<PAGE>
STARRETT CORPORATION
ONE PARK AVENUE, NEW YORK, NY 10016
TELEPHONE (212) 616-3200
FAX (212) 696-5458
PRESIDENT AND
CHIEF OPERATING OFFICER
October 23, 1997
Dear Stockholder:
I am pleased to inform you that on October 16, 1997, Starrett Corporation
("Starrett") entered into a merger agreement with Startt Acquisition, Inc.
("SAI") that provides for the acquisition of Starrett by SAI. Under the terms
of the merger agreement, SAI has commenced a tender offer for all outstanding
shares of Starrett common stock at $12.25 per share.
Your Board of Directors unanimously has approved the Merger Agreement, the
Offer and the Merger, has determined that the Offer and Merger are fair to,
and in the best interests of, the Shareholders of the company, and recommends
acceptance of the Offer and approval and adoption of the Merger Agreement and
the Merger by the Shareholders of the Company.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors. These factors included, among other
things, the opinion dated October 16, 1997 of Goldman, Sachs & Co., financial
advisor to Starrett, that, as of such date, the consideration to be received
by Starrett's stockholders pursuant to the offer and the merger was fair to
stockholders of Starrett from a financial point of view.
Attached to this letter is a copy of Starrett's Solicitation/Recommendation
Statement on Schedule 14D-9. Also enclosed is the Offer to Purchase of SAI,
together with related materials. These documents set forth the terms and
conditions of the offer and other important information. We encourage you to
read the enclosed materials carefully.
On behalf of myself, the other members of management and the directors of
Starrett, I want to thank you for the support you have given to our company.
Sincerely,
STARRETT CORPORATION
/s/ Irving R. Fischer
Irving R. Fischer
<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
------------------------
STARRETT CORPORATION
(Name of Subject Company)
STARRETT CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
885-677-100
(CUSIP Number of Class of Securities)
IRVING R. FISCHER
PRESIDENT & CHIEF OPERATING OFFICER
STARRETT CORPORATION
ONE PARK AVENUE
NEW YORK, NY 10016
(212) 616-3200
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person(s) filing statement).
COPY TO:
PETER G. SAMUELS, ESQ.
PROSKAUER ROSE LLP
1585 BROADWAY
NEW YORK, NY 10036-8269
(212) 969-3000
===============================================================================
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Starrett Corporation, a New York
corporation (the "Company"), and the address of the principal executive
offices of the Company is One Park Avenue, New York, NY 10016. The title of
the class of equity security to which this statement relates is the Company's
Common Stock, par value $1.00 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") being made by
Startt Acquisition, Inc., a New York corporation ("Purchaser"), disclosed in
a Tender Offer Statement on Schedule 14D-1, dated October 23, 1997 (the
"Schedule 14D-1"), to purchase all the issued and outstanding Shares at a
price of $12.25 per Share, net to the seller in cash (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated October 23, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together with the Offer to Purchase constitute
the "Offer" and are being mailed to the Company's shareholders simultaneously
herewith). The Purchaser is a wholly-owned subsidiary of Startt Acquisition,
LLC, a Delaware limited liability company ("Parent").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 16, 1997 (the "Merger Agreement"), between the Company and the
Purchaser, under which, subsequent to the consummation of the Offer, the
Purchaser will be merged with and into the Company (the "Merger") which will
be the surviving corporation of the Merger. A copy of the Merger Agreement is
attached to the Offer to Purchase and is incorporated herein by reference.
As set forth in the Offer to Purchase, the principal executive offices of
the Purchaser are located at Startt Acquisition, Inc., c/o Lawrence Ruben
Company, Inc., 600 Madison Avenue, 20th Floor, New York, NY 10022.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) The following describes contracts, agreements, arrangements or
understandings and any actual or potential conflict of interest between the
Company or its affiliates and: (1) the Company, or its executive officers,
directors or affiliates; or (2) the Purchaser, its executive officers,
directors or affiliates.
CERTAIN TRANSACTIONS
The Company has entered into certain transactions described below. The
following summary of those transactions is qualified in its entirety by
reference to the text of the Merger Agreement and the Shareholders Agreement
(as such term is defined under "Shareholders Agreement" below) where
applicable, a copy of each of which is attached to the Offer to Purchase and
is incorporated herein by reference.
Pursuant to a Memorandum of Understanding between the Company and the City
of New York, the Company has been designated as the developer of a mixed use
project known as Gateway Estates in Brooklyn, New York, currently anticipated
to consist of a shopping center, housing and related components. The project
is in the plan/development stage and requires various government agency
approvals. Builtland Partners, in which Paul Milstein, the Chairman of the
Board of the Company, and members of his family are the principal owners, is
the Company's 35% joint venture partner in the project.
The Company's Levitt subsidiary has leased approximately 8,800 square feet
of office space in a building in Boca Raton, Florida, under a lease with a
remaining three-year term. The building in which such space is located is
owned by a partnership in which certain executives and employees of the
Company and Levitt have an investment. Annual rental payments under the lease
aggregate $151,200.
The Company's Grenadier Realty Corp. ("Grenadier") subsidiary manages an
apartment building owned by Evergreen Gardens, Inc. ("Evergreen") and
indirectly owned by Paul Milstein and members of
1
<PAGE>
his family. Grenadier received a fee of $67,467 for such services during
1996, which was the amount of the fee approved by the New York City
Department of Housing, Preservation and Development ("HPD") for that year.
The sole shareholder of Evergreen agreed in connection with the Merger
Agreement that insofar as it is within the sole shareholder's reasonable
control and in accordance with applicable governmental regulations, on each
of the next four annual expiration dates for such management agreement cause
such management agreement to be renewed for an additional one year term on
market-rate terms approved by HPD, provided that nothing in such agreement
shall be deemed to limit provisions providing for termination for cause or
similar reason under such management agreement and provided further that in
the event Evergreen or its real estate is sold the sole shareholder will
retain the right to terminate such management agreement effective upon such
sale.
Grenadier provides management services to a project in which Irving R.
Fischer, President and Chief Operating Officer of the Company has an indirect
.5% general partnership interest; Grenadier received $272,000 for such
services during 1996.
In addition, Grenadier and the Company's Security Plus Services, ("SPS")
Inc. subsidiary provide management and security services, respectively, to
several projects in which affiliates of Oded Aboodi owned interests. During
1996, Grenadier received a fee of $443,279 for management services provided
to a project in which at October 1, 1997 affiliates of Mr. Aboodi owned a 2%
general partnership interest; SPS received a fee of $205,723 for the
provision of security services to such project. For a project in which at
October 1, 1997 affiliates of Mr. Aboodi owned a 1% general partnership
interest and in which at October 1, 1997 an affiliate of Mr. Aboodi owned a
7.76161% limited partnership interest, during 1996 Grenadier received a fee
of $83,952 for the provision of management services, and SPS received
$164,935 for security services, and for a project in which affiliates of Mr.
Aboodi owned at October 1, 1997 a 1% general partnership interest and in
which an affiliate of Mr. Aboodi owned a 3.095% limited partnership interest,
Grenadier received $75,253 and SPS $136,456 in fees during 1996. Finally, for
1996, Grenadier received a fee of $186,585 for management services provided
to a project in which at October 1, 1997 affiliates of Mr. Aboodi owned a 1%
general partnership interest and in which an affiliate of Mr. Aboodi owned a
limited partnership interest of 4.33625%.
Grenadier also provides management services and SPS provides protection
services for a project in which Murray Smith, a Vice President of the
Company, acts as the managing general partner and has a 24.54% general
partnership interest. Grenadier received a fee of $164,304 and SPS received a
fee of $166,943 for such services during 1996. Mr. Smith is also the managing
general partner for a project in which he owns a 1% general partnership
interest; Grenadier received $54,528 and SPS $53,048 for their services
during 1996 for this project. Finally, Grenadier received $138,867 during
1996 for management services provided to a project in which Mr. Smith owns a
1% general partnership interest and is co-managing general partner with the
Company.
INCENTIVE AGREEMENT
The Company is a party to an agreement dated November 7, 1996, in
furtherance of an agreement, dated September 17, 1996, which was approved by
the Board of Directors on July 14, 1997 (the "Incentive Agreement") with
Irving R. Fischer, the President, Chief Operating Officer and a director of
Starrett Corporation. The following summary is qualified in its entirety by
reference to the text of the Incentive Agreement, a copy of which is attached
to the Offer to Purchase and is incorporated herein by reference.
Pursuant to the Incentive Agreement, in the event the Offer is consummated
during 1997, Mr. Fischer will receive from the Company a lump-sum cash
payment of $1,000,000 and a grant of 100,000 Shares, except that the
aggregate value of such payment and stock grant shall be no more than
$1,673,493. The Purchaser has agreed under the Merger Agreement to provide,
if requested by the Company, unless other arrangements are entered into by
the Purchaser and Mr. Fischer, sufficient funds to make such cash payment to
Mr. Fischer. Mr. Fischer also has a long-standing agreement with the Company
whereby, after Mr. Fischer ceases to work full-time for the Company, he would
be entitled to consulting payments by the Company at 50% of his base salary
during the two-year period of a covenant not to compete.
2
<PAGE>
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement (the "Employment
Agreement") with Frank Ross, Sr., dated as of October 16, 1997. The following
summary is qualified in its entirety by reference to the text of the
Employment Agreement, a copy of which is attached to the Offer to Purchase
and is incorporated herein by reference.
Pursuant to the Employment Agreement, Mr. Ross will serve as the Chairman
and Chief Executive Officer of HRH Construction Corporation, a subsidiary of
the Company ("HRH"), during the period commencing on October 16, 1997 and
ending on December 31, 1999 (the "Employment Period"), unless extended or
modified in writing by the parties. The Employment Agreement contains a
non-competition provision the period of which continues until the first
anniversary of the date on which Mr. Ross' employment ends. The Employment
Agreement also contains loyalty, confidentiality and non-disclosure
provisions. Mr. Ross will receive an annual base salary of $300,000, and will
be eligible to receive an annual bonus of 10% of HRH's first $3 million of
annual pretax net income and 5% of all annual pre-tax net income in excess of
$3 million.
SEVERANCE CONSENT
The Purchaser has consented (the "Severance Consent") to the Company
entering into a severance letter with Mr. Lewis A. Weinfeld, the Company's
Executive Vice President, Chief Financial Officer and Secretary, dated as of
October 16, 1997. The following summary is qualified in its entirety by
reference to the text of the Severance Consent, a copy of which is attached
to the Offer to Purchase and is incorporated herein by reference.
The Severance Consent provides that the Company may enter into a severance
agreement with Mr. Weinfeld on the following terms (and only the following
terms): If the Company or the surviving corporation of the Merger terminates
Mr. Weinfeld without cause, or demotes Mr. Weinfeld from a senior executive
position, or changes any of the respective base salary, bonus or benefits
package of Mr. Weinfeld in a manner so that any of such items is less
favorable to the him than the base salary, bonus or benefits package to which
he was entitled as of September 30, 1997, Mr. Weinfeld will be entitled to
severance, consisting of twice his annual base salary if Mr. Weinfeld is
terminated prior to the second anniversary of consummation of the Offer or
his annual base salary if Mr. Weinfeld is terminated (or terminates his own
employment for any reason) thereafter.
MERGER AGREEMENT
The Company entered into the Merger Agreement with Purchaser on October
16, 1997. A copy of the Merger Agreement is attached to the Offer to Purchase
and is incorporated herein by reference.
SHAREHOLDERS AGREEMENT
As an inducement to the Purchaser to enter into the Merger Agreement and
to incur the obligations therein, Paul Milstein, Henry Benach, Irving Fischer
and Oded Aboodi, and persons and entities affiliated with them (collectively,
the "Principal Shareholders") have entered into a Shareholders Agreement
dated October 16, 1997 (the "Shareholders Agreement") with Purchaser and
Parent. The following is a summary of certain provisions of the Shareholders
Agreement, a copy of which is attached to the Offer to Purchase and is
incorporated herein by reference. Such summary is qualified in its entirety
by reference to the text of the Shareholder Agreement.
Pursuant to the Shareholders Agreement, each Principal Shareholder has
agreed, provided that Purchaser is not then in material breach of the Merger
Agreement and provided that there has not been issued an injunction which
would prohibit such Principal Shareholder from tendering Shares, to validly
tender (and not to withdraw), pursuant to and in accordance with the terms of
the Offer, not later than the fifth business day after the receipt by such
Principal Shareholder of the Offer to Purchase, the Shares beneficially owned
by such Principal Shareholder.
3
<PAGE>
INDEMNITY AGREEMENT
In connection with the execution of the Merger Agreement, the Principal
Shareholders entered into an Indemnity Agreement dated October 16, 1997 with
Purchaser and Parent (the "Indemnity Agreement"). The following is a summary
of certain provisions of the Indemnity Agreement, a copy of which is attached
to the Offer to Purchase and is incorporated herein by reference. Such
summary is qualified in its entirety by reference to the text of the
Indemnity Agreement.
The Principal Shareholders have agreed pursuant to the Indemnity Agreement
to indemnify Purchaser and Parent for certain defined "Frydman Claims"
arising out of certain arrangements between the Company and entities
controlled by Jacob Frydman. The Indemnity Agreement provides that the
Purchaser and Parent will bear the first $1,000,000 of losses and expenses
arising out of any Frydman Claims and that any remaining losses and expenses
will be shared equally by Purchaser and Parent on the one hand and the
Principal Shareholders on the other.
On October 22, 1997, a complaint (the "Complaint") captioned Starrett
Acquisition, Inc. v. Starrett Corporation et al., Index No. 605392/97, was
filed in the Supreme Court of the State of New York, County of New York (the
"Court"). The Complaint was brought by Starrett Acquisition, Inc., of which
Jacob Frydman is the President. The Company is a named defendant in the
Complaint and certain persons in privity with the Company, which may be
intended to represent Purchaser and related parties, are unnamed defendants.
The Complaint alleges, among other things, that the Company is in breach of
certain contractual obligations to the plaintiff arising out of the Frydman
Agreement (as such term is defined below) and subsequent negotiations. The
Complaint seeks specific performance of the Company's alleged contractual
obligations to the plaintiff, injunctive relief with the respect to the
commencement of the Offer and unspecified damages. The Company believes that
the allegations contained in the Complaint are without merit, and the Company
and Purchaser intend to vigorously contest the action.
On October 23, 1997, the Court denied the plaintiff's motion for a
preliminary injunction. Counsel to Mr. Frydman has informed the Company that
he will not appeal the decision. Unspecified damage claims by Mr. Frydman
remain outstanding.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, THE SHAREHOLDERS OF THE
COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER BY THE SHAREHOLDERS OF THE COMPANY.
A press release announcing the Offer, the Merger and the Merger Agreement
is filed herewith as Exhibit 1 and is incorporated herein by reference.
(b) REASONS FOR THE BOARD'S RECOMMENDATION.
In January 1994, the Company began to explore the strategic alternatives
available to the Company to maximize value to the Company's shareholders,
including a possible business combination, sale of one or more divisions, or
another extraordinary transaction (a "significant transaction").
During the period through June 1997, the Company provided certain
information regarding the Company to seven parties who signed confidentiality
agreements with the Company, of whom five parties submitted written
indications of interest or proposed letters of intent concerning a possible
significant transaction involving the Company. In January 1997, certain of
the Principal Shareholders signed a letter of intent to sell approximately
52% of the Company's outstanding shares at a purchase price of $12.00 per
Share, but such letter of intent expired without agreement upon a definitive
agreement, and none of the discussions or negotiations involving a
significant transaction with the Company resulted in a definitive agreement
for such a transaction.
4
<PAGE>
In July 1997, the Company entered into an agreement and plan of merger
(such agreement as subsequently replaced, the "Frydman Agreement") with
certain entities controlled by Jacob Frydman, providing for cash
consideration to the Company's shareholders of $12.25 per Share. On August
21, 1997, the Company notified Mr. Frydman that it had terminated the Frydman
Agreement as a consequence of his failure to deliver to the Company a
commitment for Mr. Frydman's financing of the transactions contemplated by
the Frydman Agreement reasonably acceptable to the Company and his failure to
deliver a $5,000,000 letter of credit required to be delivered by him. See
"Item 3 -- Identity and Background -- Indemnity Agreement" above for a
description of certain claims brought by Mr. Frydman.
On August 21, 1997, the Company publicly announced the termination of the
Frydman Agreement. During the period commencing August 22, 1997, the Company
engaged in discussions and negotiations with a total of 14 parties respecting
a possible significant transaction with the Company. Beginning at the same
time the Principal Shareholders held discussions with one party respecting
the possible sale of their Shares. On August 27, 1997, members of management
and the Board of Directors held an exploratory meeting with representatives
of affiliates of the Purchaser (references in this Item 4(a) to the Purchaser
include various affiliates of the Purchaser) respecting a possible
transaction involving the Company and, on September 11, 1997, the Purchaser
wrote to the Company confirming its interest in such a transaction.
On September 15, 1997, the Board of Directors of the Company determined to
establish procedures for the possible sale of the Company, including a
request that any party desiring to make a proposal for the acquisition of the
Company present a written proposal to the Board no later than September 19,
1997, specifying the proposed purchase price, confirming such party's
willingness to immediately post a $5 million cash deposit, describing such
party's equity financing and a timetable for confirming such party's debt
financing for the transaction, and, among other things, confirming the
absence of a due diligence or similar condition to closing.
Such procedures were communicated by the Company in a letter dated
September 15, 1997 to 12 parties (including the Purchaser) who had expressed
interest in a significant transaction with the Company. On September 18,
1997, the Company entered into a confidentiality agreement with the
Purchaser.
On September 19, 1997, the Company received three proposals from parties
other than the Purchaser for the acquisition of all of the Company's
outstanding Shares at prices ranging from $12.00 to $12.50 per Share. On
September 23, 1997, the Company engaged Goldman, Sachs & Co. ("Goldman
Sachs") as its financial advisor in connection with the possible sale of all
or a portion of the Company. Also on September 23, 1997, the Purchaser wrote
to the Company submitting a proposal to acquire at least 52% of the Shares of
the Company at a price of $12.10 per Share. On September 24, 1997, the
Company informed the Purchaser that they were not interested in pursuing a
transaction with the Purchaser for less than all of the Company's outstanding
Shares.
On September 25, 1997, counsel to the Company wrote to the Purchaser and
to the three parties which had provided the acquisition proposals described
above, inviting such parties to submit to the Company's counsel and financial
advisors by September 29, 1997 a binding proposal for the acquisition of all
of the Company's Shares, accompanied by a mark-up of an Agreement and Plan of
Merger enclosed with such letter which such party would be willing to sign
and a refundable $5 million cash deposit. By October 1, 1997, the Company's
counsel and financial advisors had received three responses to such letter,
each accompanied by the $5 million refundable deposit, two of which proposed
a purchase price of $12.25 or $12.30 per Share and one of which, submitted by
the Purchaser, proposed a purchase price of $11.00 per Share. The Company
informed the Purchaser that it would not consider an offer at $11.00 per
Share and the Purchaser replaced its response with one offering $12.50 per
Share, which was subsequently reduced to $12.25 per Share.
On October 1, 1997, a special meeting of the Company's Board of Directors
was held at which the status of various proposals for the purchase of the
Company and related matters were reviewed by the Board, and the Company's
financial advisors were instructed to inform potential purchasers of the
Company that all issues pertaining to the acquisition and definitive
acquisition agreements were required to be resolved by October 8, 1997.
5
<PAGE>
Various meetings between members of management and the Board of Directors
of the Company and the Purchaser took place between October 1, 1997 and
October 9, 1997 principally for due diligence purposes. In addition, various
meetings and telephone conferences were held between October 1, 1997 and
October 9, 1997 among the Company's counsel and financial advisors and the
Purchaser and its counsel to negotiate a definitive Agreement and Plan of
Merger. Simultaneous negotiations took place between the Company and two
other potential bidders for the Company.
At a special meeting of the Company's Board of Directors held on October
9, 1997, the Board reviewed the three proposals which had been made to the
Company and, after consideration of such proposals with the Company's
financial advisors and counsel, authorized management to enter into an
agreement with the Purchaser whereby neither party would be bound to enter
into a definitive merger agreement with the other party but under which the
Company agreed to negotiate with the Purchaser on an exclusive basis through
noon on October 13, 1997 to finalize the terms of the definitive Merger
Agreement.
On October 14, 1997, the Board of Directors of the Company held a special
meeting to discuss the sale of the Company, at which the status of the
negotiations with each of the bidders was discussed among the directors, the
Company's financial advisors and counsel. It was noted that, since the last
meeting of the Board, one of the bidders other than the Purchaser had raised
its offer from $12.30 to $12.50 per Share. It was reported, among other
things, that such bidder had not obtained a commitment for the debt portion
of its acquisition financing and had informed the Company that it would need
24 hours from the Company's agreement on a transaction with such bidder in
order for such a commitment to be obtained. The directors noted that it was
impossible to predict whether it would prove possible for such bidder to
obtain a financing commitment within such time period or whether such
commitment, if obtained, would prove acceptable to the Company. It was also
noted that certain issues appeared to remain unresolved with such bidder
which could add an additional element of uncertainty to completing a
transaction with such bidder. The Board discussed, in addition, significant
uncertainties that had arisen with respect to the required regulatory
approval for a transaction with the third bidder, an entity affiliated with
Mr. Frydman, and noted that in the past Mr. Frydman had, among other things,
failed in connection with the Frydman Agreement to provide the Company with a
reasonably acceptable financing commitment and the required letter of credit.
After the discussion of various other matters relevant to the certainty of
completing a transaction with the Purchaser and the other bidders, the Board
concluded that the transaction with the Purchaser presented a significantly
higher likelihood of consummation than the proposed transactions with the
other two bidders. Representatives of Goldman Sachs discussed matters related
to the proposed transaction with the Purchaser and referred the Board to the
materials distributed to the directors, including, among other things, a
summary of the proposed transaction with the Purchaser, the background of
such proposed transaction, an analysis of the Company's business, and various
analyses relevant to the valuation of the Shares. At the conclusion of its
presentation, Goldman Sachs delivered its oral opinion to the Board
(subsequently confirmed as of October 16, 1997 in the Fairness Opinion) that
the $12.25 in cash to be received by holders of the Shares in the Offer and
the Merger was fair from a financial point of view to such holders.
Thereafter, the Board (i) determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, taken
together, were fair and in the best interests of the shareholders of the
Company and approved the same, and (ii) resolved to recommend that the
holders of the Shares accept the Offer and approve and adopt the Merger
Agreement and the Merger.
FAIRNESS OPINION
Goldman Sachs has provided the Board of Directors of the Company with a
Fairness Opinion (the "Fairness Opinion") stating that "as of the date hereof
[October 16, 1997] $12.25 in cash to be received by the holders of Shares in
the Offer and the Merger is fair from a financial point of view to such
holders." The full text of the Fairness Opinion is filed herewith as Exhibit
2 and is incorporated herein by reference. Shareholders are urged to read the
Fairness Opinion carefully in its entirety.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings,
6
<PAGE>
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuation for estate, corporate and other
purposes. Goldman Sachs is familiar with the Company, having acted as its
financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Merger Agreement. Goldman Sachs has in the
past provided the companies affiliated with Richard Ruben, a principal
shareholder of the Purchaser, and Lawrence Ruben, Richard Ruben's father,
with investment banking services in transactions including, but not limited
to, common stock offerings. In addition, companies affiliated with Richard
and Lawrence Ruben have either co-invested with Goldman Sachs in real estate
principal investments or have been investors in Goldman Sachs sponsored real
estate investment funds.
In connection with the Fairness Opinion, Goldman Sachs reviewed, among
other things, the Merger Agreement, the Shareholders Agreement, Annual
Reports to Stockholders and Annual Reports on Form 10-K of the Company for
the five years ended December 31, 1996, certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company, certain other
communications from the Company to its stockholders, and certain financial
projections with respect to the Company prepared by the Company's management.
Goldman Sachs also held discussions with members of the senior management of
the Company regarding its past and current business operations, financial
condition and future prospects. In addition, Goldman Sachs reviewed the
reported price and trading activity for the Shares, compared certain
financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations
in the residential/commercial building industry specifically and in other
industries generally and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. Goldman Sachs did not
make an independent evaluation or appraisal of the assets and liabilities of
the Company or any of its subsidiaries and was not furnished with any such
evaluation or appraisal. In addition, the Board of Directors of the Company
advised Goldman Sachs of the judgment of the Board of Directors of the
Company that certain competing proposals for the Company were not attractive
relative to the transaction contemplated by the Merger Agreement due to
uncertainties relating to the ability of the parties making such competing
proposals to complete the transactions contemplated by such competing
proposals. The advisory services of Goldman Sachs and the Fairness Opinion
were provided for the information and assistance of the Board of Directors of
the Company in connection with its consideration of the transaction
contemplated by the Merger Agreement and such opinion did not constitute a
recommendation as to whether any holder of Shares should tender its Shares
pursuant to the Offer or vote its Shares in favor of the Merger.
FACTORS CONSIDERED BY THE DIRECTORS
In unanimously approving the Merger Agreement, the Offer and the Merger
and in determining that the Offer and the Merger are fair to, and in the best
interests of, the shareholders of the Company, and in recommending acceptance
of the Offer and approval and adoption of the Merger Agreement and the Merger
by the shareholders of the Company, the Board of Directors gave careful
consideration to a number of factors, including, without limitation, the
following:
1. the financial and other terms and conditions of the Offer, the Merger
and the Merger Agreement;
2. the presentation to the Board of Directors by Goldman Sachs at the
October 14, 1997 Board of Directors' meeting and the oral opinion to the
Board as of October 14, 1997 (subsequently confirmed as of October 16, 1997
in the Fairness Opinion) that, based upon and subject to certain matters
stated in the Fairness Opinion, the $12.25 in cash to be received by the
holders of Shares pursuant to the Offer and the Merger is fair from a
financial point of view to such holders. The full text of the Fairness
Opinion, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Goldman Sachs, is attached hereto as
Exhibit 2;
7
<PAGE>
3. the written commitment of Credit Suisse First Boston Mortgage Capital
LLC to provide the Purchaser with $66 million of financing for the Offer and
the Merger;
4. the deposit into escrow of $5 million by the Purchaser so that,
despite the fact that the Purchaser currently has no assets, if the Merger
Agreement is terminated by the Company as a result of (x) the Offer not
being consummated by its expiration date (provided that the conditions to
consummation of the Offer set forth on Exhibit A to the Merger Agreement
have been satisfied by such date), (y) the Offer not being consummated by
December 31, 1997 (as a result of the breach of the Merger Agreement by the
Purchaser), or (z) certain material breaches of the Merger Agreement by the
Purchaser, the Company will receive as liquidated damages the $5 million
escrow deposit;
5. the absence of a "financing out" or similar condition to the
Purchaser's obligations under the Merger Agreement;
6. the Board's awareness of the reputation of various affiliates of the
Purchaser in the business community and real estate industry and the
confidence of the Board that such affiliates could obtain or provide funding
for the Offer and Merger;
7. the significant number of parties with whom the Company has held
discussions or negotiations respecting a business combination or other
significant transaction with the Company without resulting in a sale of the
Company;
8. the significant uncertainties determined by the Board of Directors to
exist with respect to the ability of the two bidders for the Company other
than the Purchaser to consummate the purchase of the Company;
9. the fact that one of such bidders had offered a purchase price of
$12.50 per Share;
10. the fact that the Merger Agreement, which, among other things,
prohibits the Company, its subsidiaries and their respective officers,
directors, executive employees, agents or representatives from initiating,
soliciting or encouraging any potential Acquisition Transaction (as defined
in the Merger Agreement), does permit the Company to furnish information to,
or to enter into discussions and negotiations with, any person or entity
that makes an unsolicited bona fide proposal relating to an Acquisition
Transaction, if, among other things, the Board of Directors, based upon the
advice of outside counsel, determines in good faith that such action is
required for the Board of Directors of the Company to comply with its
fiduciary duties to shareholders under applicable law;
11. the fact that the terms of Merger Agreement should not unduly
discourage other third parties from making bona fide proposals subsequent to
the execution of the Merger Agreement and, if any such proposals were made,
the Company, in the exercise of its fiduciary duties, could determine to
provide information to and engage in negotiations with any such third party;
12. the possible alternatives to the Offer and the Merger, including,
without limitation, continuing to operate the Company as an independent
entity and the risks associated therewith;
13. the familiarity of the Board of Directors with the business, results
of operations, properties and financial condition of the Company, the future
prospects of the Company and the nature of the industry in which it
operates;
14. the regulatory approvals required to consummate the Merger,
including the approval of HUD, and the prospects for receiving such
approvals;
15. current industry, economic and market conditions;
16. historical market prices and trading information with respect to the
Shares;
17. publicly available information concerning other companies comparable
to the Company and the trading history of the stock of each such company;
18. the tax implications of the Offer including, without limitation,
that the receipt of cash for Shares pursuant to the Offer or the Merger will
be a taxable transaction for federal income tax
8
<PAGE>
purposes and may also be a taxable transaction under applicable state,
local or foreign tax laws. Reference is made to the Offer to Purchase being
mailed to the Company's shareholders simultaneously with this Schedule 14D-9
for a more complete discussion of the tax consequences of the Offer;
19. the availability of dissenter's rights. Holders of Shares do not
have appraisal rights as a result of the Offer; however, holders of Shares
will have certain rights pursuant to the provisions of the New York Business
Corporation Law ("BCL"), including Section 623 and 910 upon consummation of
the Merger including the right to dissent and demand appraisal of dissenting
Shares thereof. Under the BCL, dissenting shareholders who have filed with
the Company a written notice of election to dissent and who otherwise comply
with the applicable procedures set forth in the BCL will be entitled to
receive a judicial determination of the fair value of the Shares and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of
Shares could be based upon factors other than, or in addition to, the price
per Share to be paid in the Merger or the market value of the Shares. The
value so determined could be more or less than the price per Share paid in
the Merger. The foregoing summary does not purport to be complete and is
qualified in its entirety by reference to the applicable provisions of the
BCL;
20. the fact that the Offer price was above the market price for the
Shares on October 16, 1997;
21. the fact that parties to the Shareholders Agreement are willing and
desire to tender their Shares in connection with the Offer;
22. despite the fact that the parties to the Shareholders Agreement have
agreed to tender or caused to be tendered Shares representing in the
aggregate approximately 52% of the outstanding Shares, the Merger Agreement
requires that at least 66-2/3 % of the outstanding shares be tendered and
accepted, giving the other shareholders some choice; and
23. the fact that the shareholders of record on September 30, 1997 will
receive a quarterly dividend even if they tender their Shares.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendation as being on the totality of
the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any person to make solicitations or
recommendations to shareholders on its behalf concerning the Offer. However,
such solicitations may be made personally by directors, officers or employees
of the Company, who will not be compensated for such service.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) Pursuant to the Shareholders Agreement, the Principal Shareholders
have agreed to tender an aggregate of 3,318,711 Shares of the 6,260,960
Shares currently issued and outstanding.
(c) To the best knowledge of the Company, all of its executive officers,
directors and affiliates currently intend to tender pursuant to the Offer all
Shares beneficially owned by them (other than Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Except as set forth in this Schedule 14D-9, the Company is not engaged in
any negotiation in response to the Offer which relates to or would result in:
(i) an extraordinary transaction, such as a merger
9
<PAGE>
or reorganization, involving the Company or any subsidiary of the Company;
(ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change
in the present capitalization or dividend policy of the Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Press Release announcing the Offer and Merger issued by
Starrett Corporation on October 17, 1997.
Exhibit 2 Fairness Opinion dated October 16, 1997, of Goldman, Sachs &
Co.
10
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
STARRETT CORPORATION
Dated: October 23, 1997
By /s/ Irving R. Fischer
-------------------------------
President and Chief Operating
Officer
11
<PAGE>
FOR RELEASE: OCTOBER 17, 1997 LEWIS WEINFELD
(212) 751-3100
- -------------------------------------------------------------------------------
Starrett Corporation (SHO) (AMEX) announced today that it had entered
into a definitive Merger Agreement with an entity owned by affiliates of
Lawrence Ruben Company, Inc. Blackacre Capital Group, Amroc Investments and
Argent Ventures, under which the buying group will make a cash tender offer
for all of the outstanding shares of the Company's Common Stock at a purchase
price of $12.25 per share. The Company stated that it was expected that the
tender offer will be commenced on October 23, 1997. The transaction is subject
to the tender of a minimum of 66 2/3% of the Company's shares, certain
regulatory and contractual approvals, and certain other conditions. Owners of
approximately 52% of the Company's outstanding Common Stock have agreed to
tender their shares.
Mr. Paul Milstein, Chairman of Starrett, stated that:
"We are pleased to announce the acquisition of our Company by
this prestigious buying group at what we believe to be an
excellent price for our shareholders."
The Company noted that a prior bidder had threatened to challenge the
previously announced termination of a merger agreement with entities controlled
by him. The Company stated that it believed that its termination of such
agreement had been proper, and it intended to vigorously contest any such
challenge.
Starrett Corporation owns HRH Construction Corporation, Grenadier Realty
Corp., and Levitt Corporation.
<PAGE>
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Tel: 212-902-1000
PERSONAL AND CONFIDENTIAL
- -------------------------
October 16, 1997
Board of Directors
Starrett Corporation
909 Third Avenue
New York, NY 10022
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $1.00
per share (the "Shares"), of Starrett Corporation (the "Company") of the
$12.25 per Share in cash proposed to be paid by Startt Acquisition, Inc. (the
"Buyer") in the Tender Offer and the Merger (as defined below) pursuant to the
Agreement and Plan of Merger, dated October 16, 1997, between the Buyer and the
Company (the "Agreement"). The Agreement provides for a tender offer by the
Buyer for all of the outstanding Shares (the "Tender Offer") pursuant to which
the Buyer will pay $12.25 per Share in cash for each Share accepted. The
Agreement further provides that following completion of the Tender Offer, the
Buyer will be merged into the Company (the "Merger") and each outstanding
Share (other than Shares already owned by the Buyer and other than Shares held
by persons who object to the Merger and comply with all the provisions of New
York law concerning the rights of holders of Shares to dissent from the Merger
and require appraisal of their Shares) will be converted into the right to
receive $12.25 in cash.
Goldman, Sach & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. Goldman Sachs has in the past
provided the companies affiliated with Richard Ruben, a principal shareholder
of the Buyer, and Lawrence Ruben, Richard Ruben's father, with investment
banking services in transactions including, but not limited to, common stock
offerings. In addition, companies affiliated with Richard and Lawrence Ruben
have either co-invested with Goldman Sachs on real estate principal
investments or have been investors in Goldman Sachs sponsored real estate
investments funds.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Shareholders Agreement between Buyer and certain holders of
Shares dated October 16, 1997; Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company for the last five years ended December 31,
1996; certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of the Company; certain other communications from the Company to its
stockholders; and
<PAGE>
Starrett Corporation
October 16, 1997
Page Two
certain financial projections with respect to the Company prepared by the
Company's management. We also have held discussions with members of the senior
management of the Company regarding its past and current business operations,
financial condition and future prospects. In addition, we have reviewed the
reported price and trading activity for the Shares, compared certain financial
and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the
residential/commercial building industry specifically and in other industries
generally and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. We have also not made an
independent evaluation or appraisal of the assets and liabilities of the
Company or any of its subsidiaries and we have not been furnished with any
such evaluation or appraisal. In addition, the Board of Directors of the
Company has advised Goldman Sachs of their judgment that certain competing
proposals for the Company were not attractive relative to the transaction
contemplated by the Agreement due to uncertainties relating to the ability of
the parties making such competing proposals to complete the transactions
contemplated by such competing proposals. Our advisory services and the
opinion expressed herein are provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated by the Agreement and such opinion does not
constitute a recommendation as to whether or not any holder of Shares should
tender its Shares pursuant to the Tender Offer or vote its Shares in favor of
the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof $12.25 in
cash to be received by the holders of Shares in the Tender Offer and the Merger
is fair from a financial point of view to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
- ------------------------
(GOLDMAN SACHS CO.)
