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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 (Date of earliest event reported): August 26, 1998
MOBILEMEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-26320 22-3253006
(State or other (Commission File No.) (IRS Employer
jurisdication Identification No.)
of incorporation)
Fort Lee Executive Park, One Executive Drive, Suite 500,
Fort Lee, New Jersey 07024
(Address of principal executive offices)
(Zip Code)
(201) 224-9200
(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On August 20, 1998, MobileMedia Corporation and MobileMedia
Communications, Inc. issued the press release filed herewith as Exhibit 99.1,
announcing a definitive merger agreement for Arch Communications Group, Inc. to
acquire MobileMedia Corporation.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: August 26, 1998 MOBILEMEDIA CORPORATION
By: /s/ David R. Gibson
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David R. Gibson
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Page
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99.1 Press Release
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NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACTS:
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August 20, 1998 Arch -- Robert W. Lougee, Jr. 508-870-6771
MobileMedia -- Krista Grossman (Media) 201-969-4959
Lynne Burns (Investors) 201-969-4999
ARCH COMMUNICATIONS AGREES TO ACQUIRE MOBILEMEDIA:
COMBINATION TO CREATE SECOND LARGEST U.S. PAGING COMPANY
Westborough, MA and Fort Lee, NJ (August 20, 1998) --- Arch Communications
Group, Inc. (Nasdaq:APGR) and MobileMedia Corporation today announced a
definitive merger agreement for Arch to acquire MobileMedia. The companies had
announced yesterday that they were in the final stages of merger negotiations.
As indicated in the prior announcement, the transaction will create the nation's
second largest paging company with more than seven million customers throughout
the United States, and projected pro forma 1998 fourth quarter annualized
operating cash flow (earnings before interest, taxes, depreciation and
amortization, or EBITDA) of more than $240 million, excluding the benefit of
potential cost savings, and projected pro forma 1998 fourth quarter annualized
net revenues exceeding $815 million.
Arch said that the combination, when consummated, will reduce Arch's leverage to
approximately 5.6 times projected pro forma 1998 fourth quarter annualized
EBITDA based on pro forma debt of approximately $1.35 billion. In addition, Arch
expects a further increase in cash flow and decrease in leverage from estimated
cost reductions and operating synergies to be implemented during the first year
following the acquisition, which are currently estimated to result in annualized
cost savings of $25 million when fully realized.
"We believe that the combination of Arch and MobileMedia will produce an
industry leader with substantial organizational and strategic assets," said C.
Edward Baker, Jr., Arch chairman and chief executive officer. "Operationally,
the two companies are an ideal fit, with complementary areas of sales, service
coverage, and channels of distribution. This transaction will position Arch as a
leading wireless communications provider with more than seven million customers
throughout the United States, comprehensive market coverage in all 50 states,
and a strong presence in key channels of distribution, including retail." Baker
continued, "The addition of MobileMedia's two narrowband personal communications
services (NPCS) licenses should allow us to accelerate the deployment of a NPCS
network and expedite the introduction of new paging products and services."
Joseph A. Bondi, chairman-restructuring of MobileMedia and managing director of
turnaround consultants Alvarez & Marsal, Inc., said, "A combination with Arch
will be a very successful outcome for MobileMedia, and testimony to the
substantial progress we have made in improving our operational and financial
position over the past 18 months. The transaction will allow MobileMedia to
complete its Chapter 11 reorganization and emerge from bankruptcy as part of an
industry leader. In addition, the combination reflects a successful outcome for
MobileMedia's secured and unsecured creditors, with our secured creditors being
paid in full in cash and our unsecured creditors owning a substantial equity
position in Arch."
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Terms of the Transaction
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Under the terms of the agreement, Arch will acquire MobileMedia for a
combination of cash, the assumption of certain liabilities, and the issuance of
Arch common stock and warrants to acquire Arch common stock. The transaction
will be implemented through a plan of reorganization that MobileMedia will file
with the U.S. Bankruptcy Court for the District of Delaware. The acquisition is
expected to close during the first quarter of 1999, subject to satisfaction of
various closing conditions, including (i) approval by Arch's shareholders; (ii)
confirmation of the plan of reorganization by a final order of such Bankruptcy
Court; (iii) approval by a final order of the Federal Communications Commission
of the transfer of MobileMedia's FCC licenses to Arch; (iv) approval (or
expiration of waiting periods) under the Hart Scott Rodino Act; and (v) various
other conditions.
Terms of the transaction include:
o Holders of MobileMedia's secured bank debt, which aggregates $649 million in
principal amount, will receive 100% of such principal amount in cash,
comprised of a $479 million payment from Arch and $170 million in proceeds
expected to be distributed upon the closing of MobileMedia's pending sale of
its tower site assets to Pinnacle Towers, Inc.
o Arch intends to finance the $479 million cash payment with $262 million in
proceeds from additional bank debt and an additional note offering and $217
million in cash from the proceeds of the issuance of Arch common stock upon
the exercise of transferable rights to be issued by Arch to MobileMedia's
unsecured creditors. Assuming full exercise of such rights, such unsecured
creditors (or their assignees) would be entitled to acquire for cash between
34.3% and 52.1% of Arch's common stock (depending upon the market price of
the Arch common stock during a designated period based on a price collar
which has a low of $6.25 per share and a high of $10.63 per share), and
warrants to purchase another approximately 2.5% of the Arch common stock.
o Certain of MobileMedia's largest unsecured creditors have agreed in
connection with the transaction to act as standby purchasers with respect to
any shares of Arch common stock and warrants not purchased upon the exercise
of such rights. As consideration for their backup commitments, such creditors
will receive warrants to purchase another 2.5% of Arch's common stock.
o In addition to the rights, MobileMedia's unsecured creditors, whose claims
aggregate approximately $480 million, will receive between 17.2% (if the
rights entitle them to purchase 52.1%) and 31.3% (if the rights entitle them
to purchase 34.3%) of Arch's common stock (depending upon the market price of
the Arch common stock during a designated period).
o Arch's existing shareholders (including its Series C preferred shareholders)
will also receive warrants in connection with the transaction to purchase 7%
of Arch's common stock. All warrants will have an exercise price of $8.19 per
share.
o Therefore, on a diluted basis, the existing Arch shareholders (including the
Series C preferred shareholders) will hold, as of the effective date of the
transaction, between 30.7% and 34.4% of Arch's common stock, while
MobileMedia's unsecured creditors will hold between 65.6% (if the existing
Arch shareholders hold 34.4%) and 69.3% (if the existing Arch shareholders
hold 30.7%) of such stock.
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o Arch will also pay the administrative expenses of MobileMedia as of the
effective date of the transaction (with a reduction of the shares to be
distributed to MobileMedia's unsecured creditors if and to the extent that
such expenses exceed $34 million), and will repay expected borrowings under
MobileMedia's debtor in possession borrowing facility.
o MobileMedia's existing shareholders will not receive any consideration under
the merger or the plan of reorganization, and their shares of MobileMedia
common stock will be canceled.
Integration Process
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"We have begun developing a comprehensive plan for the smooth integration of our
two companies," said Lyndon R. Daniels, Arch president and chief operating
officer, "and expect to make few, if any, fundamental changes in areas that
touch the customer, such as customer service and billing systems. We plan to
leverage the respective strengths and natural synergies between the two
organizations, and build upon the steps each has recently taken to enhance its
competitive position."
Daniels continued: "Arch is an experienced consolidator of paging companies,
having completed 33 acquisitions since it was founded in 1986. Arch successfully
integrated USA Mobile Communications Holdings, Inc. in 1995 and Westlink
Holdings, Inc. in 1996. In June, Arch initiated a plan to consolidate its
operating units nationwide to achieve greater economies of scale, increase
operating efficiencies and optimize opportunities for growth. This divisional
reorganization, designed to enhance Arch's participation in sector consolidation
and its acquisition of additional paging companies, should facilitate the
integration of MobileMedia."
For its part, MobileMedia has achieved much improved financial and operating
results since initiating its reorganization in January 1997, and is currently
exceeding the financial forecasts set at the outset of its Chapter 11
proceeding. Based on unaudited results reported by MobileMedia in Forms 8-K
filed with the Securities and Exchange Commission, MobileMedia achieved a 38%
increase in EBITDA to $31.7 million for the quarter ended June 30, 1998,
compared to the same quarter of 1997.
Over the past 18 months, MobileMedia also has:
o Increased customer retention levels to industry norms.
o Overhauled its billing and collection systems, resulting in improved
collections and lower bad debt expense.
o Established a state-of-the-industry centralized customer service function,
improving customer satisfaction and responsiveness.
o Reached an agreement to sell its tower site assets for $170 million.
Noted Baker, "MobileMedia has achieved an impressive turnaround over the past 18
months. We are delighted to establish this partnership between our two
companies, and eagerly anticipate this addition to the Arch family."
Ronald R. Grawert, chief executive officer of MobileMedia, said, "Employees of
MobileMedia have done a tremendous job over the past year-and-a-half to improve
the Company's operations and return MobileMedia to a position of competitive
strength. We believe that the combination with Arch will build upon those
efforts, giving the combined company the size and scope to be a stronger
industry player and
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more effective competitor. We are working closely with Arch to effect a smooth
and efficient integration and to make the transition transparent to our
customers, who will continue to enjoy the same high quality service and reliable
networks going forward that they currently receive from MobileMedia."
Baker added, "Following the acquisition, Arch will continue to focus on growing
operating cash flow, reducing leverage and maximizing capital efficiencies while
maintaining customer service delivery as a top priority." He added: "As
nationwide demand for paging and wireless messaging continues to grow, we expect
our larger and stronger company to participate fully in that growth."
MobileMedia Corporation, Fort Lee, NJ, is one of the largest providers of paging
and personal communications services in the United States, reaching more than 95
percent of the U.S. population, including the top 100 metropolitan statistical
areas. With 3,100 employees, MobileMedia offers local, regional and nationwide
coverage to more than three million subscribers in all 50 states, the District
of Columbia and in the Caribbean. The Company operates two one-way nationwide
FLEX(TM) networks and is currently constructing two nationwide narrowband PCS
networks for which it owns licenses. MobileMedia Communications, Inc., doing
business as MobileComm(R), is a wholly-owned subsidiary of MobileMedia
Corporation. MobileComm can be found on the Internet at www.mobilecomm.com.
MobileComm is not associated with MobilComm, Inc. of Cincinnati, OH.
Arch Communications Group, Inc., Westborough, MA, is the third largest paging
company in the United States based on paging units in service and second largest
based on operating cash flow. Founded in 1986, it provides narrowband wireless
messaging services, principally paging, to more than four million subscribers
nationwide. Arch's 2,700 employees operate from approximately 200 offices and
company-owned stores in 42 states. Additional information on Arch is available
on the Internet at www.arch.com.
Safe harbor statement under the Private Securities Litigation Reform Act of
1995: Statements contained in this news release which are not historical fact,
such as forward-looking statements concerning future financial performance and
growth, involve risks and uncertainties, including those described in Arch's
most recent Annual Report on Form 10-K. Although Arch and MobileMedia believe
the expectations reflected in any forward-looking statements are based on
reasonable assumptions, they can give no assurance that their expectations will
be attained. Factors that could cause actual results to differ materially from
their expectations include the challenges of integrating the businesses of Arch
and MobileMedia, the future capital needs following the merger, the uncertainty
of additional funding, and other risks. Any forward-looking statements represent
the judgment of Arch and MobileMedia as of the date of this release. The
companies disclaim any intent or obligation to update any forward-looking
statements.
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