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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. _________)
Filed by the Registrant /_/
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement /_/ Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SIMPSON INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
MMI INVESTMENTS II-A, L.P.; MCM MANAGEMENT, LLC;
MILLBROOK CAPITAL MANAGEMENT, INC.; JOHN S. DYSON;
CLAY B. LIFFLANDER; ALAN L. RIVERA; ROBERT B. KAY AND JEROME LANDE
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(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
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/X/ No fee required.
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[MMI LETTERHEAD]
YOU DESERVE THE CHANCE TO MAXIMIZE
YOUR INVESTMENT IN SIMPSON
March 10, 2000
Dear Fellow Simpson Shareholder:
In several weeks, Simpson Industries, Inc. ("Simpson" or the "Company")
will be holding its most important Annual Meeting of Shareholders in years. At
this meeting, you, as a shareholder, will have the opportunity to express your
view that now is the time to take action to enhance the value of your investment
in Simpson.
AT THE FORTHCOMING ANNUAL MEETING, MMI INVESTMENTS II-A, L.P. ("MMI")
WILL BE PRESENTING A PROPOSAL (THE "SHAREHOLDER VALUE PROPOSAL") CALLING FOR THE
AUCTION OF SIMPSON AND NOMINATING THREE INDIVIDUALS (THE "MMI NOMINEES") FOR
ELECTION TO THE SIMPSON BOARD, EACH OF WHOM IS COMMITTED TO THE MAXIMIZATION OF
THE VALUE OF YOUR SHARES THROUGH THE SOLICITATION OF OFFERS FOR THE SALE OF
SIMPSON.
WHY IS MMI TAKING THIS ACTION?
We OWN 850,000 shares, or 4.7%, of Simpson's outstanding common stock -
nearly double the combined OWNERSHIP of Simpson's five highest paid executives
and all ten directors. Our interest is the same as yours: the creation of value
for investors in our Company. Our concern is also the same as yours: we do not
believe Simpson's management has a credible plan to reverse the trend of
negative returns for both short- and long-term shareholders. Because the MMI
Nominees' sole interest is to increase the value of Simpson common stock, we
believe that MMI's interests are the same as those of our fellow shareholders.
WHY IS A SALE OF THE COMPANY THE RIGHT THING TO DO?
MMI believes that Simpson's public valuation does not nearly match the
intrinsic value of its underlying business and assets. However, due to Simpson's
relative size and obstacles facing smaller suppliers in the automotive parts
industry, we believe a Company like Simpson cannot hope to thrive purely on
internal growth. We also are not confident that Simpson can achieve growth
through acquisitions based on Simpson's historical failure to achieve meaningful
strategic acquisitions, its low stock price and its limited cash flow available
to support additional debt. As a small-cap public auto parts company, Simpson
has become an anachronism and we believe Simpson will only grow more isolated.
As such, we believe the best means available to the Company to realize any
significant appreciation in value (and to continue to support its customers,
employees and the community) is through an acquisition of the Company by a third
party with the vision and resources necessary to effectively compete in the auto
parts industry.
WHY IS NOW THE RIGHT TIME?
In spite of Simpson's record-breaking earnings performance in 1999,
Simpson's stock trades at approximately 4.25 times its 1999 earnings before
interest, taxes, depreciation and amortization ("EBITDA"), based upon closing
stock price at 3/8/00. This valuation has ACTUALLY DECLINED FROM THE SAME DATE
LAST YEAR. We believe that Simpson's poor valuation is not a temporary anomaly
associated with the poor stock price performance of the auto parts sector.
Rather it is based upon Simpson's size and strategic position, and therefore is
unlikely to improve in the future. Furthermore, since the beginning of this
year, four negotiated auto parts deals have been announced - AN INCREASE OVER
LAST YEAR AT THIS TIME! Because of the current environment for auto parts M&A
transactions, WHICH ARE BASED OFF OF EARNINGS, we believe that there is an
excellent chance for Simpson to achieve an optimal price with an auction, if
Simpson acts now. According to the December 1, 1999 issue of THE DAILY DEAL,
"...most acquisition targets in the auto parts industry have gone for seven (7)
to nine (9) times Ebitda." Based on Simpson's approximately $67 million of
EBITDA in 1999, Simpson would, even if valued at the low end of this range, have
a value of approximately $20 per share! WE THINK IT MAKES MORE SENSE TO HAVE THE
CHANCE TO MAXIMIZE VALUE IN OUR SIMPSON SHARES FOR CASH NOW, OR IN THE STOCK OF
A LARGER COMPANY THAT WE BELIEVE HAS A SIGNIFICANTLY BETTER CHANCE TO APPRECIATE
IN THE FUTURE.
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WHY IS MMI'S PRESENCE ON THE BOARD NECESSARY?
We have become convinced, as a result of our study of Simpson's public
record and our recent meeting with Chairman and CEO Roy Parrott (a meeting we
were only granted after nearly five months of requests), that Simpson
management, and Chairman Parrott in particular, does not understand and is
unwilling to address the issues facing Simpson. We believe Chairman Parrott is
entrenched by a pension system that rewards him for years of service rather than
value created for shareholders. Furthermore, we believe that the performance of
Chairman Parrott and his Board demonstrates a lack of understanding of both the
public marketplace and the merger and acquisition environment in which Simpson
operates. The MMI Nominees, on the other hand, offer a diverse background of
corporate finance, merger and acquisition, operational management,
manufacturing, and public service experience. ALL MMI NOMINEES ARE COMMITTED TO
MAXIMIZING SIMPSON SHAREHOLDER VALUE THROUGH THE SOLICITATION OF OFFERS FOR THE
SALE OF SIMPSON AT AN ATTRACTIVE PRICE. AFTER YOU HAVE REVIEWED SIMPSON'S
REASONS FOR OPPOSING THE MMI NOMINEES AND THEIR GOALS, ASK YOURSELF IF THEY ARE
COMMITTED TO ANYTHING BUT THE STATUS QUO.
The enclosed proxy statement describes our platform and reasoning in
great detail. We urge you to read it carefully. The following are some of the
topics which we feel are compelling issues in regard to the potential sale of
Simpson to a third party.
SIMPSON'S FEEBLE RETURN TO SHAREHOLDERS IS INDISPUTABLE
Regardless of whether you have owned Simpson stock for six months or
six years, you have experienced negative returns on your investment. This is
over a period of time where the primary index benchmarks for Simpson stock have
all experienced significant appreciation. Sadly, as our fellow shareholders
know, this has been a time not only of stagnant growth for our investment in
Simpson, but of missed opportunities for that investment capital.
The following graph, which compares the percentage change in the
cumulative total returns of the common stock of Simpson, the Standard & Poor's
500 Index, the Standard & Poor's Manufacturing (diversified industries) Index
("S&P MAND"), the Russell 2000 Index and an industry peer group selected by the
Company for use in its proxy statement illustrates the point. The percentage
change in cumulative total return has been calculated for the period beginning
on December 31, 1993 through February 29, 2000. Consider Simpson's poor stock
price performance for yourself.
STOCK PERFORMANCE* SINCE DECEMBER 1993
Cumulative Total Return Based on Initial Investment of $100 on December 31,
1993,
Assuming Reinvestment of Any Dividends
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 2/29/00
<S> <C> <C> <C> <C> <C> <C> <C>
Simpson $ 100 $ 68 $ 69 $ 87 $ 97 $ 83 $ 89
S&P 500 100 101 139 170 227 291 328
S&P MAND 100 103 145 194 266 326 326
Russell 2000 100 98 126 147 180 175 243
Peer Group Index 100 83 89 113 141 140 105
</TABLE>
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Take a close look at the performance graph. A $100 investment in
Simpson's Common Stock made on December 31, 1993 has been worth less than that
amount on each of the measurement dates in the graph. SHOULD SHAREHOLDERS OF
SIMPSON CONTINUE TO BE PATIENT WITH THESE RETURNS? WE BELIEVE NOT.
SIMPSON HAS NOT REACTED TO CHANGES IN THE GLOBAL MARKETPLACE
The auto parts industry has experienced dramatic change in the last
decade. As competition and consolidation among car manufacturers have increased,
there has been growing pressure on auto parts manufacturers like Simpson to cut
prices and expand product lines. The cost-cutting and investment capital needed
to meet these demands has led to a dominant consolidation trend among smaller
manufacturers in the auto parts industry. IT IS FOR THIS REASON THAT WHEREAS
THERE WERE 3,000 AUTO PARTS MANUFACTURERS IN 1990, IT IS ESTIMATED THAT BY THE
END OF 2000 THERE WILL BE APPROXIMATELY 350.
We believe that Simpson has been discounted by the public marketplace
and institutional investment community due to its lack of any significant growth
through an acquisition program. Furthermore, because of the discount to true
value at which Simpson stock trades and the limited cash flow it can use to
support debt, we believe that the Company is simply unable to make the
acquisitions it would need to approach an adequate valuation in the public
marketplace. THE MARKET IS MOVING AWAY FROM SIMPSON AT A FASTER RATE THAN
SIMPSON CAN GROW. THE TIME FOR CHANGE IS NOW.
THE MMI NOMINEES
The MMI Nominees represent a diverse background of public finance,
private investment, merger and acquisition, public service, and operational
manufacturing experience. EACH OF THE MMI NOMINEES HAS FURTHER INDICATED THAT,
IF ELECTED TO THE BOARD, HE WILL WAIVE AND FOREGO THE RECEIPT OF ANY
COMPENSATION PAYABLE BY SIMPSON TO HIM AS A RESULT OF HIS SERVING AS A MEMBER OF
THE BOARD.
The MMI Nominees are united in the belief that unless the Board of
Directors elects to seek a sale of the Company, not only will investors continue
to suffer with stagnant or negative returns, but the eventual result will be the
deterioration of Simpson's business to the detriment of its employees,
customers, and the general community. Moreover, the MMI Nominees' significant
ownership of Simpson stock makes them uniquely qualified to serve as the voice
of the shareholders. Please consider that, if elected to the Board, the MMI
Nominees will be:
- THE MEMBERS OF THE BOARD WITH THE GREATEST BENEFICIAL OWNERSHIP OF
COMMON STOCK;
- THE ONLY SIGNIFICANT SHAREHOLDERS ON THE BOARD WHO ARE NOT DRAWING A
SALARY FROM THE COMPANY IN EXCESS OF A QUARTER OF A MILLION DOLLARS
ANNUALLY; AND
- THE ONLY MEMBERS OF THE BOARD WHO WILL NOT RECEIVE DIRECTORS' FEES OR A
SALARY FROM THE COMPANY.
WE BELIEVE THE MMI NOMINEES WILL BE THE ONLY DIRECTORS WHOSE INTERESTS
ARE COMPLETELY AND SOLELY ALIGNED WITH THOSE OF OUR FELLOW SHAREHOLDERS.
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YOUR VOTE IS CRUCIAL
You, as the true owner of Simpson, have the chance to define a new
course of action for the realization of value for shareholders. Management will
counsel that now is not the time to act; that there are other alternatives. We
urge you to be skeptical of efforts to avoid action and to question whether
there are other possible motivations behind management's attempt to deflect
shareholders from a sale of the Company.
The MMI Nominees are not employees of the Company. Nor are we potential
acquirers. The MMI Nominees have only one interest: the appreciation of our
mutual investment in Simpson. We urge you to exercise your right as an owner of
the Company to send a message to Chairman Parrott and the rest of Simpson
management that the same course of inaction that has torpedoed our company's
value, will not be tolerated in the future.
WE THANK YOU FOR YOUR SUPPORT.
JOHN S. DYSON CLAY B. LIFFLANDER ALAN L. RIVERA
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*********IMPORTANT*********
1. Be sure to vote on the BLUE card. Vote "FOR" the MMI Nominees and "FOR"
the Shareholder Value Proposal. We urge you not to sign any proxy card
which is sent to you by Simpson, even as a protest vote against the
incumbent Board of Directors. REMEMBER, EACH PROPERLY EXECUTED PROXY YOU
SUBMIT REVOKES ALL PRIOR PROXIES. EVEN IF YOU HAVE ALREADY SUBMITTED A
PROXY SENT TO YOU BY SIMPSON, YOU SHOULD SIGN AND RETURN THE MMI BLUE
PROXY.
2. If any of your shares are held in the name of a bank broker or other
nominee, please contract the person responsible for your account and
direct him/her to vote on the BLUE PROXY CARD "FOR" THE MMI NOMINEES
AND THE SHAREHOLDER VALUE PROPOSAL.
3. If you have any questions or need assistance in voting your shares, please
feel free to contact:
D.F. KING & CO. INC.
(888) 242-8149
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* The S&P 500 Index is a broadly diversified index that is based on the
stock prices of 500 different companies, broken down as of February 29,
2000 into 378 industrial companies, 40 utilities, 11 transportation
companies, and 71 financial institutions. It is a capitalization
weighted index which means changes in the price of a particular stock
will influence the index in proportion to the total market value of the
outstanding stock of that particular company. As of February 29, 2000,
the weighted average market value of the S&P 500 Index was
approximately $134 billion while the median market value of stocks
represented in that index was approximately $7.9 billion. The average
price/earnings ratio of companies included in the S&P 500 Index as of
February 29, 2000 was 31.08. The S&P MAND is an index that is based on
the stock prices of 11 manufacturing companies that is designed to
measure the performance of the manufacturing (diversified industries)
sector of the S&P 500 Index. It is also a capitalization weighted
index. The average price/earnings ratio of companies included in the
S&P MAND as of February 29, 2000 was 21.54. The Russell 2000 Index
measures the performance of the 2,000 smallest companies in the Russell
3000 Index, which represent approximately 8% of the total market
capitalization of the 3,000 largest US companies based on TOTAL MARKET
CAPITALIZATION. As of June 30, 1999, the average market capitalization
of such companies was approximately $526.4 million. As of February 29,
2000, the average price/earnings ratio of such companies was 63.88. As
of February 29, 2000, Simpson's market capitalization was approximately
$181.2 million and its price/earnings ratio was 8.83.
