<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-3
(AMENDMENT NO. 2)
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E)
OF THE SECURITIES EXCHANGE ACT OF 1934)
---------------------
WCI STEEL, INC.
(Name of the Issuer)
------------------------
WCI STEEL HOLDINGS, INC.
THE RENCO GROUP, INC.
(Name of Person(s) Filing Statement)
------------------------
COMMON STOCK, NO PAR VALUE, $.01 STATED VALUE
(Title of Class of Securities)
92923J109
(CUSIP Number of Class of Securities)
------------------------
DENNIS A. SADLOWSKI, ESQ.
WCI STEEL HOLDINGS, INC.
THE RENCO GROUP, INC.
C/O THE RENCO GROUP, INC.
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
------------------------
COPY TO:
MICHAEL C. RYAN, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
------------------------
This Statement is filed in connection with (check the appropriate box):
a. / / The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. /X/ A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials statement referred to in
checking box (a) are preliminary copies. / /
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<PAGE>
TENDER OFFER
This Amendment No. 2 (this "Amendment") on Schedule 13E-3 amends and
supplements the Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Statement") originally filed with the Securities and Exchange Commission (the
"Commission") on October 28, 1996 by WCI Steel Holdings, Inc., a Delaware
corporation ("Holdings"), and The Renco Group, Inc., a New York corporation
("Renco") that beneficially owns 30,746,900 shares of common stock, no par
value, $.01 stated value (the "Shares"), of WCI Steel, Inc., an Ohio corporation
(the "Company"), as amended by Amendment No. 1 thereto, filed with the
Commission on October 31, 1996, relating to the offer by Holdings to purchase
all of the outstanding Shares at $10.00 per Share, net to the seller in cash, on
the terms and subject to the conditions, and as more fully set forth in, the
Offer to Purchase, dated October 28, 1996 (including the First Supplement filed
as Exhibit (d)(10) to this Amendment, the "Offer to Purchase"), and in the
related Letter of Transmittal, copies of which have been previously filed with
the Statement as Exhibits (d)(1) and (d)(2), respectively, thereto (which, as
may be thereafter amended, collectively constitute the "Offer").
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings ascribed to such terms in the Statement. Except as
expressly set forth herein, all information in the Statement remains unchanged,
and is incorporated herein by reference.
CROSS REFERENCE SHEET
The Cross Reference Sheet is hereby amended and restated to read in its
entirety as follows:
<TABLE>
<CAPTION>
WHERE LOCATED IN THE SCHEDULE
ITEM IN SCHEDULE 13E-3 14D-1
- ----------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C>
Items 1(a)-(c)................................................................ Items 1(a)-(c)
Items 1(d)-(f)................................................................ *
Item 2....................................................................... Item 2
Item 3(a)(1)................................................................. Item 3(a)
Item 3(a)(2)................................................................. Item 3(b)
Item 3(b).................................................................... *
Item 4(a).................................................................... *
Item 4(b).................................................................... **
Item 5....................................................................... Item 5
Item 6(a).................................................................... Item 4(a)
Item 6(b).................................................................... *
Item 6(c).................................................................... Item 4(b)
Item 6(d).................................................................... Item 4(c)
Item 7(a).................................................................... Item 5
Item 7(b).................................................................... **
Items 7(c)-(d)................................................................ *
Items 8(a)-(e)................................................................ *
Item 8(f).................................................................... **
Items 9(a)-(c)................................................................ *
Item 10(a)................................................................... Item 6(a)
Item 10(b)................................................................... Item 6(b)
Item 11...................................................................... Item 7
Item 12...................................................................... *
Item 13(a)................................................................... *
Items 13(b)-(c)............................................................... **
Item 14(a)................................................................... *
Item 14(b)................................................................... **
Item 15(a)................................................................... **
Item 15(b)................................................................... Item 8
Item 16...................................................................... Item 10(f)
Item 17(a)................................................................... Item 11(b)
Item 17(b)................................................................... *
Item 17(c)................................................................... Item 11(c)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
WHERE LOCATED IN THE SCHEDULE
ITEM IN SCHEDULE 13E-3 14D-1
- ----------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C>
Item 17(d)................................................................... Item 11(a)
Item 17(e)................................................................... *
Item 17(f)................................................................... Item 11(f)
</TABLE>
- ------------------------
* Information in response to these Items of this Schedule 13E-3 is not
required to be included in the Schedule 14D-1.
** Not applicable.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Item 17 is hereby amended and restated to read in its entirety as follows:
(a) Commitment Letter, dated October 25, 1996, from Congress Financial
Corporation to The Renco Group, Inc.
(b)(1) Report of Gleacher NatWest Inc. to the Independent Director, dated
October 20, 1996.
(b)(2) Selected pages of the preliminary board report.
(c)(1) Letter, dated October 9, 1996, from The Renco Group, Inc. to the
Board of Directors of WCI Steel, Inc.
(c)(2) The information set forth under "Special Factors--Interests of
Certain Persons" in Exhibit (d)(1), the Offer to Purchase, is
incorporated herein by reference.
(d)(1) Offer to Purchase, dated October 28, 1996.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Guaranteed Delivery.
(d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(d)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(d)(7) Letter to Shareholders of the Company, dated October 28, 1996.
(d)(8) Text of Press Release issued by WCI Steel, Inc. on October 23, 1996.
(d)(9) Summary Advertisement, dated October 31, 1996.
(d)(10) First Supplement, dated November 18, 1996, to Offer to Purchase,
dated October 28, 1996.
(e) Sections 1701.84 and 1701.85 of the Ohio General Corporation Law
(attached as Annex A to Exhibit (d)(1), the Offer to Purchase).
(f) Not applicable.
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: November 18, 1996
WCI STEEL HOLDINGS, INC.
By: /s/ ROGER L. FAY
-----------------------------------------
Name: Roger L. Fay
Title: Vice President
THE RENCO GROUP, INC.
By: /s/ ROGER L. FAY
-----------------------------------------
Name: Roger L. Fay
Title: Vice President, Finance
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE NO.
- --------- -------------
<S> <C> <C>
(a) Commitment Letter, dated October 25, 1996, from Congress Financial Corporation to The Renco
Group, Inc.................................................................................... *
(b)(1) Report of Gleacher NatWest Inc. to the Independent Director, dated October 20, 1996*.......... --
(b)(2) Selected pages of the preliminary board presentation.......................................... *
(c)(1) Letter, dated October 9, 1996, from The Renco Group, Inc. to the Board of Directors of WCI
Steel, Inc.................................................................................... *
(c)(2) The information set forth under "Special Factors--Interests of Certain Persons" in Exhibit
(d)(1), the Offer to Purchase, is incorporated herein by reference............................ *
(d)(1) Offer to Purchase, dated October 28, 1996..................................................... *
(d)(2) Letter of Transmittal......................................................................... *
(d)(3) Notice of Guaranteed Delivery................................................................. *
(d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.............. *
(d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees...................................................................................... *
(d)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9......... *
(d)(7) Letter to Shareholders of the Company, dated October 28, 1996................................. *
(d)(8) Text of Press Release issued by WCI Steel, Inc. on October 23, 1996........................... *
(d)(9) Summary Advertisement, dated October 31, 1996................................................. *
(d)(10) First Supplement, dated November 18, 1996, to Offer to Purchase, dated October 28, 1996....... --
(e) Sections 1701.84 and 1701.85 of Ohio General Corporation Law (attached as Annex A to Exhibit
(d)(1), the Offer to Purchase.)............................................................... *
(f) Not applicable................................................................................ *
</TABLE>
* Previously Filed
<PAGE>
PROJECT BUCKEYE
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SUMMARY HISTORICAL AND PROJECTED FINANCIAL INFORMATION(a)
($ in Millions, Except Per Share and Per Ton Data)
<TABLE>
<CAPTION>
FYE OCT. 31, PROJECTED FYE OCT. 31,
------------------------ LTM EST. FYE ------------------------
JULY 31, OCT. 31,
1993 1994 1995 1996 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $578.6 $709.4 $631.0 $597.5 $657.5 $674.1 $677.6 $661.5
% GROWTH 12.2% 22.6% (11.1)% -- 4.2% 2.5% 0.5% (2.4)%
Gross Profit $86.6 $134.8 $86.2 $65.1 $108.9 $108.5 $120.4 $116.1
% MARGIN 15.0% 19.0% 13.7% 10.9% 16.6% 16.1% 17.8% 17.6%
EBITDA $67.5 $99.9 $66.5 $46.3 $87.1 $87.1 $98.1 $93.6
% MARGIN 11.7% 14.1% 10.5% 7.8% 13.2% 12.9% 14.5% 14.2%
Operating Income $46.5 $80.0 $45.3 $23.7 $64.6 $63.1 $72.9 $67.2
% MARGIN 8.0% 11.3% 7.2% 4.0% 9.8% 9.4% 10.8% 10.2%
Net Income $14.2 $30.9 $15.5 $3.2 $27.7 $28.2 $34.8 $32.5
EPS $0.44 $0.95 $0.42 $0.09 $0.76 $0.78 $0.95 $0.89
Weighted Avg. Shares 30.750 32.491 36.575 36.557 36.514 36.404 36.563 36.563
Shipments (000 NT) 1,302 1,468 1,222 1,264 1,391 1,383 1,400 1,350
Sales per Ton $445 $483 $516 $473 $473 $487 $484 $490
EBITDA per Ton 52 68 54 37 63 63 70 69
Op. Income per Ton 36 54 37 19 46 46 52 50
</TABLE>
- ------------------
(a) Projected financial information provided by BUCKEYE management.
-3-
<PAGE>
PROJECT BUCKEYE
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HISTORICAL AND PROJECTED FINANCIAL INFORMATION - INCOME STATEMENT
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FYE OCTOBER 31,
----------------------------------------------------------------------------------------------------
ACTUAL PROJECTED (a)
1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $578.6 $709.4 $631.0 $657.5 $674.1 $677.6 $661.5
COGS 492.0 574.6 544.8 548.6 565.6 557.2 545.4
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Gross Margin 86.6 134.8 86.2 108.9 108.5 120.4 116.1
D&A 21.0 19.9 21.2 22.5 23.9 25.2 26.4
SG&A 19.1 34.9 19.7 21.8 21.5 22.3 22.5
----------------------------------------------------------------------------------------------------
EBIT 46.5 80.0 45.3 64.6 63.1 72.9 67.2
Interest Expense (23.2) (28.7) (25.8) (25.0) (24.0) (22.9) (22.9)
Interest Income 0.0 1.4 5.4 6.3 7.9 8.1 9.8
Other Income, net 0.3 0.1 0.8 0.4 0.0 0.0 0.0
----------------------------------------------------------------------------------------------------
Pretax Income 23.6 52.8 25.8 46.2 47.1 58.0 54.1
Taxes (9.5) (21.9) (10.3) (18.5) (18.8) (23.2) (21.7)
----------------------------------------------------------------------------------------------------
Net Income $14.2 $30.9 $15.5 $27.7 $28.2 $34.8 $32.5
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
EPS $0.44 $0.94 $0.42 $0.76 $0.78 $0.95 $0.89
Shares Outstanding 30.750 32.491 36.575 36.514 36.404 36.563 36.563
EBITDA $67.5 $99.9 $66.5 $87.1 $87.1 $98.1 $93.6
Shipments (000 NT) 1,302 1,468 1,222 1,391 1,383 1,400 1,350
Sales per Ton $444 $483 $516 $473 $487 $484 $490
EBITDA per Ton 52 68 54 63 63 70 69
Op. Income per Ton 36 54 37 46 46 52 50
</TABLE>
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(a) Projected financial information provided by BUCKEYE management
<PAGE>
EXHIBIT A
FIRST SUPPLEMENT
TO
OFFER TO PURCHASE FOR CASH
WCI STEEL HOLDINGS, INC.
HEREBY AMENDS ITS
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
WCI STEEL, INC.
AT
$10.00 PER SHARE
THIS OFFER HAS BEEN AMENDED SO THAT THE OFFER AND THE WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 26, 1996, UNLESS
EXTENDED. TENDERS OF SHARES OF COMMON STOCK, NO PAR VALUE, $.01 STATED VALUE
(THE "SHARES"), MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN
THE OFFER TO PURCHASE, AS SUPPLEMENTED, AND THE LETTER OF TRANSMITTAL.
WCI Steel Holdings, Inc., a Delaware corporation ("Holdings") and a
wholly-owned subsidiary of The Renco Group, Inc., a New York corporation
("Renco"), hereby amends and supplements its Offer to Purchase For Cash, dated
October 28, 1996 (the "Offer to Purchase"), pursuant to which Holdings has
offered to purchase all of the outstanding shares of common stock, no par value,
$.01 stated value (the "Shares") of WCI Steel, Inc., an Ohio corporation (the
"Company" or "WCI"), at a purchase price of $10.00 per Share (the "Offer
Price"), net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase and in the related Letter
of Transmittal (which, together with this and any additional amendments or
supplements thereto, collectively constitute the "Offer").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Offer to Purchase.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
November 18, 1996
<PAGE>
SPECIAL FACTORS
BACKGROUND
The following should be read in conjunction with events relating to the
period October 11 through October 20, 1996 described on pages 4-5 of the Offer
to Purchase:
On October 11, 1996, the WCI Board received a letter from a representative
of Brickell Partners ("Brickell") stating that Brickell was a WCI shareholder
and stating Brickell's opinion that members of the Board have "heightened
responsibilities" to maximize shareholder value in the proposed transaction
which would take WCI "private."
In a letter to CW&T dated October 17, 1996, in response to a request made by
CW&T that Brickell's representative set forth its views in writing, Brickell,
based upon publicly available information, expressed its belief that the Offer
Price was inadequate because: the Offer Price was the same as the price offered
in the initial public offering in July 1994, a time at which WCI's financial
condition was not as strong; the price-to-cash-flow ratio being offered was
inadequate relative to other transactions in the industry; minority investors
would be denied the opportunity to participate in the future growth of WCI;
minority investors would be denied a premium in the event WCI were otherwise
acquired; and the premium contained in the Offer Price over the trading price of
WCI stock was inadequate relative to other minority acquisition transactions. As
a result of these letters, representatives from S&S and Gleacher NatWest met
with Brickell representatives at S&S's offices on October 18, 1996 at which time
Brickell's representatives expressed the same concerns set forth in the October
17 letter. The Independent Director considered each of the concerns raised by
Brickell and concluded that they had already been considered as part of the
Independent Director's analysis.
At the October 20, 1996 Board meeting, the Independent Director asked Renco
to confirm representations previously made that Renco was not in discussions
with any third party with respect to a sale of the Company and had no current
intention to effect such a sale. The Independent Director was motivated to ask
for such confirmation, in part, because of the concern raised by Brickell that
minority investors would not participate in a premium over the Offer Price in
the event WCI was subsequently acquired by a third party. In response, Mr.
Rennert confirmed representations made at prior Board meetings that there were
no discussions with any third parties concerning the sale of the Company, that
he had no current intention to effect such a sale and that, if there were a sale
of the Company, he would be prepared to share any premium over the Offer Price
with WCI's Public Shareholders. Neither the Independent Director nor the Board
asked Mr. Rennert to amend the Offer, but to eliminate any concern with respect
to the issue and primarily because he had no intention to sell the Company, Mr.
Rennert volunteered to amend the Offer to include the Contingent Cash
Consideration Rights which would be in effect for twelve months following the
consummation of the Equity Transactions.
CONTINGENT CASH CONSIDERATION RIGHTS
The following should be read in conjunction with the discussion under
"--Contingent Cash Consideration Rights" on page 8 of the Offer to Purchase:
In addition to the Offer Price, holders of Shares who have tendered and had
accepted for purchase their Shares pursuant to the Offer or whose Shares are
extinguished and who receive the Offer Price per Share pursuant to the Merger,
shall also be entitled to the right to receive, per Share, without interest, a
pro rata portion, equal to a fraction, the numerator of which is one and the
denominator of which is the total number of Shares outstanding immediately prior
to the consummation of the Equity Transactions, of the Sale Proceeds Amounts
(the "Contingent Cash Consideration Rights") from a Control Event within twelve
months following consummation of the Equity Transactions.
As set forth in the Offer to Purchase under "--Contingent Cash Consideration
Rights," neither Renco nor Holdings has any current or future plans, nor does it
intend to cause, directly or indirectly, a Control Event with respect to the
Company, which Control Event would give rise to the Contingent Cash
<PAGE>
Consideration Rights. As such, it is Holdings' view that it is highly unlikely
the Contingent Cash Consideration Rights will be realized, and therefore,
holders who tender their Shares or whose Shares are converted to the right to
receive the Offer Consideration pursuant to the Merger are unlikely to ever
receive any consideration in excess of the Offer Price.
In connection with the Contingent Cash Consideration Rights, the Company
shall report either through press releases or on the appropriate forms filed
with the Commission pursuant to the Securities Exchange Act of 1934, as amended,
in connection with its publicly-held debt securities (i) any merger of the
Company with another entity, (ii) all significant changes in ownership of equity
securities of the Company, and (iii) all significant sales of assets of the
Company other than in the ordinary course of business, and, in each such event,
whether the event is a Control Event. In addition, in the event of consummation
of a Control Event, the Company shall retain a nationally recognized investment
banking firm to determine the Sale Proceeds Amounts in connection therewith. In
the event that securities and tangible or intangible real or personal property
are received as all or part of the Sales Proceeds Amounts, and there is a
difference in the valuation of such securities or property, as the case may be,
by the Board and such investment banking firm, the valuation determined by the
latter shall control.
The Contingent Cash Consideration Rights shall only materialize in the event
of a Control Event by or with respect to the Company. Transactions by Renco
(including, but not limited to, a change of control of Renco itself), Holdings,
the Company or any of their respective affiliates or subsidiaries which do not
involve a Control Event by or with respect to the Company shall not give rise to
the Contingent Cash Consideration Rights. Thus, it should be noted that a change
of control of Renco could occur without causing a Control Event, in which case
the Contingent Cash Consideration Rights would not materialize. In the event any
such transaction did not constitute a Control Event, the Company would continue
to be obligated until the Rights expired.
The Contingent Cash Consideration Rights constitute a contractual obligation
for payment of certain consideration from Holdings to former holders of Shares
who have tendered and had accepted for purchase their Shares pursuant to the
Offer or whose Shares were extinguished and who received the Offer Price per
Share pursuant to the Merger, to the extent such consideration is due as a
result of a Control Event. Subsequent to the Merger, such contractual
obligations will be assumed by the Company (as the surviving corporation in the
Merger) by operation of law. Because such contractual obligations will be that
of the Company, (i) the Company will be obligated to use any proceeds from a
sale of all or substantially all of its assets to pay on the Contingent Cash
Consideration Rights, and (ii) any purchaser of a majority of the capital stock
of the Company would be assuming control of the Company, which includes its
assets and liabilities (which liabilities include the contractual obligations to
pay on the Contingent Cash Consideration Rights). With respect to item (i) in
the foregoing sentence, it should be noted that in connection with such sale of
assets, some or all of the liabilities of the Company (which may or may not
include the contractual obligations to pay on the Contingent Cash Consideration
Rights) may be assumed by the person(s) acquiring such assets. Thus, if the
contractual obligations to pay on the Contingent Cash Consideration Rights were
to be so assumed, holders of the Contingent Cash Consideration Rights would have
to look to such person(s) to enforce their rights thereunder; otherwise, the
contractual obligations will remain with, and holders may continue to look to,
the Company, to enforce their Contingent Cash Consideration Rights. Because the
Contingent Cash Consideration Rights will in all cases constitute a contractual
obligation from the Company to former holders of Shares, however, no person
will, subsequent to the Merger, act as a fiduciary on behalf of former holders
of Shares in enforcing the Contingent Cash Consideration Rights of such holders.
Former holders of Shares may only enforce their Contingent Cash Consideration
Rights through an action brought against the Company in a court of competent
jurisdiction.
The obligations of Holdings and the Company to determine whether a Control
Event has occurred and whether Contingent Cash Consideration Rights are due to
former holders of Shares are contractual, and are not and shall not be evidenced
by any document or writing other than the Offer, and none of Holdings, Renco or
the Company shall have any obligations in connection therewith other than as
expressly set forth in the Offer.
3
<PAGE>
FAIRNESS OF THE EQUITY TRANSACTIONS
The following should be read in conjunction with the discussion of the
Independent Director's consideration of the fairness of the Equity Transactions
and the description of the opinion of Gleacher NatWest on pages 10-17 of the
Offer to Purchase:
In determining the fairness of the Offer Price, the Independent Director,
relying on analyses completed by Gleacher NatWest, considered, among other
factors, the historical trading information up to the Initial Announcement. The
Independent Director did not consider market prices after such date because he
believed such prices to be speculative and reactive to the Initial Announcement
itself, and thus not appropriate in determining the fairness of the Offer Price.
To arrive at going concern value, the Independent Director considered comparable
company analysis and discounted cash flow analysis.
Neither the Independent Director nor Gleacher NatWest considered net book
value, liquidation value or the purchase price paid in prior transactions
involving the Shares to provide any more reasonable or meaningful guidance as
compared with the valuation methodologies used by Gleacher NatWest. In reaching
these conclusions, Gleacher NatWest and the Independent Director considered that
(x) the net book value of the Company has been artificially depressed by the
Company's emergence from bankruptcy in 1988, (y) their respective discussions
with the Company and its advisors led them to believe that no voluntary
liquidation of the Company was planned, nor was such a voluntary liquidation
feasible without the consent of Renco, which had expressed its intention to
continue operating the Company as a going concern, and (z) the absence of any
significant transactions in the Shares by the Company, Renco or any of their
respective affiliates. Gleacher NatWest selected the valuation methods
underlying its opinion as to the fairness, from a financial point of view, of
the Offer Price based on its discussions with the Company, its management and
advisors and based on Gleacher NatWest's experience in evaluating such matters.
The valuation methodologies performed by Gleacher NatWest were found to be more
appropriate by the Independent Director in assessing the fairness of the Offer
Price from a financial point of view.
THE BOARD. In determining that the Equity Transactions are fair to the
Company's Public Shareholders, the Board relied primarily on the opinion and
analysis of both the Independent Director and Gleacher NatWest, as well as its
own views of such opinions and analyses, and did not conduct on its own any
separate analysis of the fairness of the Equity Transactions. In making such
determination, the Board also considered the historical market price for the
Shares from July 20, 1994 (the date of the initial public offering) through the
date of the Initial Announcement, as well as the addition of the Contingent Cash
Consideration Rights to the Proposal. In relying primarily on the opinions and
analyses of the Independent Director and Gleacher NatWest, the Board did not
consider net book value, liquidation value or the purchase paid in prior
transactions involving the Shares for the reasons such factors were not
considered by the Independent Director or Gleacher NatWest, as described in the
immediately preceding paragraph.
THE TENDER OFFER
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
The following should be read in conjunction with the information regarding
withdrawal rights set forth on page 21 of the Offer to Purchase:
Holdings will accept for payment (and thereby purchase) and, under the terms
of the Offer, pay for Shares that are validly tendered and not properly
withdrawn, as soon as practicable after the later of the following dates: (i)
the Expiration Date, and (ii) the date of satisfaction or waiver of all of the
conditions to the Offer as set forth in the Offer; PROVIDED, HOWEVER, all such
conditions must be satisfied or waived by Holdings prior to the Expiration Date.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless already accepted for payment by Holdings as
provided in the Offer to Purchase, may also be withdrawn at any time after
December 27, 1996.
4
<PAGE>
SECTION 8. CERTAIN INFORMATION CONCERNING THE COMPANY, RENCO AND HOLDINGS
The following should be read in conjunction with "--Certain Company
Projections" on page 31 of the Offer to Purchase:
The Company also provided to the Independent Director other projections as
to the Company's future anticipated performance for the 1996, 1997, 1998, and
1999 fiscal years, including (i) tons shipped of 1,390,879, 1,383,000, 1,400,000
and 1,350,000, respectively; (ii) gross margin of $108.9 million, $108.5
million, $120.4 million and $116.1 million, respectively; and (iii) earnings
before interest, taxes, depreciation and amortization (EBITDA) of $87.1 million,
$87.1 million, $98.1 million and $93.6 million, respectively. For a more
complete description of the projected financial information, refer to the Report
of Gleacher NatWest filed as Exhibit (b)(1) to the Schedule 13E-3.
5
