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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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)
JUNE 12, 1998
LITTLE SWITZERLAND, INC.
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(Exact name of registrant as specified in charter)
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DELAWARE 0-19369 66-0476514
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
161-B CROWN BAY CRUISE SHIP PORT, ST. THOMAS, U.S.V.I. 00802
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (809) 776-2010
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Item 5 - Other Events
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Little Switzerland, Inc. (the "Company") distributed correspondence to its
shareholders, dated June 12, 1998, regarding its termination of the Agreement
and Plan of Merger, dated as of February 4, 1998, by and among the Company,
Destination Retail Holdings Corporation ("DRHC") and certain subsidiaries of
DRHC. A copy of such correspondence is attached hereto and incorporated herein
in its entirety.
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
Exhibit 99.1 - Correspondence from Little Switzerland, Inc. to shareholders
of Little Switzerland, Inc., dated June 12, 1998.
2
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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 thereunto duly authorized.
LITTLE SWITZERLAND, INC.
Date: June 15, 1998 By:/s/ John E. Toler, Jr.
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John E. Toler, Jr.
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
Exhibit 99.1 - Correspondence from Little Switzerland, Inc. to shareholders
of Little Switzerland, Inc., dated June 12, 1998.
</TABLE>
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Exhibit 99.1
[LETTERHEAD OF LITTLE SWITZERLAND, INC.]
June 12, 1998
Dear Fellow Stockholder:
On June 9, your Board of Directors terminated the merger agreement between
Little Switzerland and Destination Retail Holdings Corporation/*/, parent
company of Colombian Emeralds, due to Destination's inability to raise the
financing necessary to consummate the merger. Having taken this difficult but
necessary action, Little Switzerland will now pursue its long-term business plan
as an independent entity. We intend to devote our considerable energies to
rebuilding and revitalizing your Company. YOUR BOARD OF DIRECTORS IS CONVINCED
THAT ITS DECISION WAS IN THE BEST INTERESTS OF ALL LITTLE SWITZERLAND
STOCKHOLDERS.
WHY WE TERMINATED THE MERGER AGREEMENT
On May 8, 1998, following stockholder approval of the transaction, we
notified Destination that Little Switzerland had satisfied all of the conditions
to the merger agreement and informed Destination that we were prepared to close
the transaction at that time. In response, Destination informed us that it was
not yet prepared to close the merger, indicating that it had no financing and
requesting an extension of between 90 and 120 days. Although we had the
contractual right to terminate the merger agreement at any time after May 22, we
continued to work diligently with Destination to understand the structure,
timing and likelihood of Destination's financing, including making repeated
requests for, among other things, Destination's most recent fiscal year-end and
interim financial statements, which were not provided to us until the end of
May. As a result of such diligence, it became clear to us that it was highly
unlikely that Destination would be able to raise the funds necessary to meet its
obligations to Little Switzerland stockholders.
While your Board often felt frustrated in its efforts to obtain information
from Destination in order to gauge Destination's progress toward consummating
the merger, we did learn the following facts which supported our decision to
terminate the merger agreement:
. Donaldson, Lufkin & Jenrette ("DLJ"), Destination's original financing
source for the proposed transaction, refused to renew their customary
commitment letters for bridge and equity financing in the ordinary
course, despite Little Switzerland's solid performance;
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/*/ As referred to herein, Destination includes Destination Retail Holdings
Corporation, LSI Acquisition Corp., Young Caribbean Jewellery Company Limited,
Alliance International Holdings Limited and CEI Distributors Inc.
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. Though Destination had previously confirmed that it was continuing to
work with DLJ to obtain the necessary financing, Destination recently
informed us that it is no longer in active discussions with DLJ regarding
financing for the merger and that DLJ will not, under any circumstances,
provide any bridge or equity financing in connection with the proposed
transaction;
. Destination now has no financing commitments in place to raise the
financing necessary to consummate the merger, and Destination has
indicated that it must start anew its efforts to raise financing for the
transaction;
. Despite Little Switzerland's repeated requests for Destination to
demonstrate its commitment to the transaction through financial
consideration or otherwise, Destination absolutely refused to provide
Little Switzerland with any security or form of good faith payment, or
even to reimburse Little Switzerland's burgeoning merger-related expenses
going forward in exchange for an extension;
. Destination recently disclosed that it is fully drawn on its credit lines
and that most of its assets are pledged as collateral under existing loan
agreements; and
. Stephen Crane, Chairman of Destination and its principal stockholder,
refused to stand behind Destination's obligations to Little Switzerland
in connection with the merger by failing to provide a personal guarantee,
even though Mr. Crane provides such a guarantee in connection with
Destination's long-term debt and bank overdrafts.
Based on the foregoing, the Board of Directors has little confidence that
Destination will ever be able to obtain the financing necessary to consummate
the proposed transaction. In addition, the Board believes that Little
Switzerland has been significantly harmed by Destination's inability to honor
its contractual commitments under the merger agreement and has determined that
the additional delay associated with continuing the process with Destination
would entail considerable risk and cause additional harm to Little Switzerland's
business.
Since announcing the merger in February of 1998, your Board of Directors and
management has expended considerable amounts of time and money in their efforts
to consummate the transaction. Unfortunately, during the same six month period,
Little Switzerland suffered not only the loss of certain key employees but also
a deterioration in certain vendor relationships. As the likelihood of
Destination consummating the merger diminished, the urgency of protecting our
assets, employees and vendor relationships grew. In short, we reached a
critical juncture, and it became clear that a further accommodation of
Destination would come at the expense of Little Switzerland's own stockholders.
Our decision, therefore, reflects our conviction that Destination will most
likely not be able to secure the financing necessary to consummate the merger.
Given such uncertainty, the Board determined that the expected benefit of
providing Destination with a lengthy extension did not outweigh the significant
harm that Little Switzerland would suffer as a result of such further delay,
particularly as we must plan for our approaching peak selling season. As a
result, the Board of Directors of Little Switzerland believes that termination
of the merger agreement with Destination is in the best interests of Little
Switzerland and its stockholders.
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LITIGATION COMMENCED
Little Switzerland has commenced legal action against Destination, Stephen
Crane and other related entities in the United States Federal Court for the
District of Delaware, seeking damages caused by the defendants' breach of the
merger agreement. We are seeking compensation for damages caused by Mr. Crane
and his companies as a result of their inability to fulfill the terms of the
merger agreement, an agreement which Mr. Crane aggressively pursued. We intend
to prosecute that action vigorously on behalf of Little Switzerland
stockholders.
OUR FUTURE
Little Switzerland remains a world class organization in an attractive and
rapidly growing industry. As an independent entity, we look forward to pursuing
our long-term business plan to capitalize on our strengths and take advantage of
the lucrative markets in which we compete. Having acted in the best interests of
stockholders to protect our considerable assets, our sole focus moving forward
will be to grow your Company and increase its profitability, and, accordingly,
we have instructed Wasserstein, Perella & Co., Inc. to cease its efforts to sell
the Company. In the short-term, our results will be affected by, among other
things, the expense and disruption caused by Destination. Over the long-term,
however, we are optimistic that we will deliver on our pledge to our
stockholders to build an even stronger and more profitable franchise. We will
continue to be ever mindful of our ultimate responsibility to you, our
stockholders, to enhance the value of your investment in Little Switzerland.
On behalf of your Board of Directors and all of the dedicated Little
Switzerland employees, thank you for your continued support.
Sincerely,
/s/ C. William Carey
C. William Carey
Chairman of the Board
