<PAGE>
File No. 005-48641
As filed with the Securities and Exchange Commission on June 8, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934
(Amendment No. 2)
J. RAY MCDERMOTT, S.A.
(Name of Subject Company)
MCDERMOTT INTERNATIONAL, INC.
MCDERMOTT ACQUISITION COMPANY, INC.
a wholly-owned subsidiary of
MCDERMOTT INTERNATIONAL, INC.
(Bidder)
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Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
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P 64658 10 0
(Cusip Number)
S. Wayne Murphy
McDermott International, Inc.
1450 Poydras Street
New Orleans, LA 70161
Telephone: (504) 587-5400
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
Copies to:
Christopher Mayer R. Joel Swanson
Davis Polk & Wardwell Baker & Botts, L.L.P.
450 Lexington Avenue One Shell Plaza
New York, New York 10017 Houston, Texas 77002-4995
Telephone: (212) 450-4000 Telephone: (713) 229-1234
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CUSIP No. P 64658 10 0
- ------------------------------
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
McDermott International, Inc.
I.R.S. Employer Identification No. 72-0593134
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK and WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Republic of Panama
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
24,668,297
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
63.16%
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10 TYPE OF REPORTING PERSON
HC
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- ------------------------------
CUSIP No. P 64658 10 0
- ------------------------------
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
McDermott Acquisition Company, Inc.
I.R.S. Employer Identification No. 72-1445243
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Republic of Panama
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
0
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES
[ ]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
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<PAGE>
This Amendment No. 2 ( "Amendment No. 2") amends and supplements the Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") originally filed on May
13, 1999 by McDermott International, Inc., a Panama corporation ("Parent"), and
McDermott Acquisition Company, Inc., a Panama corporation ("Purchaser") and a
wholly-owned subsidiary of Parent, as amended by Amendment No. 1 to the Schedule
14D-1 filed with the Commission on May 14, 1999, relating to the offer by
Purchaser to purchase all outstanding shares of common stock, par value $0.01
per share (the "Shares"), of J. Ray McDermott, S.A. (the "Company") (other than
shares beneficially owned by Parent) at a price of $35.62 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 13, 1999 (the "Offer to Purchase") and in the
related Letter of Transmittal.
All capitalized terms used in this Amendment No. 2 without definition have the
meanings attributed to them in the Schedule 14D-1.
The items of the Schedule 14D-1 set forth below are hereby amended as follows:
Item 2. Identity and Background.
Item 2 (a)-(d), (g) of the Schedule 14D-1 is hereby amended and supplemented
by adding the following to the end thereof:
The information set forth in the second line of the first paragraph of
Schedule I of the Offer to Purchase is hereby amended and restated to read in
its entirety as follows:
Each of the Company's directors and officers is a citizen of the United
States, other than Cedric E. Ritchie, who is a citizen of Canada.
The information set forth in the second line of the first paragraph of
Schedule II of the Offer to Purchase is hereby amended and restated to read in
its entirety as follows:
Each of Parent's and Purchaser's directors and officers, and each of the
proposed directors and officers of the Company after consummation of the
Offer and the Merger, is a citizen of the United States, other than John N.
Turner, who is a citizen of Canada.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
Item 3(a) of the Schedule 14D-1 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and restated to read in its entirety as follows:
Background of the Offer; Recommendation of the Independent Committee and
the Company Board
On January 31, 1995, Parent and Offshore Pipelines, Inc. ("OPI") consummated
a transaction (the "OPI Merger") pursuant to which Parent contributed its
worldwide marine construction businesses to the Company, a newly-formed Panama
corporation, and OPI was merged into a wholly-owned subsidiary of the Company.
As a result of the OPI Merger, the shareholders of OPI acquired approximately
36% of the outstanding Shares, and Parent retained the remaining 64% of the
outstanding Shares and all of the Preferred Stock.
In connection with the OPI Merger, the Company Board established the
Independent Committee, comprised of directors who were not present or former
officers or employees of Parent or the Company as an oversight committee to
review the fairness to the Company and its public shareholders of certain
transactions between the Company and Parent. At the same time, Parent and the
Company agreed that the Company would not take certain actions without the
approval of the Independent Committee or the affirmative vote of the holders of
a majority of the outstanding voting stock of the Company owned by
<PAGE>
persons other than Parent and its subsidiaries. Although this agreement expired
in January 1998, the Independent Committee continued to review and approve all
significant transactions between the Company and Parent.
Over the last four years, representatives of the Company, the Independent
Committee and Parent have had general conversations from time to time
concerning the Company's strategic alternatives and Parent's investment in the
Company.
At a meeting of the Company Board on November 11, 1998, Mr. Roger E.
Tetrault, Chairman and Chief Executive Officer of Parent and the Company,
advised the Company Board that Parent was considering various strategic
alternatives, including the possible acquisition of the publicly-held Shares.
No terms were discussed. Mr. Tetrault identified possible benefits that could
result from a combination of the two companies. He also indicated that if
Parent decided to make such a proposal, it would likely be made in late
February or early March 1999 and that Parent would advise the Company Board
upon completion of its review. The Company Board determined that any such
proposal would be considered by the Independent Committee. The Independent
Committee consisted of Messrs. William J. (Bill) Johnson (Chairman), Rick L.
Burdick, Sean C. O'Keefe, Cedric E. Ritchie and Robert L. Howard. It was
determined that Mr. Howard would recuse himself from participation on the
Independent Committee in connection with its consideration of any proposal made
by Parent because of his position as a member of the Parent Board of Directors
(the "Parent Board"). None of the four members of the Independent Committee who
participated in the consideration of the proposals from Parent were present or
former employees, officers or directors of Parent or employees or officers of
the Company.
On November 13, 1998, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") made a presentation to the Parent Board about various
strategic alternatives, including a possible acquisition by Parent of the
publicly-held Shares. Merrill Lynch suggested that Parent could acquire the
publicly-held Shares of the Company using either cash or common stock of Parent
("Parent Stock") as consideration. Merrill Lynch indicated that combining
Parent and the Company would be beneficial because the combined entity would
eliminate expenses associated with the separate management of two publicly
traded companies, receive greater coverage by equity research analysts and
create a more efficient organizational structure. During the meeting, the
Parent Board empaneled a Finance Committee, consisting of Messrs. John W.
Johnstone, Jr. (Chairman), Philip J. Burguieres, William McCollam, Jr. and
Bruce DeMars (the "Finance Committee").
On November 25, 1998, the Finance Committee discussed several strategic
initiatives of Parent. The Finance Committee reaffirmed its commitment to
complete its review of all of the strategic initiatives currently under
consideration by the Finance Committee, prior to making a decision whether or
not to seek to acquire the publicly-held Shares of the Company. Each member of
the Finance Committee confirmed that he did not own any Shares.
In December 1998, Parent engaged Davis Polk & Wardwell ("Davis Polk") as its
legal advisor with respect to the strategic initiatives under review.
In early December 1998, Mr. Tetrault suggested that the Independent Committee
should consider engaging financial and legal advisors in anticipation of a
possible proposal from Parent.
The Independent Committee engaged Baker & Botts, L.L.P. ("Baker & Botts") as
its legal advisor on December 17, 1998 and Simmons as its financial advisor on
January 5, 1999.
On January 4, 1999, the Finance Committee concluded that it should analyze
and develop alternatives for acquiring the publicly-held Shares. On January 20,
1999, the Finance Committee engaged Merrill Lynch as its financial advisor.
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The Independent Committee met with its legal and financial advisors in
Houston, Texas, on January 12, 1999. At that meeting, Baker & Botts addressed
the Independent Committee concerning their duties and responsibilities under
applicable law. The members of the Independent Committee acknowledged that in
considering and negotiating any transaction with Parent their responsibility
was to act in the best interests of the Company's public shareholders. The
members of the Independent Committee determined that consideration of any
business combination between the Company and Parent was within the Independent
Committee's scope of authority, but indicated that the Company Board should
consider a resolution confirming the Independent Committee's authority to act
on any such transaction. During this meeting, Simmons outlined the scope of
their anticipated activities in advising the Independent Committee, including
providing a financial analysis of any proposals which may be received from
Parent and an evaluation of possible alternative transactions, providing, if
requested, a fairness opinion as to a business combination between the Company
and Parent and assisting the Independent Committee in negotiating with Parent.
The Independent Committee decided to wait until it received a proposal from
Parent before beginning discussions with Parent.
On February 1, 1999, the Finance Committee met with Merrill Lynch to discuss
alternatives for acquiring the publicly-held Shares of the Company. Merrill
Lynch reviewed with the Finance Committee its study and evaluation of the
Company, Parent and several proposed transactions, which included analyses of
comparable companies, comparable transactions, the values of the Company and
Parent, the relative values of the two companies, premiums in a stock for stock
transaction and premiums in similar public transactions. The methodologies used
in conducting these analyses were substantially the same as the methodologies
set forth below under "Opinion of Financial Advisor to the Finance Committee."
Merrill Lynch's presentations were based primarily on an assumed stock for
stock transaction and an assumed offer price of $27.31 per publicly-traded
Share. Such a transaction would have required Parent to issue approximately
19.3 million new shares of Parent Stock and represented approximately a 15%
premium to the Share price as of February 1, 1999. Merrill Lynch also provided
an analysis of the pro forma effect on Parent's projected earnings per share of
an acquisition of the publicly-held Shares in a stock for stock transaction.
Assuming that the goodwill associated with combining Parent and the Company
would be amortized over 15 or 30 years, this analysis indicated that a stock
for stock transaction with an assumed $27.31 offer price would dilute Parent's
fiscal year 2000 earnings per share by 16.8% and 12.5%, respectively. This
information was presented on the following day to the Parent Board.
On February 17, 1999, Parent and the Company executed a confidentiality
agreement (the "Confidentiality Agreement"), under which Parent agreed to
provide to the Company certain confidential information relating to its
operations and the Company agreed to keep all nonpublic information received
from Parent in confidence, subject to certain exceptions.
On March 4, 1999, Simmons met with Messrs. Johnson and O'Keefe to discuss
their analysis to date, which included analyses of the Company, Parent, a
potential business combination of the two companies and possible alternative
transactions. The analysis of each of the Company and Parent included a review
of its history, its financial and operating performance and the financial
performance of comparable companies, its assets and liabilities (including
contingent liabilities) and its operating markets. The methodologies used in
conducting an analysis of a potential combination of the two companies were
substantially the same methodologies used in connection with the fairness
opinion delivered by Simmons to the Independent Committee on May 6, 1999, which
are set forth below under "Opinion of Financial Advisor to the Independent
Committee." Because the Initial Proposal involved the receipt of Parent Stock
as consideration, Simmons used similar methodologies to value Parent and Parent
Stock. Finally, Simmons described its preliminary views of the positive and
negative aspects of alternative transactions, including continued ownership by
the public shareholders combined with the implementation of a strategic
acquisition program funded by the Company's cash reserves, a private sale of
the Company, a private sale of the publicly-held Shares, a repurchase by the
Company of the publicly-held Shares, a repurchase by the Company of the Shares
held by Parent, a spin-off of the Company and a secondary offering of Shares.
Simmons noted that, because of Parent's controlling ownership interest in the
Company, any such alternative transaction would be
<PAGE>
dependent on Parent's concurrence in the Company's decision to pursue an
alternative transaction. On March 9, 1999, Simmons met with Mr. Burdick to
review the foregoing preliminary analysis.
At a meeting on March 9, 1999, the Finance Committee considered various
alternatives for acquiring the publicly-held Shares and determined to make a
specific proposal to the Independent Committee.
On March 10, 1999, the Finance Committee delivered its initial proposal to
the Independent Committee. The proposal involved a merger of a newly-formed
subsidiary of Parent into the Company, whereby each Share not owned by Parent
would become 1.15 shares of Parent Stock and the Company would become a
wholly-owned subsidiary of Parent (the "Initial Proposal"). The Initial
Proposal was disclosed to the public on March 10, 1999. In response, the
Independent Committee announced that it would consider the Initial Proposal.
On March 11, 1999, the Company Board adopted resolutions confirming the
Independent Committee's authority to act with respect to any proposal for a
business combination between Parent and the Company.
On March 15, 1999, representatives of Merrill Lynch and Simmons met to
discuss the Initial Proposal. During this meeting, Merrill Lynch presented an
overview of the merits of the Initial Proposal. Merrill Lynch and Simmons
discussed, among other things, the small public float in the Shares, the
confusion in the market perception of Parent and the rationale for the
combination (including cost savings and increased analyst and institutional
interest in Parent). Merrill Lynch noted that the 1.15 shares of Parent Stock
that would be received in the Initial Proposal by the Company's minority
shareholders represented a 8.5% premium to the closing Share price on the day
preceding the Initial Proposal and a 16.2% premium to the closing Share price
at the time of the announcement of the Initial Proposal. Merrill Lynch also
presented the results of its comparable company trading analysis, which
suggested that the Shares were overvalued in the market in relation to other
comparable companies. Merrill Lynch also discussed with Simmons recent
third-party forecasts, which indicated a greater decline in both Parent's and
the Company's earnings per share for fiscal years 2000 and 2001 than had been
previously forecasted.
Because the Initial Proposal involved an exchange of stock, both companies
and their advisors requested and undertook due diligence. On March 17, 1999,
management of Parent made a presentation and answered questions posed by the
Company's advisors. On March 22, 1999, the Company's management made a similar
presentation. Further due diligence was conducted during the following weeks.
The Independent Committee met with its advisors on April 1, 1999. At that
meeting, representatives of Baker & Botts discussed the duties and
responsibilities of the members of the Independent Committee in connection with
their consideration of a business combination with Parent, stressing the
importance of actively and independently representing the interests of the
minority shareholders of the Company. Representatives of Simmons began a
discussion of the Initial Proposal by indicating that a valuation of Parent was
complicated because of Parent's contingent liabilities. Simmons indicated that
these contingent liabilities were not easily quantified, but should be
considered in any evaluation of Parent. Simmons then reviewed with the
Independent Committee its study and evaluation of the Company, Parent and the
Initial Proposal, which included an update of their March 4, 1999 analysis
provided to the members of the Independent Committee. Simmons also discussed
the potential positive aspects (including a premium to the current market
price, improved investor profile, improved profile in capital markets and the
benefits from the elimination of duplicative costs) and negative aspects
(including potential dilution of any future recovery in the oilfield service
industry, the uncertainty of Parent's contingent liabilities and less access to
excess cash) to the Company's minority shareholders of completing a business
combination with Parent, assuming the receipt of Parent Stock as consideration.
Simmons calculated the premium implied by the Initial Proposal based on stock
prices over time periods of one day, one week and four weeks prior to the
announcement of the Initial Proposal and concluded that (1) the nominal premium
ranged from 8.5% to 29.7%, (2) after adjustment for the recovery of oilfield
service company stock prices and elimination of the effect of the announcement
of the Initial Proposal, the premium ranged from 7.8% to 9.9% and (3) after
such adjustment
<PAGE>
and if no premium was attached to the Company's substantial cash reserves, the
premium ranged from 14.8% to 19.2%. Simmons also indicated that they received
an analysis prepared by Merrill Lynch in support of the Initial Proposal. In
Simmons' view, that analysis did not appropriately value the Company's
substantial cash reserves or take into consideration the recent recovery in the
market for oilfield service company stocks. After an extensive discussion of
the Simmons analysis and the terms of the Initial Proposal, the Independent
Committee determined that the Initial Proposal was inadequate because of, among
other things, the substantial increase in the market price for oil service
stocks since the date the Initial Proposal was delivered and the Independent
Committee's belief that sufficient value had not been given to the Company's
substantial excess cash. The Independent Committee authorized Mr. Bill Johnson
(Chairman of the Independent Committee) to contact Mr. John Johnstone (Chairman
of the Finance Committee) to arrange a meeting between the financial advisors
of each Committee.
Unable to reach Mr. Johnstone, Mr. Johnson contacted Mr. Philip Burguieres,
another member of the Finance Committee, on April 1, 1999 to inform him that
the Independent Committee had determined that the Initial Proposal was
inadequate and to suggest that Simmons and Merrill Lynch meet to discuss their
valuations. Mr. Burguieres agreed to authorize Merrill Lynch to meet with
Simmons, and Mr. Johnson instructed Simmons to arrange the meeting.
On April 6, 1999, Simmons and Merrill Lynch met to discuss their respective
valuations of the Company and Parent. They discussed the Initial Proposal and
alternatives, including combinations that would involve cash and stock or all
cash as consideration. Simmons indicated that it could not recommend the
Initial Proposal. Merrill Lynch left the meeting with the impression that
Simmons would be willing to recommend to the Independent Committee an offer of
1.15 shares of Parent Stock plus $4 in cash for each Share.
On April 8, 1999, the Finance Committee met with Merrill Lynch to review the
results of the April 6 meeting between Merrill Lynch and Simmons. The Finance
Committee also discussed with Merrill Lynch the increase in oilfield service
company stock prices since the announcement of the Initial Proposal. Merrill
Lynch attributed the increase primarily to OPEC's March 10, 1999 announcement
to decrease oil production. Merrill Lynch also updated the analyses contained
in its February 1, 1999 presentation to the Finance Committee using current
market information. Merrill Lynch's revised dilution analysis indicated that a
part-stock, part-cash transaction would be less dilutive to Parent's projected
earnings per share than an all-stock transaction and that an all-cash
transaction would be significantly less dilutive to Parent's projected earnings
per share than either of the other two alternatives. Based on Merrill Lynch's
understanding of the position of the Independent Committee and the Finance
Committee's discussions with its financial advisor, the Finance Committee
decided to increase its offer to 1.15 shares of Parent Stock plus $1.50 in cash
for each Share.
On April 9, 1999, Merrill Lynch informed Simmons that the Finance Committee
had increased its offer to 1.15 shares of Parent Stock plus $1.50 in cash per
Share. Merrill Lynch also told Simmons that the Finance Committee was very
concerned about the possibility that any transaction with the Company might
cause dilution to Parent's per share earnings. Simmons communicated this to the
Independent Committee, which instructed Simmons to develop an analysis of the
dilution to Parent's per share earnings assuming that the Company's excess cash
was invested at a rate of return greater than money market rates of return.
On April 9, 1999, Baker & Botts and the Independent Committee received from
Davis Polk an initial draft of a proposed merger agreement.
Concerned that the valuations of the two committees may still be too far
apart for a transaction to materialize, the Independent Committee instructed
Simmons to contact Merrill Lynch to determine if Parent would consider selling
its Shares and, if so, at what price. Simmons was informed that Parent was not
interested in soliciting offers to purchase its Shares.
<PAGE>
On April 13, 1999, members of the Independent Committee met by telephone with
their advisors. Simmons' dilution analysis was reviewed and discussed. The
dilution analysis indicated that under certain rate of return assumptions,
Parent could significantly reduce its pro forma projected earnings per share
dilution by investing the Company's excess cash in capital projects or
acquisitions rather than continuing to earn money market rates of return.
Simmons also presented an analysis of a transaction whereby the Company would
repurchase the Shares from its public shareholders. This analysis showed that
such a transaction could be accretive to Parent's earnings per share and cash
flow per share. Simmons stated that this analysis could reduce the Finance
Committee's concerns regarding the impact of an acquisition by Parent of the
publicly-held Shares on Parent's earnings per share. Members of the Independent
Committee discussed their concern about the proper valuation of Parent's
contingent liabilities. After this discussion, members of the Independent
Committee decided to present to the Finance Committee a counteroffer of 1.15
shares of Parent Stock and $5 in cash per Share. They also instructed Baker &
Botts on several points to be included in the Independent Committee's comments
on the proposed merger agreement, including the Independent Committee's
position that the proposed transaction should be conditioned on the affirmative
vote of holders of a majority of the outstanding Shares other than Shares
beneficially owned by Parent.
On April 14, 1999, Simmons met with Merrill Lynch to review its dilution
analysis and present the Independent Committee's counteroffer. Merrill Lynch
expressed its concern that the proposed counteroffer would substantially dilute
the Parent's future earnings. Simmons suggested that members of the two
committees and their financial advisors meet to discuss their differences and
try to reach a resolution.
On April 15, 1999, the Independent Committee's comments on the initial draft
of the merger agreement were delivered to Davis Polk.
On April 16, 1999, the Finance Committee met to discuss the counteroffer from
the Independent Committee. At the end of the meeting, the Finance Committee
asked its advisors to seek clarification of the terms of the counteroffer from
the advisors to the Independent Committee.
On April 16, 1999, Merrill Lynch and Simmons discussed the terms of the
counteroffer.
On April 19, 1999, the Finance Committee reconvened to hear the report from
its advisors concerning their discussions with the advisors to the Independent
Committee. Merrill Lynch reported that Simmons was no longer prepared to
recommend to the Independent Committee an offer of 1.15 shares of Parent Stock
plus $4 in cash for each Share. After extended discussions, the Finance
Committee unanimously determined to terminate discussions with the Independent
Committee.
Promptly after the meeting, Davis Polk informed Baker & Botts that the
Finance Committee had decided to terminate the merger discussions with the
Independent Committee because of a failure to reach agreement on the financial
terms of the transaction. A press release to that effect was issued the
following day.
After discussions with individual members of the Independent Committee and
with its legal and financial advisors, Mr. Bill Johnson contacted Mr. Philip
Burguieres on April 22, 1999 in an attempt to restart discussions between the
two committees.
On April 29, 1999 Mr. Johnson met with Simmons to discuss Simmons' comparison
of the accretion/dilution to Parent's earnings per share based on various
transaction values and structures, including various combinations of stock,
cash and warrants to purchase stock This analysis indicated that alternative
transactions could reduce dilution to Parent's earnings per share.
On April 30, the Finance Committee convened and decided to authorize Mr.
Burguieres to meet with Mr. Johnson.
<PAGE>
On May 1, 1999, Mr. Burguieres and Merrill Lynch met to discuss Merrill
Lynch's analysis of the pro forma effect on Parent's projected earnings per
share of an all cash acquisition of the publicly-held Shares at various
consideration values. This analysis showed the dilutive effect to Parent's
fiscal year 2000 earnings increasing from 12.7% to 18.6% using consideration
values ranging from $31 per Share to $36 per Share. Merrill Lynch also provided
an analysis of premiums paid in minority interest transactions. In the
aggregate, this analysis indicated relevant merger premiums of between 15.0%
and 25.0%.
Messrs. Johnson and Burguieres met on May 4, 1999. They discussed the recent
increase in the price of the Shares, the valuation of the Company's excess cash
and the opportunity to earn higher returns, the possible dilution to Parent's
earnings per share and other factors relating to value. After further
discussion, Messrs. Johnson and Burguieres agreed to recommend to their
respective committees an all cash transaction at $35.62 per Share.
Later that day, the Finance Committee met to review the report and
recommendation from Mr. Burguieres. Merrill Lynch advised the Finance Committee
that they were of the opinion that the consideration proposed to be paid to the
holders of Shares (other than Parent) was fair from a financial point of view
to Parent. Merrill Lynch's analyses were substantially the same as the analyses
set forth below under "Opinion of Financial Advisor to the Finance Committee."
Based on the foregoing, the Finance Committee voted unanimously to recommend
the $35.62 all cash proposal to the full Board of Parent.
The Independent Committee met by telephone during the afternoon of May 4,
1999 with its legal and financial advisors. Mr. Johnson presented the proposal
to the Independent Committee, and Simmons provided certain updated analyses of
the Company and the terms of the proposed transaction. Simmons' analyses were
substantially the same as the analyses set forth below under "Opinion of
Financial Advisor to the Independent Committee." Simmons informed the
Independent Committee that it was prepared to deliver a fairness opinion with
respect to a transaction priced at $35.62 per Share. Members of the Independent
Committee noted that an all cash transaction removed the risk associated with
Parent's contingent liabilities, a major concern raised by the Initial
Proposal. Representatives of Baker & Botts informed the Independent Committee
of discussions with Davis Polk regarding the revised terms of the proposed
merger. The Independent Committee instructed Baker & Botts regarding its
comments on the revised merger agreement, including that the proposed
transaction should be structured as a two step transaction with a tender offer
followed by a merger and that the tender offer should be conditioned upon there
being validly tendered and not withdrawn prior to the expiration of the tender
offer a number of Shares equal to at least a majority of the outstanding Shares
other than Shares beneficially owned by Parent. After further discussion, the
Independent Committee decided to defer action to a later date allowing the
Independent Committee members an additional opportunity to consider the
proposal and further review the extensive materials provided by Simmons during
the negotiation process.
On May 5, 1999, the full Board of Parent met to consider the $35.62 all cash
proposal, the recommendation of the Finance Committee and the advice of Merrill
Lynch and Davis Polk. A detailed summary underlying Merrill Lynch's opinion to
the Parent Board is set forth below under "Opinion of Financial Advisor to the
Finance Committee." After a full discussion, the Board of Parent approved the
proposal subject to Mr. Tetrault being satisfied that the financing necessary
to consummate the transaction was available. Three directors who were also
directors of the Company (Messrs. Tetrault, Woolbert and Howard) indicated that
they were in favor of the proposal but, on advice of counsel, abstained from
voting.
Promptly thereafter, Parent commenced discussions with Citibank about
providing a $525 million facility to finance the transaction. On May 7, 1999,
Citibank issued to Parent a commitment letter for the financing. See "Financing
of the Offer and the Merger." Mr. Tetrault determined that he was now satisfied
that the necessary financing was available.
On May 5, 1999, the Independent Committee met to again consider the proposed
transaction. Members of the Independent Committee discussed the terms of the
Merger Agreement, and representatives of Simmons
<PAGE>
reviewed and updated their analysis of the fairness of the proposal. A detailed
summary of the analyses performed by Simmons is set forth below under "Opinion
of Financial Advisor to the Independent Committee." Simmons then rendered an
oral opinion (subsequently confirmed by delivery of a written opinion dated May
6, 1999) to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the consideration to be paid in the
Offer and the Merger was fair to the holders of Shares (other than Parent) from
a financial point of view. The Independent Committee then unanimously
determined that the terms of the Offer and the Merger are fair to and in the
best interests of the Company's shareholders (other than Parent), and
unanimously voted to recommend that the Company Board approve the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger. At the meeting, the Independent Committee requested that Simmons
update its analysis for purposes of a summary presentation and confirmation of
its oral opinion at a meeting of the Company Board to be held on the following
day.
On May 6, 1999, the Company Board met to consider the Merger Agreement and
the transactions contemplated thereby. Mr. Johnson described the terms of the
Merger Agreement and indicated that the Independent Committee had unanimously
approved the Merger Agreement and recommended that the Company Board approve
the Merger Agreement. Representatives of Simmons described their review and
analysis of the transaction and confirmed its oral fairness opinion provided to
the Independent Committee on May 5, 1999. Representatives of Baker & Botts then
described the principal terms of the Merger Agreement. After a full discussion,
the Company Board accepted the recommendation of the Independent Committee and
(i) determined that the terms of the Offer and the Merger were fair to and in
the best interests of the Company's shareholders (other than Parent), (ii)
approved the Merger Agreement and authorized the execution and delivery thereof
and (iii) determined to recommend that the shareholders of the Company tender
their Shares pursuant to the Offer and approve the Merger Agreement. Prior to
participating in the determinations and recommendations of the Company Board,
the members of the Company Board who were also directors or officers of Parent
identified their affiliations with Parent and noted that as a result of such
affiliations they had a potential conflict of interest. As a result, Roger E.
Tetrault, Robert L. Howard and Richard E. Woolbert elected to abstain.
Item 3(b) of the Schedule 14D-1 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and restated to read in its entirety as set forth under Item 3 hereto.
The information set forth in the first paragraph of "Purpose and Structure of
the Offer and the Merger; Reasons of Parent for the Offer and the Merger" of the
Offer to Purchase is hereby amended and restated to read in its entirety as
follows:
The purpose of the Offer and the Merger is for Parent to increase Parent's
ownership of the Company from approximately 63% to 100%. Upon consummation of
the Merger, the Company will become a direct, wholly-owned subsidiary of
Parent. The Company's purpose in entering into the Merger Agreement was to
maximize the value received by holders of the publicly-held Shares as a result
of such Share ownership, in light of available alternatives. Alternative means
to accomplish this purpose were considered by the Company but were not pursued
because the Company considered the terms of the Offer and the Merger to be
superior to any practical alternative. The Company determined to undertake the
transactions contemplated by the Merger Agreement at this time due to its
receipt of a proposal by Parent to engage in a business combination and its
determination that the Offer and the Merger are in the best interests of its
shareholders (other than Parent).
The information set forth in "Purpose and Structure of the Offer and the
Merger; Reasons of Parent for the Offer and the Merger" of the Offer to Purchase
is hereby supplemented by adding the following after the last paragraph:
<PAGE>
After a comprehensive review of Parent's strategic alternatives in November
1998, the Finance Committee concluded in early 1999 that for the reasons
described in the preceding three paragraphs Parent should pursue the
acquisition of the publicly-held Shares, provided that the combination could be
achieved on terms acceptable to both companies and their shareholders. Based on
Parent's long-term outlook for the marine construction industry, the Finance
Committee and Parent concluded that an opportunity existed for Parent to
acquire such Shares at a premium, which would be attractive to the Company's
public shareholders while providing value to Parent's shareholders. Prior to
early 1999, neither the Finance Committee nor Parent had systematically
analyzed the acquisition of the publicly-held Shares.
Purchaser is a wholly-owned subsidiary of Parent and was organized on May 10,
1999 solely for the purpose of consummating the transactions contemplated by
the Merger Agreement. Purchaser is pursuing this transaction at this time in
order to assist Parent in its efforts to acquire all of the publicly-held
Shares. The Merger Agreement provides that as promptly as practicable after all
conditions to the Merger set forth therein have been satisfied or, to the
extent permitted thereunder, waived, Purchaser will be merged into the Company
in accordance with Panama Law. As a result of the Merger, the separate
existence of Purchaser will cease, and the Company will continue as the
Surviving Corporation. As a result, Parent will own all of the Shares of the
Company.
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and restated to read in its entirety as follows:
The projections were prepared solely for internal use and not with a view to
public disclosure or compliance with the published guidelines of the Commission
or the American Institute of Certified Public Accountants regarding projections
and were not prepared with the assistance of, or reviewed by, independent
accountants. Such projections are included by Purchaser in this Offer to
Purchase solely because such information was furnished to Parent and Purchaser
by the Company. The projections were not prepared in accordance with generally
accepted accounting principles and were not audited or reviewed by any
independent accounting firm, nor did any such firm perform any other services
with respect thereto. While presented with numerical specificity, the
projections are based on a variety of assumptions relating to the businesses of
the Company, industry performance, general business and economic conditions and
other matters, which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the Company's control and are not
capable of precise prediction. These assumptions involve judgments with respect
to, among other things, future economic and competitive conditions, inflation
rates and future business conditions. Therefore, such projections are
inherently imprecise and there can be no assurance that they will prove to be
reliable. Also, actual future results may vary materially from those shown in
the projections. None of Parent, Purchaser, the Company, Simmons or Merrill
Lynch is under any obligation to or has any intention to update the projections
at any future time and the inclusion of such projected information in this
Offer to Purchase should not be regarded as a representation by any such
persons that such projected outcomes will be achieved.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
Item 5(a)-(e) of the Schedule 14D-1 is hereby amended and supplemented by
adding the following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and restated to read in its entirety as set forth under Item 3 hereto.
The information set forth in "Purpose and Structure of the Offer and the
Merger; Reasons of Parent for the Offer and the Merger" of the Offer to Purchase
is hereby amended and restated as set forth under Item 3 hereto.
<PAGE>
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and restated to read in its entirety as set forth under Item 3 hereto.
Item 5(f)-(g) of the Schedule 14D-1 is hereby amended and supplemented by
adding the following to the end thereof:
The information set forth in "Increased Interest in Net Book Value and Net
Earnings of the Company" under "Certain Effects of the Offer" of the Offer to
Purchase is hereby amended and supplemented by adding the following sentence to
the end of the first paragraph:
Purchaser has adopted Parent's analysis of the effects of the Offer and the
Merger.
Item 6. Interest in Securities of the Subject Company.
Item 6 of the Schedule 14D-1 is hereby amended and supplemented by adding the
following to the end thereof:
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and restated to read in its entirety as set forth under Item 2 hereto.
The information set forth in Schedules I and II of the Offer to Purchase is
hereby amended and supplemented as set forth under Item 2 hereto.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
Item 7 of the Schedule 14D-1 is hereby amended and supplemented by adding the
following to the end thereof:
The information set forth in "Background of the Offer; Recommendation of the
Independent Committee and the Company Board" of the Offer to Purchase is hereby
amended and restated to read in its entirety as set forth under Item 3 hereto.
The information set forth in "Purpose and Structure of the Offer and the
Merger; Reasons of Parent for the Offer and the Merger" of the Offer to Purchase
is hereby amended and restated as set forth under Item 3 hereto.
The information set forth in the last paragraph of "Certain Projections" under
"Certain Information Concerning the Company" of the Offer to Purchase is hereby
amended and restated to read in its entirety as set forth under Item 2 hereto.
Item 8. Persons Retained, Employed or to be Compensated.
Item 8 of the Schedule 14D-1 is hereby amended and supplemented by adding the
following to the end thereof:
The information set forth in the second paragraph of "Premium Analyses" under
"Opinion of Financial Advisor to the Independent Committee" of the Offer to
Purchase is hereby amended and restated to read in its entirety as follows:
In addition, Simmons compared the Offer Price to the May 6 Closing Price, the
Estimated May 6 Price and the Pre-announcement Price, in each case as adjusted
to eliminate any premium on the Company's excess cash. Simmons made this
adjustment as a result of its determination that any purchaser would be
unwilling to pay a premium for the Company's excess cash and that, as a result,
any premium should be solely attributable to the Company's operating business.
It was Simmons' judgment that the Company's cash and
<PAGE>
cash equivalents and investments in debt securities exceeded the Company's cash
needs at May 6 by an amount equal to $12.95 per Share. Simmons calculated this
amount by subtracting an amount equal to 5% of the Company's fiscal 1999
revenues (which in Simmons' judgment is an amount that approximates cash
typically needed for operations by companies engaged in the offshore
construction and oilfield services industry) from the Company's cash and cash
equivalents and dividing that amount by the outstanding Shares. In order to
gauge the premium implied by the Offer Price over the May 6 Closing Price as
adjusted to eliminate any premium on excess cash, Simmons subtracted the per
share amount of the excess cash ($12.95) from each of the May 6 Closing Price
(to yield an adjusted price per Share of $17.55) and the Offer Price (to yield
$22.67 per Share) and compared the adjusted Offer Price to the adjusted May 6
Closing Price. This calculation resulted in a 29.2% premium. In like fashion,
Simmons adjusted both the Estimated May 6 Price and the Pre-announcement Price
to exclude the excess cash and determined that the premium so implied with
respect to the adjusted Estimated May 6 Price was 38.0% and the premium so
implied with respect to the adjusted Pre-announcement Price was 139.1%.
The information set forth in the first paragraph of "Other Factors and
Analyses" under "Opinion of Financial Advisor to the Independent Committee" of
the Offer to Purchase is hereby amended and restated to read in its entirety as
follows:
In the course of preparing its Opinion, Simmons performed other analyses and
reviewed other matters, including the trading characteristics of the Shares and
the shares of comparable companies and the history and outlook for energy
markets, the oilfield services industry and the Company's markets. Simmons
observed that the Company's stock performance (1) reflected the general decline
in other oilfield services company stocks from late 1997 through early 1999,
driven by declining energy prices and activity levels in the oilfield services
industry, and (2) more recently reflected the recovery in the market for
oilfield services company stocks, driven by a recovery in energy prices and an
improving outlook for oilfield services companies. Simmons also reviewed the
assumptions underlying projections for the Company and for comparable companies
and observed that such assumptions were generally consistent with its analysis
of historical and current conditions in the oilfield services industry. Simmons
then considered the potential for further recovery in the oilfield services
industry, observing that the Company's public shareholders could, if they wish,
retain their exposure to any future recovery in the oilfield services industry
by reinvesting the proceeds of the transaction contemplated by the Merger
Agreement in oilfield services company securities. Simmons also reviewed the
ownership interests of the Company's principal shareholders (other than Parent)
and the possible effects of Parent's significant ownership interests, and noted
that, because of Parent's controlling ownership interest in the Company, any
alternative transaction to the Offer and the Merger would be dependent on
Parent's concurrence in the Company's decision to pursue an alternative
transaction. Simmons also reviewed the Company's contingent liabilities and
observed that the transaction contemplated by the Merger Agreement would
eliminate any future impact of those liabilities on the holders of the
publicly-held Shares. In addition, Simmons analyzed the pro forma effects of
the Offer and the Merger on Parent (after giving effect to potential cost
savings following the transaction) and concluded that the transaction is
significantly dilutive to Parent's projected earnings per share, making it
unlikely that Parent would complete the transaction at a higher price than the
per Share price to be paid in the Offer and the Merger.
The information set forth under "Opinion of Financial Advisor to the Finance
Committee" of the Offer to Purchase is hereby supplemented by adding the
following after the last paragraph:
Because Purchaser is a wholly-owned subsidiary of Parent formed solely for
the purpose of consummating the transactions contemplated by the Merger
Agreement and will cease to exist upon consummation of the Merger, Purchaser
did not receive any additional report, opinion or appraisal from an outside
party relating to the Offer and the Merger other than the Merrill Lynch
Opinion. Each director and executive officer of Purchaser is a director or
executive officer of Parent and received the Merrill Lynch Opinion. The
Purchaser adopted the analyses of the Finance Committee and the Parent Board.
<PAGE>
Item 10. Additional Information.
Item 10(d) of the Schedule 14D-1 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in "Increased Interest in Net Book Value and Net
Earnings of the Company" under "Certain Effects of the Offer" of the Offer to
Purchase is amended and supplemented by adding a sentence to the end of the
first paragraph as set forth under Item 5 hereto.
<PAGE>
Item 10(f) of the Schedule 14D-1 is hereby amended and supplemented by adding
the following to the end thereof:
The information set forth in "Fairness of the Offer and the Merger" of the
Offer to Purchase is hereby amended and restated to read in its entirety as
follows:
Fairness of the Offer and the Merger
Independent Committee. In reaching its determinations referred to above, the
Independent Committee considered the factors listed below, which, in the view
of the Independent Committee, supported such determinations. The following
discussion of the factors considered by the Independent Committee is not
intended to be exhaustive but summarizes the material factors considered.
(i) The fact that the per Share price ($35.62) to be paid in the Offer
and the Merger represents (a) a premium of approximately 12.6% over the
closing price of the Shares ($31.63) on the New York Stock Exchange
("NYSE") on May 4, 1999 (the day prior to the Independent Committee's
recommendation to the Company Board) and an effective premium of 21.4% over
such price per Share if no premium were attributed to the Company's excess
cash, estimated by Simmons at $12.95 per share (Simmons determined the
effective premium by subtracting the excess cash per share from both the
$35.62 Offer Price and from the closing price of the Shares on May 4, 1999
and calculating the premium of the adjusted Offer Price to the adjusted
price on May 4, 1999), (b) a premium of approximately 19.2% over the per
Share price estimated by Simmons ($29.89) that would have prevailed on May
4, 1999, recognizing the recent significant recovery in oil and gas service
industry equities but excluding any speculative activity occasioned by the
recent negotiations between Parent and the Company concerning the possible
acquisition of the publicly-held Shares by Parent and the effective premium
(calculated in a similar manner as above) of 33.8% over such price if no
premium were attributed to the Company's excess cash, and (c) a premium of
58.8% over the 20-day average trading price of the Shares through March 9,
1999 ($22.43) (the day before the announcement of the Initial Proposal
before oil service stocks began their general uptrend associated with
improved crude prices) and the effective premium (calculated in a similar
manner as above) of 139.1% over such price if no premium were attributed to
the Company's excess cash. The Independent Committee believed that the
historical trading price of the Shares over the past few months was within
a range of the going concern value of the Company and that the premiums
discussed above were attractive in comparison to premiums received in
comparable transactions.
(ii) The fact that the per Share price to be received in the Offer and
the Merger is payable in cash, thereby eliminating any uncertainties in
valuing the consideration.
(iii) The Company's shareholder profile, the percentage of the
outstanding Shares owned by Parent, the absence of contractual restrictions
on the acquisition of additional Shares by Parent, and Parent's stated
unwillingness to solicit offers to purchase its Shares from a third party,
all of which led the Independent Committee to conclude that exploration of
a business combination with a third party was not practicable.
(iv) The Independent Committee's belief, based upon Company management
and Simmons presentations, that the per Share price to be paid in the Offer
and the Merger was fair in light of the financial condition, results of
operations, business and prospects of the Company as a separate company.
(v) The knowledge of the members of the Independent Committee of
various risks and uncertainties associated with a decision to continue to
operate the Company as an independent entity, including, but not limited
to, trends in the offshore construction industry and the declining backlog
at the Company, which led the members of the Independent Committee to
believe that there was a substantial risk that the market price for the
Shares could remain at levels experienced in the past few months for a
prolonged period of time or decline from those levels. As a result, the
Independent
<PAGE>
Committee believed that the Share price to be paid in the Offer and the
Merger was superior to the anticipated Share price if the Company remained
a separate company.
(vi) The arm's-length negotiations between the Independent Committee
and its representatives and the Finance Committee and its representatives,
including that the negotiations resulted in (a) an increase in the price at
which Parent was prepared to acquire the Shares and a change in the
structure of the transaction and the form of consideration to be received
by the Company's shareholders, and (b) the Independent Committee's belief
that $35.62 per Share was the highest price that could be obtained from
Parent under the circumstances.
(vii) The opinion of Simmons, dated May 6, 1999, that, as of the date
of the opinion and based on and subject to certain matters stated in the
opinion, the consideration to be paid in the Offer and the Merger is fair
to holders of the Shares (other than Parent) from a financial point of
view, and the analyses presented to the Independent Committee by Simmons
with respect thereto. See "Opinion of Financial Advisor to the Independent
Committee."
(viii) The fact that the Minimum Condition requires that the Offer not
be consummated unless at least a majority of the outstanding Shares other
than shares beneficially owned by Parent are validly tendered pursuant to
the Offer and not withdrawn.
(ix) The terms and conditions of the Offer, the Merger and the Merger
Agreement, including provisions that no change may be made that, without
the consent of the Company, (a) waives the Minimum Condition, (b) changes
the form of consideration to be paid, (c) decreases the per Share price or
the number of Shares sought in the Offer or (d) adds conditions.
(x) The fact that the Merger Agreement does not preclude the
Independent Committee from withdrawing or modifying its recommendation to
shareholders if failure to do so would be inconsistent with its fiduciary
duties provides the Independent Committee with a degree of flexibility to
respond to changed circumstances.
(xi) The provision of the Merger Agreement permitting the Company to
negotiate with third parties that make unsolicited Acquisition Proposals
(as defined in the Merger Agreement) if there is a reasonable likelihood
that the directors' fiduciary duties would otherwise be breached provides
the Independent Committee with a degree of flexibility in the event that a
superior offer is received.
(xii) The possibility that the timing of the transaction is at a down
cycle in the offshore construction and oil service industry and that
shareholders might not be able to participate fully in the recovery (unless
they took the proceeds and reinvested in the industry), which the
Independent Committee viewed as a risk that did not outweigh the benefits
of the Offer and the Merger.
(xiii) The fact that other transaction structures, including a
transaction that would be predominately stock for stock, would be generally
nontaxable, but would expose the Company's shareholders to the market and
other risks inherent in owning Parent Stock, which the Independent
Committee viewed as less preferable than the terms of the Offer and the
Merger.
(xiv) The issues associated with the fact that the Company has
significant excess cash, including the following:
(1) after taking into account the excess cash (for which a purchaser is
unlikely to pay more than dollar for dollar), the actual premium paid
for the underlying business is substantially higher than the premium
on the whole transaction;
<PAGE>
(2) the risks associated with deploying substantial excess cash in the oil
service industry in a period of cyclical downtrend or diversifying
into new lines of business in which the Company does not have
experience; and
(3) the possibility that Purchaser might be deemed to be paying for the
purchase with the Company's own assets.
The Independent Committee believed the issues referred to in clauses (1)
and (2) supported its determination that the Share price to be paid in the Offer
and the Merger was fair, and that viewing the transaction in the manner referred
to in clause (3) was not appropriate.
(xv) The likelihood that the Offer and the Merger will be consummated
in light of the facts that the Offer and the Merger are not subject to any
financing condition, that Parent has represented that the funds necessary
to consummate the Offer and Merger will be available and the limited nature
of the other conditions to the Offer and the Merger.
(xvi) The fact that during calendar year 1998, the Shares had traded
at prices higher than, and certain Share repurchases by the Company were
made at prices higher than, the Share price to be paid in the Offer and the
Merger did not significantly impact the Independent Committee's
determination as to the fairness of the Offer and the Merger, because of
the Independent Committee's belief that conditions in the offshore
construction and oilfield services industry had changed since those dates
to such an extent that those transactions had limited relevance for
determining the current value of the Company and the fairness of the Offer
and the Merger.
Company Board. In reaching its determinations referred to above, the
Company Board considered the following factors: (i) the determinations and
recommendations of the Independent Committee; (ii) the Independent Committee's
analysis of the factors referred to above, which the Company Board adopted;
and (iii) the fact that the price to be paid in the Offer and the Merger and
the terms and conditions of the Merger Agreement were the result of arm's-
length negotiations between the Independent Committee and the Finance
Committee.
The description set forth above of the factors considered by the Company
Board, including members of the Independent Committee, is not intended to be
exhaustive, but summarizes the primary factors considered. The members of the
Company Board, including the members of the Independent Committee, evaluated
the Offer and the Merger in light of their knowledge of the business,
financial condition and prospects of the Company, and based upon the advice of
financial and legal advisors. In light of the number and variety of factors
that the Company Board and the Independent Committee considered in connection
with their evaluation of the Offer and the Merger, neither the Company Board
nor the Independent Committee found it practicable to assign relative or
specific weights to the foregoing factors, and, accordingly, neither the
Company Board nor the Independent Committee did so. Individual members of the
Company Board and the Independent Committee may have given differing weights
to different factors and may have viewed certain factors more positively or
negatively than others. Neither the Company Board nor the Independent
Committee considered the net book value or liquidation value of the Company in
connection with their determinations referred to above because of their belief
that these measures of value are not relevant for purposes of valuing a
company actively engaged in the offshore construction and oilfield service
industry due to (1) in the case of net book value, the significant asset
writedowns incurred by many of such companies and (2) in the case of
liquidation value, the relatively low valuation that would result as compared
to other methods of valuation due to the nature of the Company's business and
assets.
The Company Board, including the members of the Independent Committee,
believes that the Offer and the Merger are procedurally fair because, among
other things: (i) the Independent Committee consisted entirely of directors
who were neither employees or officers of the Company nor employees, officers
or directors of Parent and were appointed to represent the interests of the
minority shareholders of the Company;
<PAGE>
(ii) the Independent Committee retained and was advised by independent legal
counsel; (iii) the Independent Committee retained Simmons as its independent
financial advisor to assist it in evaluating a potential transaction with
Parent and received advice from Simmons; (iv) the Minimum Condition which may
not be waived by Purchaser without the consent of the Company and which has
the effect of requiring that in order for the Offer to be successful, a
majority of the publicly-held Shares must be tendered and not withdrawn; (v)
the Independent Committee engaged in extensive deliberations in evaluating the
Offer and the Merger and alternatives thereto; and (vi) the fact that the
$35.62 per Share price and the other terms and conditions of the Merger
Agreement resulted from active arm's-length bargaining between the Independent
Committee and its representatives, on the one hand, and the Finance Committee
and its representatives, on the other hand.
The Company's executive officers have not been asked to make a
recommendation as to the Offer or the Merger.
The information set forth in "Position of Parent and Purchaser Regarding
Fairness of the Offer and the Merger" of the Offer to Purchase is hereby amended
and restated to read in its entirety as follows:
Position of Parent and Purchaser Regarding Fairness of the Offer and the
Merger
Parent and Purchaser believe that the consideration to be received by the
Company's shareholders (other than Parent) pursuant to the Offer and the
Merger is fair to such shareholders. Parent and Purchaser base their belief on
the following facts:
(i) the fact that the Independent Committee and Company Board
concluded that the Offer and the Merger are fair to, and in the best
interests of, the Company's shareholders (other than Parent);
(ii) notwithstanding the fact that Simmons' opinion was addressed to
the Independent Committee and that neither Parent nor Purchaser is entitled
to rely on such opinion, the fact that the Independent Committee received
an opinion from Simmons that, as of the date of such opinion and based on
and subject to certain matters stated in such opinion, the consideration to
be paid in the Offer and the Merger is fair to the holders of Shares (other
than Parent) from a financial point of view;
(iii) the fact that the same consideration will be paid in both the
Offer and the Merger;
(iv) the fact that the Offer and the Merger will each provide
consideration to the Company's shareholders entirely in cash;
(v) the fact that the per Share price to be paid in both the Offer and
Merger constitutes a 16.79% premium over the closing market price of the
Company's Shares on May 6, 1999, the business day immediately prior to the
date on which the Merger Agreement was announced and that the premium was
within the range of premiums paid for target company shares in certain
transactions in which minority interest holdings were acquired by a
controlling shareholder over the pre-announcement stock prices of such
target companies, as calculated by Merrill Lynch;
(vi) the fact that the Minimum Condition requires that the Offer not
be consummated unless at least a majority of the publicly-held Shares are
validly tendered pursuant to the Offer and not withdrawn;
(vii) the other factors enumerated by the Independent Committee as
supporting their recommendation of the Offer and the Merger;
(viii) the terms and conditions of the Offer, the Merger and the
Merger Agreement, including the fact that the Merger Agreement does not
preclude the Independent Committee from withdrawing or modifying its
recommendation to shareholders if failure to do so would be inconsistent
with its fiduciary
<PAGE>
duties, which provides the Independent Committee with a degree of
flexibility to respond to changed circumstances; and
(ix) the fact that the Offer Price was within the range of the
Company's value, as calculated by Merrill Lynch using a discounted cash
flow analysis.
Parent and Purchaser considered each of the factors listed above and
evaluated each factor in light of their knowledge of the business and
operations of the Company and their business judgement. Parent and Purchaser
did not find it practicable to assign, nor did they assign, relative weights
to the individual factors considered in reaching their conclusion as to
fairness. However, Parent and Purchaser did conclude that factors (i), (ii),
(vi) and (viii) provide the procedural safeguards necessary to assure the
fairness of the Offer and the Merger to the public shareholders of the
Company. Parent and Purchaser also concluded that factor (iv) benefits the
public shareholders of the Company by ensuring that such holders will not be
subject to any potential liabilities arising from any future litigation
concerning the Parent's other business operations and various other risks and
uncertainties associated with Parent's operations. Furthermore, Parent and
Purchaser concluded that factors (v) and (ix) indicate that the Offer Price is
fair to the public shareholders of the Company.
In light of the nature of the Company's business, Parent and Purchaser did
not deem net book value to be a relevant indicator of the value of the Shares
because of the many unusual charges and gains recorded by both the Company and
companies deemed comparable to the Company. In addition, use of net book
values or multiples of book values is not preferred in the oilfield service
industry due to the significant asset writedowns typically incurred in the
oilfield service industry. Parent and Purchaser also did not deem liquidation
value to be a relevant indicator of the value of the Shares, because Parent
did not, and does not now, have any intention to liquidate the Company. In
addition, Parent and Purchaser did not deem historical market prices to be a
relevant indicator of the value of the Shares, because of the significant
negative changes in the offshore construction industry and the declining
backlog at the Company in recent months. Furthermore, the fact that during
calendar year 1998, the Shares had traded at prices higher than, and certain
Share repurchases by the Company were made at prices higher than, the Share
price to be paid in the Offer and the Merger did not significantly impact
Parent's or the Purchaser's determination as to the fairness of the Offer and
the Merger, because of their belief that conditions in the offshore
construction and oilfield services industry had changed since those dates to
such an extent that those transactions had limited relevance for determining
the current value of the Company and the fairness of the Offer and the Merger.
The executive officers of the Purchaser and Parent have not been asked to
make a recommendation as to the Offer or the Merger.
Item 11. Material to be Filed as Exhibits.
(c)(6) Assumption Agreement, dated May 28, 1999, among Purchaser, Parent and
the Company.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Amendment is true, complete and correct.
June 8, 1999 MCDERMOTT ACQUISITION COMPANY, INC.
By: /s/ Daniel R. Gaubert
---------------------------------
Name: Daniel R. Gaubert
Title: Treasurer
MCDERMOTT INTERNATIONAL, INC.
By: /s/ S. Wayne Murphy
---------------------------------
Name: S. Wayne Murphy
Title: Senior Vice President, General
Counsel and Corporate Secretary
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
(c)(6) Assumption Agreement, dated May 28, 1999, among Purchaser, Parent and
the Company.
<PAGE>
EXHIBIT 99(C)(6)
ASSUMPTION AGREEMENT
McDermott Acquisition Company, Inc., a Panama corporation
("AcquisitionCo."), hereby expressly assumes, and agrees to perform and
discharge, all of the obligations and liabilities of the Merger Subsidiary (as
defined in the Merger Agreement referred to below) under the Agreement and Plan
of Merger (the "Merger Agreement") dated as of May 7, 1999 between J. Ray
McDermott, S.A., a Panama corporation (the "Company"), and McDermott
International, Inc., a Panama corporation ("Parent"). All references in the
Merger Agreement to the "Merger Subsidiary" shall hereafter refer to
AcquisitionCo. and its successors.
Upon the terms and subject to the conditions set forth in the Merger
Agreement, at the Effective Time (as defined in the Merger Agreement),
AcquisitionCo. shall be merged with and into the Company in accordance with
Panama Law, whereupon the separate existence of AcquisitionCo. shall cease, and
the Company shall continue as the surviving corporation. Parent shall not be a
party to any merger pursuant to the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, McDermott Acquisition Company, Inc. has caused its duly
authorized officer to execute and deliver this Assumption Agreement as of
May 28, 1999.
MCDERMOTT ACQUISITION
COMPANY, INC.
By: /s/ D.R. Gaubert
--------------------------------
Name: D.R. Gaubert
Title: Treasurer
Agreed and accepted:
J. RAY MCDERMOTT, S.A.
By: /s/ S.W. Murphy
--------------------------------
Name: S.W. Murphy
Title: Senior Vice President
and General Council
and Corporate Secretary
MCDERMOTT INTERNATIONAL, INC.
By: /s/ R.E. Tetrault
--------------------------------
Name: R.E. Tetrault
Title: Chairman of the Board and
Chief Executive Officer
2
