisal of such shares in accordance with Articles 5.11
through 5.13 of the TBCA. The price to be paid to the Company's common
shareholders was reduced from $4.53 per share to $4.50 per share and the
price to be paid to holders of the 8% Preferred Stock was reduced from
$144.96 per share to $144 per share because the Company and Supercanal
determined that the price necessary to purchase certain minority interests
in joint ventures of the Company, as required by the Merger Agreement, had
to be increased in order to assure that the holders of such interests
would sell such interests. On September 15, 1997, the day prior to the
date of execution of the Original Merger Agreement, the closing price for
the Company's Common Stock, as reported on the NASDAQ SmallCap Market, was
$3.375 per share. The 8% Preferred Stock is not publicly traded.
Accordingly, the prices to be paid in the Tender Offers, even after being
reduced from $4.53 to $4.50 per share of Common Stock and from $144.97 to
$144 per share of 8% Preferred Stock, represented a premium of 33.3%
and 44.0% in excess of the closing price of the Common Stock and the
redemption price of the 8% Preferred Stock, respectively. The Company's
Board of Directors deemed the premiums to be significant and concluded
that the Tender Offers would enable the Company's stockholders to realize
a price per Share significantly higher than the price per Share such
stockholders would be likely to realize through an open market sale of
Shares in the absence of the Tender Offers.
After the Original Merger Agreement was signed, required filings were
made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the waiting periods required by the HSR Act
were terminated. Also, agreements between Supercanal and various financial
institutions, including an agreement with ING Bank N.V., pursuant to which
Supercanal received the financing required for the Tender Offers and the
Merger contemplated by the Original Merger Agreement, were drafted.
However, before those financing agreements were signed, it was realized
that the purchase by Acquisition of 45% of the Company's Common
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Stock and 30% of its 8% Preferred Stock would not result in the Company's
financial statements being included in Supercanal's consolidated financial
statements. Consequently, the Merger would cause Supercanal to be in
violation of financial ratio covenants which were required in the loan
agreements.
On November 5, 1997, representatives of Supercanal informed the
Company's principal executive officers that Supercanal would not be able
to carry out the transactions contemplated by the Original Merger
Agreement due to the reasons mentioned above. Discussions ensued, and on
December 5, 1997, Acquisition and the Company entered into the Amended
Stock Purchase and Merger Agreement. The Merger Agreement provides that
(i) on December 5, 1997, Acquisition shall purchase a total of 6,006,006
shares of the Company's Common Stock for $20,000,000 ($3.33 per share), of
which $15,000,000 would be paid in cash and the balance would be paid by
permitting the Company to keep a $5,000,000 deposit which the Acquisition
had given to the Company when the Original Merger Agreement was executed,
(ii) the Tender Offers shall be announced not later than December 5, 1997
and materials relating to the Tender Offers shall be sent to the Company's
stockholders not later than December 12, 1997, and (iii) if, pursuant to
the Tender Offers, Acquisition obtains at least two-thirds of the
outstanding Common Stock and two-thirds of the outstanding 8% Preferred
Stock (the "Minimum Condition"), the Merger shall occur. In such a case,
Acquisition will be merged with and into the Company, thus forming
Surviving Corporation. The Merger Agreement is described in Item 3(b)
under the caption "The Merger Agreement."
In the past two years, the Board has explored in detail numerous
proposals for maximizing stockholder value. These opportunities included
the merger of the business activities of the Company into other entities
engaged in similar activities, the raising of additional funds through the
public and private sale of securities of the Company and the outright sale
of the Company to independent companies. In addition to the discussions
the Company had with Supercanal, during the winter of 1996-1997, the
Company held negotiations with United International Holdings, Inc. ("UIH")
regarding a possible business combination between UIH and the Company.
These discussions were ultimately terminated as a result of the inability
of the parties to reach agreement on various issues, including the pricing
of the transaction and certain contingent liabilities. During the past two
years, detailed discussions were conducted regarding the value of the
Company's properties relative to those of potential merger candidates.
Additionally, the Board considered the prices being paid for properties
that were similar to those owned by the Company. Based upon these
analyses, the Board concluded that the prices per Share offered by
Acquisition pursuant to the Tender Offers was among the highest prices
paid in the equity market for properties similar to that owned by the
Company. Such conclusion was reached after an analysis of the per share
tender prices relative to per subscriber values, trailing estimated cash
flow multiples, discounted cash flow analyses and certain other
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criteria. As mentioned above, in analyzing other alternatives, the Company
attempted to estimate the potential financial benefits and risks other
alternatives would provide its shareholders. In alternatives where the
Company's shareholders would receive securities of another company, the
potential benefits included the possibility that the value of a combined
entity would be greater than that of the Company alone and that the
Company's shareholders would share in this increased value by owning
shares in such entity. In such a situation, the risks include the
potential illiquidity of such securities and the risk that the market
would not value a combined entity greater than that of the Company alone.
In alternatives where the Company sought to raise funds to finance
expansion or otherwise seek to grow, the potential benefits included the
ability of the company to control the growth of its business and the
ability of the Company's shareholders to control the sale of their shares
and potential risks included the cost of such funds and ability of the
company to acquire and integrate additional cable systems. Given the
uncertainty of success of these alternative strategies and the significant
cash premium to the current market price that the Tender Offers
represented, the Board chose to pursue the Tender Offers.
Subsequent to the execution of the Original Merger Agreement, the
Argentine cable television market experienced significant changes. Several
acquisitions have been announced which suggest that the Argentine cable
television market will be consolidated by three companies: Multicanal
S.A. ("Multicanal"), which holds a minority interest in Supercanal,
Cablevision S.A. ("Cablevision"), which is controlled by CEI and
Supercanal. Additionally, an affiliate of Supercanal acquired the
Argentine cable television assets of United International Holdings, Inc.,
and as a result of this acquisition, the Company and Supercanal operate
competitive cable television systems in the Argentine cities of Comodoro
Rivadavia, Trelew and Rawson. The Board has concluded that Tender Offers
represent an excellent opportunity for the Company's stockholders to
capitalize on the competitive re-alignment underway in the Argentine
market.
Additionally, prior to executing the Original Merger Agreement, the
Company obtained a verbal opinion (the "Fairness Opinion") from Arnhold &
S. Bleichroeder, Inc. ("Bleichroeder"), an independent, third party
investment banker, regarding the fairness of the Tender Offers proposed by
Acquisition. Bleichroeder has provided financial and advisory services to
the Company since the commencement of its operations in Argentina
including, but not limited to, investment banking services pertaining to
prospective mergers, capital-raising activities and financial
negotiations. Bleichroeder provided to the Board an unqualified Fairness
Opinion which concluded that the Tender Offers were fair and equitable to
the Company's stockholders from a financial point of view. Bleichroeder
re-issued its Fairness Opinion in written form at the time of execution of
the Merger Agreement, a copy of which is filed as Exhibit 6 hereto."
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INFORMATION STATEMENT PURSUANT TO SECTION 14(F).
The sixth paragraph of the section of the Schedule 14D-9 entitled
"INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER" is hereby deleted and replaced in its
entirety by the following:
"The information contained in this Information Statement concerning
Acquisition has been furnished to the Company by Acquisition."
EXHIBIT G FAIRNESS OPINION.
Exhibit 6 to the Schedule 14D-9, the Fairness Opinion of Arnhold & S.
Bleichroeder, is hereby amended and restated in its entirety as on the
enclosure herewith.
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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 Amendment is true, complete
and correct.
December 24, 1997
/s/ Jack R. Crosby
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Jack R. Crosby
Chairman of the Board and
Chief Executive Officer
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[LETTERHEAD]
(212) 698-3000
December 8, 1997
Board of Directors
Tescorp, Inc.
327 Congress Avenue, Suite 200
Austin, Texas 78701
Members of the Board:
We understand that Tescorp Acquisition Corporation ("Acquisition"), a
wholly owned subsidiary of Supercanal Holding S.A. and Tescorp, Inc.
("Tescorp" or the "Company"), has entered into a Stock Purchase and Merger
Agreement dated as of September 16, 1997 (the "Agreement") and subsequently
amended on December 5, 1997 (the "Amended Agreement") regarding the proposed
purchase of the Company, in cash, by Acquisition (the "Proposed Acquisition").
The Amended Agreement provides that, following the purchase of 6,006,006
shares of Tescorp Common Stock for a total consideration of $20,000,000,
Acquisition will offer to purchase all the outstanding Tescorp Common Stock
for a per share amount equal to $4.50 in cash and offer to purchase all the
outstanding 8% Preferred stock for a per share amount equal to $144.00 in
cash, plus an amount equal to accrued and unpaid dividends. The terms and
conditions of the Proposed Acquisition are set forth in more detail in the
Amended Agreement.
We have acted as financial advisor to the Company in connection with its
review of the strategic alternatives for the Company and with the negotiation
of the Proposed Acquisition, and have been requested by the Company to render
our opinion with respect to the fairness, from a financial point of view to
the Company's stockholders, of the consideration to be offered to such
stockholders in the Proposed Acquisition. We have not been requested to opine
as to, and our opinion does not in any manner address, the Company's
underlying business decision to proceed with or effect the Proposed
Acquisition.
In arriving at this opinion, we reviewed and analyzed, among other
things, the following: (i) the Agreement and the Amended Agreement; (ii)
publicly available information concerning Tescorp which we believed to be
relevant to its inquiry; (iii) financial and operating information with
respect to the business, operations and prospects of Tescorp furnished to us
by Tescorp;
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Tescorp, Inc.
Page Two
(iv) trading history of Tescorp's Common Stock up to September 15, 1997 (the
last trading day prior to the September 16, 1997 Agreement); (v) a comparison
of the historical financial results and present financial condition of
Tescorp with those of other publicly traded companies which we deemed
relevant; and (vi) a comparison of the financial terms of the Proposed
Acquisition with the terms of certain other recent transactions which we
deemed relevant. In addition, we had discussions with the management of
Tescorp concerning the Company's business, operations, assets, financial
condition and prospects, and undertook such other studies, analyses
and investigations as we deemed appropriate for the purposes of the opinion
expressed herein.
In condition with our review, we assumed and relied upon the accuracy and
completeness of the financial and other information used by us in arriving at
our opinion without independent verification and further relied upon the
assurances of the management of Tescorp that it was not aware of any facts
that would make such information inaccurate. With respect to the financial
and operating information relating to the business, operations and prospects
of Tescorp, with the consent of Tescorp, we assumed that such information had
been reasonably prepared on a basis reflecting the then best currently
available estimates and judgments of the management of Tescorp. In arriving
at our opinion, we did not make nor obtain any evaluations or appraisals of
the assets or liabilities of Tescorp. Our opinion is necessarily based upon
market, economic and other conditions as they existed on, and could be
evaluated as of, the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Acquisition and will receive a fee for our services, a portion of
which is contingent upon the consummation of the Proposed Acquisition. In
addition, the Company has agreed to indemnify us for certain liabilities
arising out of the rendering of this opinion. We have performed various
investment banking services for Tescorp in the past and have received fees
for such services. In the ordinary course of our business, we actively trade
in the equity securities of the Company for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities. In addition, certain of our affiliated
funds under management hold long positions in the securities of the Company.
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Tescorp, Inc.
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Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the Company's stockholders in the Proposed Acquisition is fair to
such stockholders.
This opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to the Proposed Acquisition.
Very truly yours,
Arnhold and S. Bleichroeder, Inc.
