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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT: AUGUST 25, 1997
MORRISON KNUDSEN CORPORATION
(formerly Washington Construction Group, Inc.)
Commission File Number 1-12054
A Delaware corporation
IRS Employer Identification No. 33-0565601
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208/386-5000
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ITEM 5. OTHER MATERIAL IMPORTANT EVENTS.
On August 25, 1997, the Company announced that, following the
recommendation of a special committee of independent directors, its Board of
Directors has approved an agreement in principle with Dennis R. Washington,
chairman of the board, regarding the purchase by the Company of Montana
Resources, Inc. from Washington. (See the attached press release filed as
Exhibit 99.1 hereto and incorporated herein by this reference.)
SIGNATURE
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.
MORRISON KNUDSEN CORPORATION
August 27, 1997 By: /s/ Stephen G. Hanks
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Stephen G. Hanks
Executive Vice President, Chief Legal Officer
and Secretary
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EXHIBIT 99.1
MORRISON KNUDSEN CORPORATION
NEWS RELEASE
Morrison Knudsen Plaza/P. O. Box 73
Boise, Idaho 83729 For Further Information Contact:
Web Site: www.mk.com Corporate Communications
Phone: (208) 386-5255
FOR RELEASE:
AUGUST 25, 1997
AGREEMENT IN PRINCIPLE REACHED REGARDING PURCHASE BY MK OF
MONTANA MINING FIRM
BOISE - Upon the recommendation of a special committee of independent
directors of Morrison Knudsen Corporation (MK), the MK Board of Directors has
approved an agreement in principle with Dennis R. Washington, chairman of the MK
Board, regarding the purchase by MK of Montana Resources, Inc. (MRI) from
Washington. The special committee determined that the transaction would be fair
to MK and its stockholders.
The agreement is subject to negotiation of final documentation, must be
approved by the company's stockholders and will be subject to other conditions
including regulatory and other approvals. The agreement also requires an opinion
from Dillon, Read & Co. Inc., financial advisor to the special committee, that
the consideration being paid for MRI is fair, from a financial point of view, to
the stockholders of MK other than Washington. The transaction could be
completed by year-end.
MRI owns a 50.1-percent interest in a copper mining and concentrating
operation in Butte, Montana. According to the agreement, MK would purchase MRI
for 2.2 million shares of newly issued Series B convertible paid-in-kind
preferred stock at an issue price of $50 per share for a total of $110 million.
The preferred stock to be issued to Washington would be convertible into
MK common stock five years after the closing date at a conversion price of
$13.65 per share (approximately 3.663 shares of common stock for each share of
preferred stock) which represents a 15.0 percent premium over the 10-day average
common stock trading price at the close of business on August 22, 1997. The
preferred stock would accrue a 6.25 percent annual dividend (payable in
preferred stock); and potentially earn at the end of the five-year period a
stock appreciation bonus of additional common shares if MK's common stock
achieves target prices above $13.65 per share up to a maximum of 911,800 shares
at or above $17.30 per share.
After five years, if Washington converts all of the preferred shares to
common stock and realizes the additional 911,800 stock appreciation bonus
shares, his total ownership of MK common shares will have increased by 11.9
million shares. Washington presently owns approximately 20.2 million shares
(37.5 percent) of MK's approximately 54 million outstanding primary shares of
common stock.
The Butte mine, one of the best managed pit operations, with 326 employees,
is a low cost producer of copper and molybdenum. Some 45,000 tons of ore are
processed daily, 365 days per year. During the past 10 years, the average annual
production of concentrate has contained the equivalent of approximately 90
million pounds of refined copper and 10 million pounds of refined molybdenum.
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At current production rates, ore reserves are estimated to be sufficient
for more than 30 years of operation. In 1996, the mine had net income before
taxes of $27.8 million on sales of $107.7 million. Revenue and net income of the
mine are highly dependent upon the price of copper and can vary significantly
from year to year. Production and financial information for 1996 is not
necessarily representative of the mine's future performance.
Additional terms of the agreement in principle are as follows:
-- The preferred stock is not redeemable prior to the fifth anniversary of
the date of initial issuance. If Washington does not elect to convert the
preferred stock into common stock on the fifth anniversary of the date of
initial issuance, MK may, at its option, (1) redeem the preferred stock (plus an
amount equal to accrued and unpaid dividends to the date of redemption), in
whole or in part, for cash or for common stock of MK at $13.65 per share of
common stock, or (2) exchange the preferred stock (plus accrued and unpaid
dividends) for newly issued subordinated debentures of MK carrying an annual
interest rate of 6.25 percent and maturing on the fifteenth anniversary of the
date of initial issuance.
-- During the initial five-year period, the preferred stock would have one-
tenth of one vote for each share of underlying common stock except on matters
adversely affecting the preferred stock as a class or as required by law. In
addition, in the event MK issues additional shares of voting stock, the
preferred stock would be entitled to incremental voting rights (up to one vote
for each share of underlying common stock) which would provide Washington with
certain protections against dilution of his current voting interest in MK.
-- The preferred stock would rank senior to all classes of equity other
than the currently outstanding Series A preferred stock of MK as to dividends
and upon liquidation. The preferred stock would be subject to customary change-
of-control provisions.
-- During a 10-year period the company would be required to have at least
three directors who are independent of both Washington and the company.
-- During a six-year period, Washington must obtain approval from the
independent members of the MK Board of Directors prior to increasing his
ownership of MK shares.
Morrison Knudsen Corporation (MK-NYSE) has 8,500 employees at work in 33
countries serving the environmental, industrial, heavy civil construction,
mining, operations & maintenance, power, process and transportation markets as
an engineer and constructor.
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