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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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BUSINESS RESOURCE GROUP
(NAME OF SUBJECT COMPANY)
BUSINESS RESOURCE GROUP
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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12329K 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HARRY S. ROBBINS
BUSINESS RESOURCE GROUP
2150 NORTH FIRST STREET, SUITE 101
SAN JOSE, CALIFORNIA 95131
(408) 325-3200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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With a copy to:
<TABLE>
<S> <C>
SCOTT D. BLICKENSTAFF, ESQ. STEVEN J. TONSFELDT, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP VENTURE LAW GROUP
1020 MARSH ROAD 2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025 MENLO PARK, CALIFORNIA 94025
(650) 614-7400 (650) 854-4488
</TABLE>
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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This Amendment No. 1 to the Solicitation/Recommendation Statement on
Schedule 14D-9 amends and supplements the Solicitation/Recommendation Statement
on Schedule 14D-9 originally filed on July 21, 2000 by Business Resource Group,
a California corporation (the "Company" or "BRG"), relating to a tender offer by
BRG Acquisition Corporation, a Delaware corporation ("Purchaser"), disclosed in
a tender offer statement on Schedule TO dated July 14, 2000, to purchase all
outstanding shares (other than shares held by BRG Acquisition and its
affiliates) of common stock of the Company (the "Shares") at a price of $9.25
per Share, net to the seller in cash, without interest (the "Offer Price"), upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
July 14, 2000 and the related Letter of Transmittal. Capitalized terms used but
not defined herein shall have the meanings assigned to them in the
Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4 is hereby amended to read in its entirety as follows
(a) SOLICITATION RECOMMENDATION.
At a meeting held on July 6, 2000, acting on the recommendation of a
committee of independent, disinterested directors not affiliated with the
Purchaser or its stockholders (the "Special Committee"), the Board unanimously
(with John Peth, Brian McNay and Jeff Tuttle, the three directors who will
acquire interests in one or both of Holdings, Inc. and BR Holdings, being absent
or not voting) (i) approved the Merger Agreement and the transactions
contemplated by it, the Offer, and the Merger as described in the Merger
Agreement; (ii) determined that the Merger Agreement and the transactions
contemplated by it are advisable and fair to, and in the best interests of, the
Company and its shareholders; and, (iii) resolved to recommend that the
Company's shareholders tender their shares in response to the Offer and, if
approval of the Company's shareholders is required by applicable law to
consummate the Merger, adopt and approve the Merger Agreement and the Merger.
Accordingly, the Board unanimously (with the three directors who will acquire
interests in one or both of Holdings, Inc. and BR Holdings being absent or not
voting) recommends that the shareholders of the Company tender their shares of
Common Stock pursuant to the Offer. Copies of the Company's letter to the
shareholders of the Company communicating the Board's recommendation, and the
Company's press release announcing the Merger Agreement and the transactions
contemplated thereby, are filed as Exhibits (a)(3) and (a)(4) hereto,
respectively, and are incorporated herein by reference.
(b) BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On several occasions during 1999, the Board of Directors of the Company and
the Company's management discussed their belief that the Company's stock price
did not fairly reflect the Company's value in large part because there were no
securities analysts covering the Company. This, in turn, contributed to light
trading volume in the Company's stock, further depressing the Company's stock
price. The failure of the Company's stock price to react on a sustained basis to
the Company's release of positive news caused the Company's directors additional
concern. As a result, the Board of Directors felt it was appropriate to examine
alternatives to advance the interests of the Company's shareholders. It was also
noted that an important component of the compensation packages of the Company's
non-executive as well as executive employees included the issuance of stock
options, the value of which was based on the trading price for the Company's
stock. If these stock options, the exercisability of which vests over a period
of time, were not perceived by the Company's employees as a valuable asset, the
Board and management were concerned that the Company might experience difficulty
in retaining key employees in the future and in attracting replacements for
departing employees and in expanding the Company through new hires. This concern
was only heightened by the perceived tightness of the Northern California job
market and the view that many of the Company's key employees would be able to
find alternative employment in a relatively easy manner.
In view of these factors, in the fall of 1999, the Company engaged a
financial advisor, Huntington Holdings, Inc., to assist it in evaluating various
possible strategic alternatives to enhance shareholder value. Possible strategic
alternatives being considered included, but were not limited to, a merger, a
strategic alliance, the infusion of additional equity, or an affiliation with a
strategic partner. Huntington Holdings had had an advisory relationship with the
Company intermittently since 1994 and had been engaged by the Company to source
and advise upon potential acquisitions on an ongoing basis commencing in October
1998.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
In preparation for its new assignment, representatives of Huntington
Holdings conducted a due diligence review and investigation of the Company. At
the completion of this process, Huntington Holdings, along with members of the
Company's management, prepared a confidential memorandum (the "Confidential
Memorandum"), which described the Company and its business, for circulation in
connection with the solicitation process.
On January 6, 2000, the Company made a public announcement to the effect
that it had retained Huntington Holdings to seek methods for enhancing
shareholder value.
Over the next several months, as part of a general solicitation effort,
Huntington Holdings contacted 135 potential financial buyers and 44 potential
strategic partners or buyers on behalf of the Company. Of these, 45 financial
buyers and two strategic buyers executed confidentiality agreements with the
Company and received copies of the Confidential Memorandum for their
consideration. All parties that executed confidentiality agreements and received
the Confidential Memorandum were invited to submit proposals regarding an
acquisition of the Company or other similar transaction with the Company.
On January 21, 2000, John Corwin of Huntington Holdings contacted W. Robert
Wright, II of TCR and informed him that Huntington Holdings had been retained by
the Company to assist in evaluating strategic alternatives to enhance value to
its shareholders. Mr. Corwin asked whether a company formed by funds advised by
TCR might be interested in acquiring the Company. Following these discussions,
TCR executed a confidentiality agreement on January 31, 2000 and was forwarded a
package of information on the Company, including the Confidential Memorandum, to
review. Due to the nature of the Company's business and the importance of key
employees to the value of that business, the Company and its financial advisors
believed the commitment of key employees and management to the business would be
important to the marketability of the Company and would maximize shareholder
value. Accordingly, with the concurrence of Huntington Holdings, the
Confidential Memorandum indicated that Messrs. Peth, Palmer, McNay and Tuttle
were willing to continue with and invest in the recapitalized company.
On February 16, 2000, Mr. Wright and Willem deVogel of TCR attended a
management presentation regarding the Company delivered by John Peth, President
and Chief Executive Officer of the Company, John Palmer, Chief Operating Officer
and Chief Financial Officer of the Company, Brian McNay, Executive Vice
President of Sales of the Company, Jeffrey Tuttle, Executive Vice President of
Marketing of the Company, and Mr. Corwin, at the Company's headquarters in San
Jose, California. On March 2 and 3, 2000, representatives of TCR visited the
Company's headquarters to discuss the process for TCR to conduct due diligence
regarding the Company.
On March 16, 2000, Messrs. deVogel and Wright met with Messrs. Peth and
Corwin at the Company's headquarters in San Jose, CA and discussed the
possibility that a company formed by Three Cities advised by TCR might make a
tender offer for $9.75 per Share. The closing price of the Company's stock on
that day was $7.94. During the meeting, the TCR representatives noted that the
members of the management of companies TCR acquired normally received an equity
interest in the companies. Representatives of the Company said it would take
some time to review the proposal.
On March 23, 2000, a meeting of the Company's Board was convened and
considered the TCR proposal. At this meeting, in view of the potential that the
Company's management group might be requested or required to participate as an
equity participant in the acquisition entities that might be employed by TCR in
the proposed transaction, the Company's Board appointed a Special Committee of
independent, disinterested directors (consisting of two directors, Harry Robbins
and George Kelly), to consider strategic opportunities presented to the Company,
enter into discussions or negotiations related to such strategies or
opportunities and recommend to the Board what action, if any, should be taken
with respect to them. The Special Committee retained Venture Law Group as its
counsel and considered investment banks it might retain as advisors to render an
opinion about the fairness of any transaction which might be agreed upon. The
Special Committee selected, and the Company subsequently retained, Merrill Lynch
Business Advisory Services, a division of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") for this purpose.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
On April 12, 2000, Harry Robbins, one of the members of the Special
Committee, called Willem deVogel and told him that the Special Committee would
not recommend an offer of $9.75 per Share for the Company. Subsequently, J.
William Uhrig, another partner at TCR, and Mr. Corwin agreed that discussions
should continue.
On April 28, 2000, Messrs. Robbins, Kelly and Corwin met at TCR's offices
in New York with Messrs. Uhrig and deVogel to discuss the price which a TCR
acquisition company might be willing to pay for the Company's Shares and to
discuss the progress of TCR's review of a possible transaction.
During the week of May 1, 2000, there was a series of telephone
conversations between Messrs. Uhrig and Corwin regarding the price the TCR
acquisition company might be willing to pay. Informal meetings of the Special
Committee, including Mr. Corwin and representatives of Venture Law Group, were
convened several times during this week to consider the progress of these
discussions.
On May 5, 2000, TCR stated to Mr. Corwin that, subject to completion of due
diligence, it appeared the TCR acquisition company would be willing to pay
$11.75 per Share for the Company's Common Stock. During the days that followed,
the Special Committee, together with Huntington Holdings and Venture Law Group
convened several telephonic meetings to consider the proposed transaction and
proposed price per Share.
During the course of these meetings Mr. Corwin also reviewed the progress
of the solicitation process since January and the general status of the
discussions with the other parties that had expressed possible interest in
acquiring the Company. Mr. Corwin noted that, while a number of the contacted
parties had executed confidentiality agreements and received the Confidential
Memorandum regarding the acquisition opportunity, only a small handful of those
had elected to proceed with tentative discussions regarding a possible
transaction. Mr. Corwin further noted then that of the group of possible buyers
that had reviewed the Confidential Memorandum regarding the Company, only TCR
had put forward any form of firm offer and only TCR was continuing on an active
basis with its review of the Company. Based on its consideration of all of these
factors, the Special Committee authorized Mr. Corwin to contact TCR and inform
them that the Special Committee was prepared to move forward with a transaction
with TCR at the $11.75 price. On May 12, 2000, Mr. Corwin informed Mr. Uhrig
that the Special Committee was prepared to authorize the Company and its
advisors to proceed with the negotiation of a transaction at that price.
On May 15, 2000, Clifford Chance Rogers & Wells, LLC ("CCR&W"), the
attorneys for TCR, sent Orrick, Herrington & Sutcliffe LLP, the attorneys for
the Company, a draft of a Plan and Agreement of Merger. Subsequently, on May 20,
2000, a representative of Venture Law Group contacted David Bernstein of CCR&W
and informed him that Venture Law Group, as counsel to the Special Committee,
would take the principal role in reviewing and negotiating a merger agreement.
During the second and third weeks of May, representatives of TCR continued
their due diligence review of the Company. Also during this period, TCR
presented information regarding the Company to potential financing sources,
which would be used in connection with the acquisition and as a source of funds
for the Company after acquisition. On May 22, 2000, a representative of TCR
informed Mr. Corwin that, because of negative reactions of prospective financing
sources at the $11.75 price, TCR would not be willing to proceed at $11.75 per
Share. The TCR representative said TCR was not willing to pay a price per Share
of more than $9.00 for the Shares of the Company.
On June 1 and 2, 2000, Messrs. Uhrig and de Vogel met in New York with
Messrs. Robbins and Corwin to discuss TCR's revised proposal. Following these
meetings, Mr. Uhrig said that, as a possible alternative to paying $9.00 per
Share in cash, TCR acquisition company might be willing to pay $8.00 in cash,
and have the Company issue to its shareholders convertible preferred stock with
a liquidation preference of $2.00 per share, which would remain outstanding but
not be tradable on any securities market in the foreseeable future, after the
TCR acquisition company acquired the Company's Common Stock.
On June 8, 2000, Mr. Corwin and counsel for the Special Committee told
counsel for TCR that the Special Committee would not recommend the $9.00 per
Share cash proposal, or the proposal that contemplated an $8.00 per Share cash
payment together with a convertible preferred stock dividend, but it would
consider an offer of
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
$9.75 in cash following a dividend to the Company's shareholders of $2.00 in
convertible preferred stock. That was confirmed later in the day to Messrs.
deVogel and Wright of TCR. In response, Mr. deVogel sent a letter to Messrs.
Corwin, Kelly and Robbins in which he stated that, in view of the fact that the
Special Committee would not recommend TCR's offer of $9.00 per Share in cash,
TCR was terminating all discussions with the Company.
On June 9, 2000, Mr. Robbins told Mr. deVogel that the Special Committee
and the Board would be meeting on June 15 and June 16, 2000, respectively.
Mr. Robbins urged that TCR increase the price to $9.75 per Share. Eventually,
Mr. deVogel proposed increasing the price to $9.25 per Share. On that same day,
Mr. deVogel told Mr. Peth on the telephone that TCR might be willing to proceed
with a transaction at that price. Mr. Peth said he was not authorized to discuss
price, but would convey the information to the Special Committee.
Following June 9, 2000, there were discussions between TCR and the Special
Committee of the transaction at $9.25 per Share. Among other things, TCR agreed
that if the transaction were at that price, the break-up fee it would require
if, after an agreement was signed the Company accepted what it viewed as a
better proposal, would be one percent (1%) of the enterprise value of the
Company, rather than the five percent (5%) TCR had previously been seeking.
On June 15, 2000, the Special Committee convened a telephonic meeting in
which it reviewed the $9.25 per Share offer with Merrill Lynch, Huntington
Holdings and Venture Law Group. At this meeting, representatives of Merrill
Lynch made a presentation regarding its preliminary views as to the fairness of
the proposed consideration, from a financial point of view, to the shareholders
of the Company, other than the Management Participants. Representatives of
Venture Law Group reviewed the proposed terms and conditions of the transaction,
and Mr. Corwin reviewed the history of the discussions between the two parties
and the fact that after a lengthy solicitation process no other potential buyer
had made a proposal to acquire the Company, or was even reviewing the Company's
business at that time. From this, the Special Committee concluded that it was
unlikely that any other proposals from a third party buyer would be forthcoming
in the future. Based on a very lengthy analysis and review of status, the
Special Committee concluded that it was prepared to recommend to the entire
Board and its advisors to proceed with the negotiation of a transaction at $9.25
per Share in cash to the Company's shareholders on terms substantially
consistent with those presented. Following this meeting, a meeting of the entire
Board, including the members of management sitting on the Board and
representatives of Orrick, Herrington & Sutcliffe LLP, as legal counsel to the
Company, was convened. A lengthy discussion ensued regarding the proposed
transaction and its proposed time schedule. At the completion of this
discussion, the Board of Directors, with all of the members of management who
were Board members abstaining, confirmed the Special Committee's recommendation
that negotiations regarding the proposed transaction proceed along the terms of
the transaction outlined at the meeting.
On June 20, 2000, the attorneys for TCR sent representatives of Brobeck,
Phleger & Harrison LLP, the law firm which had been retained by Messrs. Peth,
Palmer, McNay and Tuttle, to represent them in connection with the proposed
transaction, drafts of an agreement regarding the exchanging of a total of
319,168 shares of the Company, held by Messrs. McNay and Tuttle, for interests
in BR Holdings and copies of the Limited Liability Company Agreement of BR
Holdings. On June 22, CCR&W sent Brobeck, Phleger & Harrison drafts of
employment agreements under which, if the Purchaser acquired the Company, the
four members of the management identified above would be employed by the
Purchaser (which, after the Merger, would own and operate the business of the
Company).
Between June 21 and July 7, 2000, there were a number of discussions and
negotiations among the parties and their respective advisors of the terms of
pertinent agreements and documents, including the Merger Agreement, the
Employment Agreements, the Share Exchange Agreements, the Deferred Compensation
Agreement and the Commitment Letter.
On July 6, 2000, the Special Committee met with all members present. Among
other things, the Special Committee received (i) an oral presentation of Merrill
Lynch regarding certain principal financial terms of the transaction and the
fairness from a financial point of view of the consideration to be received by
the Company's shareholders in the transaction, other than the Management
Participants, a written copy of which is attached hereto as Exhibit (e)(6), and
is incorporated herein by reference, together with Merrill Lynch's oral opinion,
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
subsequently confirmed in writing, as to the fairness, from a financial point of
view, of the consideration to be received in the Offer and Merger by the
Company's shareholders, other than the Management Participants, a copy of which
is attached hereto as Annex A, and is incorporated herein by reference; and
(ii) a briefing by representatives of Venture Law Group as to the terms of the
proposed transaction and the financing for the transaction (with drafts of the
transaction documents having been distributed to the members of the Special
Committee in advance of the meeting). The Special Committee also reviewed with
Mr. Corwin the history of the negotiations and the procedures that Huntington
Holdings had engaged to pursue possible partners in connection with the general
solicitation process and the fact that no party other than TCR had made a firm
offer to acquire the Company. Based on the factors described below in "Reasons,"
the Special Committee by unanimous action resolved to recommend to the full
Board the approval of the proposed transaction and approval of the Merger
Agreement. A meeting of the Board was convened immediately after completion of
the Special Committee meeting and, by unanimous action (with Messrs. Peth, McNay
and Tuttle, the three directors who will acquire interests in one or both of
Holdings, Inc. or BR Holdings, being absent or not voting), the proposed
transaction and Merger Agreement were approved.
During the evening of Friday, July 7, 2000, after the U.S. securities
markets had closed, the Merger Agreement was executed. On Monday, July 10, 2000,
before the U.S. securities markets had opened, the Company and TCR jointly
announced the signing of the Merger Agreement and the Purchaser's intention to
commence the Offer.
(c) REASONS.
In making the determinations and recommendations set forth in subparagraph
(a) above, the Special Committee and the Board considered a number of factors,
including, without limitation, the following:
(i) the amount and form of consideration to be received by the
Company's shareholders in the Offer and the Merger;
(ii) the Company's prospects if it were to remain independent,
including the risks and benefits inherent in remaining
independent, including the risk arising from the workspace
products and services industry becoming increasingly
competitive;
(iii) the possible alternatives to the Offer and the Merger
(including the possibility of continuing to operate the Company
as an independent entity) and other potential business
combination transactions as well as discussions with other
potential acquirers of the Company, the fact that, after
Huntington Holdings had contacted nearly 180 potential
acquirors and strategic partners, only the Purchaser and its
affiliates had elected to make a definitive offer to acquire
the Company, the judgment of the Special Committee and the
Board that other potential acquirers were unlikely to offer
greater value for the Company, the range of possible benefits
to the Company's shareholders of such alternatives and the
timing and likelihood of accomplishing the goal of any of such
alternatives;
(iv) information with regard to the financial condition, results of
operations, business and prospects of the Company, the
regulatory approvals required to consummate the Offer and the
Merger as well as current economic and market conditions
(including current conditions in the industry in which the
Company competes);
(v) the historical and recent trading activity and market prices of
shares of Common Stock, and the fact that the Offer and the
Merger will enable the holders of shares of Common Stock to
realize a premium of 37% over the last sale price of such Shares
reported on the NASDAQ National Market on July 7, 2000, the last
full trading day prior to the day on which there was a public
announcement of the execution of the Merger Agreement, 64% over
the average closing prices of the past twelve (12) months, 109%
over the average closing prices of the past twenty-four
(24) months and 122% over the average closing prices of the past
thirty-six (36) months;
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
(vi) the limited analyst coverage for the Company and the low trading
volume in the Company's Common Stock, which makes it extremely
difficult, if not impossible, for any interested shareholder to
acquire or dispose of any substantial block of shares;
(vii) the substantial costs to the Company associated with
maintaining its registration under the United States securities
laws and the listing of the Company's Common Stock on the
Nasdaq National Market;
(viii) the fact that the Merger Agreement permits the Company to
furnish information to, and enter into discussions or
negotiations with, any person that makes an unsolicited bona
fide written proposal to acquire the Company pursuant to a
merger, consolidation, share exchange, business combination,
tender or exchange offer or other similar transaction if
(A) the Board determines in good faith (after consultation with
its financial advisor) that the proposal would, if consummated,
result in a transaction more favorable to the Company's
shareholders than the transactions contemplated by the Merger
Agreement, (B) the Board further determines in good faith
(after consultation with its financial adviser) that the
proposal would likely result in the Company's shareholders
receiving consideration with a value which is greater than the
Offer Price, and (C) no information is so furnished, and no
such discussions or negotiations are held, prior to the
execution by the receiving party and the Company of an
appropriate confidentiality agreement;
(ix) the fact that the Merger Agreement permits the Special Committee
and the Board to withdraw or modify its approval or
recommendation of the Offer and the Merger if the Special
Committee or the Board determines in good faith, after having
received advice from outside counsel, that the failure to take
such action would be a breach of the fiduciary duties of the
Board under applicable law;
(x) the fact that the Merger Agreement permits the Company (with the
approval of the Special Committee) to terminate the Merger
Agreement, after complying with certain procedural steps and
paying to the Purchaser a reasonable termination fee and
reimbursing it for certain of its expenses, in order to accept a
Superior Proposal (as defined in Section 7.1(d) of the Merger
Agreement);
(xi) the fact that the Offer and the Merger provide for a prompt cash
tender offer for all of the shares of Common Stock to be
followed by the Merger for the same consideration, thereby
enabling the Company's shareholders, at the earliest possible
time, to obtain the benefits of the transaction in exchange for
their shares of Common Stock;
(xii) the financial analysis and presentation of Merrill Lynch to the
Special Committee on July 6, 2000, and the oral opinion of
Merrill Lynch on July 6, 2000 (which opinion was subsequently
confirmed by delivery of a written opinion of Merrill Lynch
dated July 6, 2000), the date the Board adopted the Merger
Agreement, to the effect that, as of such date, and based upon
and subject to certain matters stated in such opinion, the
$9.25 per Share cash consideration, net to the seller, to be
received by holders of shares of Common Stock, other than the
Management Participants pursuant to the Merger Agreement, was
fair, from a financial point of view, to such holders, other
than Management Participants. The full text of Merrill Lynch's
written opinion, dated July 6, 2000, which sets forth the
assumptions made, matters considered and limitations on the
review undertaken by Merrill Lynch, is attached hereto as
Annex A, and is incorporated herein by reference. Merrill
Lynch's opinion was prepared solely for the Special Committee
to assist the Special Committee in its analysis of the Offer
and the Merger and speaks only to the fairness, from a
financial point of view, of the cash consideration to be
received in the Offer and the Merger by holders of shares of
Common Stock, other than the Management Participants, and is
not intended to constitute, and does not constitute, a
recommendation as to whether any shareholder should tender
shares of Common Stock pursuant to the Offer. Holders of shares
of Common Stock are urged to read such opinion carefully in its
entirety;
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
(xiii) the high likelihood that the proposed acquisition would be
consummated, in light of the fact that the Offer and Merger are
not subject to any financing contingencies and the financial
strength of Purchaser and Parent;
(xiv) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants and the conditions to
their respective obligations.
The foregoing discussion of the information and factors considered by the
Special Committee and the Board is not intended to be exhaustive, but includes
many of the factors considered by the Special Committee and the Board. In view
of the variety of factors considered in connection with its evaluation of the
Offer and the Merger, the Special Committee and the Board did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors or determine that any single factor was of determinative
importance. Rather, the Special Committee and the Board each viewed its position
and recommendations as being based on the totality of the information presented
to and considered by it. In addition, it is possible that different members of
the Special Committee and the Board assigned different weights to the various
factors described above.
(d) INTENT TO TENDER.
To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to offer all Shares of
the Company Common Stock which are held of record or beneficially owned by such
persons pursuant to the Offer, other than the Company Common Stock, if any, held
by such persons which, if tendered, could cause such person to incur liability
under the provisions of Section 16(b) of the Securities Exchange Act of 1934;
provided that two of the Company's senior officers will exchange certain shares
in accordance with the Share Exchange Agreement and the Chief Executive Officer
of the Company will forfeit certain options in exchange for an equity interest
in the Purchaser pursuant to the Deferred Compensation Agreement.
(e) OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH.
The Special Committee selected, and the Company retained, Merrill Lynch
solely to evaluate the fairness, from a financial point of view, of the
consideration to be paid in the Offer and the Merger (collectively, the
"Transaction"). On July 6, 2000, Merrill Lynch delivered to the Special
Committee its oral opinion, later confirmed in writing, to the effect that, as
of that date and based upon the assumptions made, matters considered and limits
of its review, as set forth in its opinion, the $9.25 per Share consideration
was fair from a financial point of view to the holders of the Common Stock,
other than Management Participants in the Transaction.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, DATED JULY 6, 2000, WHICH SETS
FORTH A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED,
FACTORS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS
ANNEX A. BUSINESS RESOURCE GROUP SHAREHOLDERS ARE URGED TO READ THE MERRILL
LYNCH OPINION CAREFULLY IN ITS ENTIRETY, ESPECIALLY WITH REGARD TO THE
ASSUMPTIONS MADE AND FACTORS CONSIDERED BY MERRILL LYNCH. THE MERRILL LYNCH
OPINION WAS PROVIDED FOR THE USE AND BENEFIT OF THE SPECIAL COMMITTEE AND IS
DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
CONSIDERATION TO THE STOCKHOLDERS, OTHER THAN MANAGEMENT PARTICIPANTS IN THE
TRANSACTION, DOES NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY THE
COMPANY TO ENGAGE IN THE TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER SUCH STOCKHOLDER'S SHARES IN THE OFFER
OR AS TO HOW SUCH STOCKHOLDER SHOULD VOTE ON THE PROPOSED MERGER OR ANY MATTER
RELATED THERETO.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Merrill Lynch opinion or the presentation made by
Merrill Lynch to the Special Committee. The preparation of a fairness opinion is
a complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the applications of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary description. Accordingly,
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
Merrill Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all of its analyses,
would create an incomplete view of the underlying Merrill Lynch opinion. In
arriving at its opinion, Merrill Lynch did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch or the Company. Any estimates contained in the analyses performed
by Merrill Lynch are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such
businesses or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition, as
described above, the Merrill Lynch opinion and Merrill Lynch's presentation to
the Special Committee were among several factors taken into consideration by the
Special Committee in making its determination to accept the $9.25 per Share
consideration. Consequently, the Merrill Lynch analyses described below should
not be viewed as determinative of the decision of the Special Committee with
respect to the fairness of the $9.25 per Share consideration.
In arriving at its opinion, Merrill Lynch, among other things:
o reviewed certain publicly available business and financial information
relating to the Company that Merrill Lynch deemed to be relevant;
o reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company furnished to Merrill Lynch by the Company;
o conducted discussions with members of the Company senior management and
representatives of BRG concerning the matters described in the two
preceding clauses;
o reviewed the market prices and valuation multiples of certain publicly
traded companies that Merrill Lynch deemed to be relevant;
o reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that Merrill Lynch deemed to
be relevant;
o compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that Merrill Lynch deemed
to be relevant;
o reviewed a draft dated July 5, 2000 of the Merger Agreement; and
o reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information, did not undertake an independent evaluation or
appraisal of any of the assets or liabilities of the Company and was not
furnished with any such evaluation or appraisal. In addition, Merrill Lynch did
not assume any obligation to conduct any physical inspection of the properties
or facilities of the Company. With respect to the financial forecast information
furnished to or discussed with Merrill Lynch by the Company, Merrill Lynch
assumed that such information was reasonably prepared and reflected the best
currently available estimates and judgment of the Company's management as to the
expected future financial performance of the Company. Merrill Lynch also assumed
that the final form of Merger Agreement was substantially similar to the last
draft reviewed by Merrill Lynch. In addition, in connection with the preparation
of the opinion, Merrill Lynch was not authorized by the Company or the Special
Committee to solicit, nor did Merrill Lynch solicit, third-party indications of
interest for the acquisition of all or any part of the Company.
8
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
The Merrill Lynch opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch, as of July 6, 2000, the date of its
opinion.
The following is a summary of the material portions of the financial and
comparative analyses performed by Merrill Lynch in connection with its
preparation of the Merrill Lynch opinion.
Merrill Lynch calculated a range of implied valuations for the Company by
utilizing the following three principal valuation analyses:
1. SELECTED COMPARABLE COMPANY ANALYSIS. A publicly traded comparable
company analysis reviews a business' operating performance and outlook
relative to a group of publicly traded peer companies to determine an
implied unaffected market trading valuation multiple.
2. SELECTED COMPARABLE M&A TRANSACTION ANALYSIS. A comparable acquisition
transaction analysis provides an implied valuation multiple based upon
financial information of companies which have been acquired in selected
recent transactions and which are in the same or similar industries as
the business being valued.
3. DISCOUNTED CASH FLOW ANALYSIS. A discounted cash flow analysis provides
insight into the intrinsic value of a business based on the projected
earnings and capital requirements and the net present value of the
subsequent cash flows anticipated to be generated by the assets of the
business.
SELECTED COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
Merrill Lynch reviewed the stock prices as of July 5, 2000 and market multiples
of the common stock of the following companies for purposes of the analyses
described below:
o HON Industries
o Kimball International
o Miller (Herman), Inc.
o Mity-Lite Inc
o Open Plan Systems Inc.
o Steelcase Inc.
o Reconditioned Systems Inc.
Merrill Lynch believes these companies are engaged in lines of business
that are generally comparable to those of the Company.
LATEST TWELVE MONTHS EBITDA ANALYSIS. Merrill Lynch determined the equity
market value and derived the unlevered value (defined as market value plus
preferred equity at liquidation value plus short term debt plus long term
debt plus minority interest less the cash and cash equivalents) for these
comparable companies. Merrill Lynch calculated a range of such unlevered
values as a multiple of the latest twelve months earnings before interest,
taxes, depreciation and amortization ("EBITDA"). This calculation resulted
in a range of multiples from 2.6x to 7.7x, compared to an implied multiple
based on the $9.25 per Share consideration of 8.6x for the Company.
LATEST TWELVE MONTHS EBIT ANALYSIS. Merrill Lynch determined the equity
market value and derived the unlevered value (defined as market value plus
preferred equity at liquidation value plus short term debt plus long term
debt plus minority interest less the cash and cash equivalents) for these
comparable companies. Merrill Lynch calculated a range of such unlevered
values as a multiple of the latest twelve months earnings before interest
and taxes ("EBIT"). This calculation resulted in a range of multiples from
2.9x to 12.9x, compared to an implied multiple based on the $9.25 per Share
consideration of 10.9x for the Company.
LATEST TWELVE MONTHS EARNINGS PER SHARE ANALYSIS. Merrill Lynch determined
the prices of the comparable companies as a multiple of latest twelve
months earnings per share ("EPS") The latest twelve months EPS multiples
ranged from 4.0x to 15.5x, compared to an implied multiple based on the
$9.25 per Share consideration of 16.9x for the Company.
9
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
LAST TWELVE MONTHS CASH FLOW ANALYSIS. Merrill Lynch determined the prices
of the comparable companies as a multiple of latest twelve months cash
flow. The latest twelve months cash flow multiples ranged from 3.7x to
10.7x, compared to an implied multiple based on the $9.25 per Share
consideration of 11.0x for the Company.
SELECTED COMPARABLE M&A TRANSACTION ANALYSIS. Using publicly available
information and certain information provided by the Company management on the
four acquisitions completed by the Company, Merrill Lynch reviewed the purchase
prices and multiples paid in the following eight selected transactions.
<TABLE>
<CAPTION>
TARGET ACQUIROR
--------------------------- ------------------------------
<S> <C>
Baquet-Pastrijak Inc. Business Resource Group
Modern Office Interiors Business Resource Group
Re'Nu Office Systems Business Resource Group
Office Furniture Network Business Resource Group
DO Group, Inc. Mity-Lite Inc.
The CenterCore Group, Inc. Mity-Lite Inc.
Steelcase Strafor S.A. Steelcase Inc.
Knoll Inc. Warburg, Pincus Ventures Inc.
</TABLE>
LATEST TWELVE MONTHS EBITDA ANALYSIS. Merrill Lynch derived the unlevered
value (defined as offer value plus preferred equity at liquidation value
plus short term debt plus long term debt plus minority interest less the
cash and cash equivalents) for these selected transactions. Merrill Lynch
calculated a range of such unlevered values as a multiple of the latest
twelve months EBITDA. This calculation resulted in a range of multiples
from 5.8x to 7.8x, compared to an implied multiple based on the $9.25 per
Share consideration of 8.6x for the Company.
LATEST TWELVE MONTHS EBIT ANALYSIS. Merrill Lynch derived the unlevered
value (defined as offer value plus preferred equity at liquidation value
plus short term debt plus long term debt plus minority interest less the
cash and cash equivalents) for these selected transactions. Merrill Lynch
calculated a range of such unlevered values as a multiple of the latest
twelve months EBIT. This calculation resulted in a range of multiples from
5.0x to 11.2x, compared to an implied multiple based on the $9.25 per Share
consideration of 10.9x for the Company.
LATEST TWELVE MONTHS NET INCOME ANALYSIS. Merrill Lynch compared the
multiples of latest twelve months net income implied by the offer values of
the selected transactions. The latest twelve months net income multiples
ranged from 8.3x to 16.5x, compared to an implied multiple based on the
$9.25 per Share consideration of 16.9x for the Company.
No company, transaction or business used in the analyses described under
"--Selected Comparable Companies Analysis" and "--Selected Comparable M&A
Transaction Analysis" is identical to the Company as of July 6, 2000.
Accordingly, an examination of the results of those analyses necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
transaction or the public trading or other values of the company or companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
acquisition or company data.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis of the Company on a stand alone basis using a set of
forecasts provided by management of the Company. Utilizing the the Company
forecasts, Merrill Lynch calculated the theoretical unlevered discounted
present value for the Company by adding together the present value of
(1) the projected stream of unlevered free cash flow through the fiscal
year 2004 for the Company and (2) the projected terminal value of the
Company at the end of fiscal year 2004. The terminal value of the Company
was calculated based upon EBITDA multiples ranging from 4.75x to 5.25x and
the unlevered after-tax discount rates used in the discounted cash flow
analyses ranged from 17.0% to 18.0%. This calculation resulted in a range
of implied equity values for the Company ranging from $7.29 to $8.87,
compared to the consideration of $9.25 per Share.
10
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.--(CONTINUED)
The Special Committee selected Merrill Lynch on the basis of its experience
and expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm which, as a part of its investment banking business, regularly
is engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Merrill Lynch has provided in
the past, and may continue to provide in the future, financial advisory services
to Three Cities Research Corp. In addition, in the ordinary course of its
business, Merrill Lynch may actively trade the equity securities of the Company
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended to refile the following exhibit:
# (e)(7) Opinion of Merrill Lynch dated July 6, 2000 to the Special
Committee of the Board of Directors of the Company.
------------------
# Incorporated by reference to Annex A of this Amendment No. 1 to
Schedule 14D-9.
11
<PAGE>
SIGNATURE
AFTER DUE 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.
By: /s/ HARRY S. ROBBINS
---------------------------------
Name: Harry S. Robbins
Title: Member, Special Committee
of the Board of Directors
August 2, 2000
12
<PAGE>
ANNEX A
OPINION OF MERRILL LYNCH
<PAGE>
Private Client Group
Business Advisory Services
Sears Tower
233 South Wacker Drive
[LOGO] MERRILL LYNCH Suite 5620
Chicago, IL 60606
(312) 928-8800
FAX (312) 928-1987
FAX (312) 928-8844
July 6, 2000
Special Committee of the
Board of Directors (the "Special Committee")
Business Resource Group
2150 North First Street, Suite 101
San Jose, CA 95131
Members of the Special Committee:
Business Resource Group (the "Company") and BRG Acquisition Corporation (the
"Acquiror"), a subsidiary of BR Holdings LLC, which is a subsidiary of Three
Cities Research Corp. ("Three Cities"), propose to enter into a Plan and
Agreement of Merger (the "Merger Agreement") pursuant to which (i) the Acquiror
would commence a tender offer (the "Tender Offer") for all outstanding shares of
the Company's common stock, par value $0.01 per share (the "Common Shares"), for
$9.25 per share, net to the seller in cash (the "Consideration") and (ii) the
Company, or the Company's successor, would be merged into the Acquiror in a
merger (the "Merger"), in which any Common Share not acquired in the Tender
Offer, other than certain Common Shares held by management, held in treasury,
held by the Acquiror or held by any direct or indirect subsidiary of the Company
or as to which dissenter's rights have been perfected, would be converted into
the right to receive the Consideration. The Tender Offer and the Merger, taken
together, are referred to as the "Transaction."
You have asked us whether, in our opinion, the Consideration to be received by
the holders of the Common Shares, other than members of the management of the
Company who are participating in the Transaction with Three Cities (the
"Participating Holders"), pursuant to the Merger Agreement is fair from a
financial point of view to such holders, other than the Participating Holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company furnished to us by
the Company;
(3) Conducted discussions with members of the senior management
and representatives of the Company concerning the matters
described in clauses 1 and 2 above;
<PAGE>
MERRILL LYNCH BUSINESS ADVISORY SERVICES
Business Resource Group
07/06/00
Page 2
(4) Reviewed the market prices and valuation multiples of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared
them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with
the financial terms of certain other transactions that we
deemed to be relevant;
(7) Reviewed a draft dated July 5, 2000 of the Merger Agreement;
and
(8) Reviewed such other financial studies and analyses and took
into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that such information has been reasonably prepared and
reflects the best currently available estimates and judgment of Company's
management as to the expected future financial performance of the Company. We
have also assumed that the final form of the Merger Agreement will be
substantially similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions as
they exist and can be evaluated on, and on the information made available to us
as of, the date hereof.
In connection with the preparation of this opinion, we have not been authorized
by the Company or the Special Committee to solicit, nor have we solicted,
third-party indications of interest for the acquisition of all or any part of
the Company.
In addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. We have also in the past, and may continue in the
future, provide financial advisor services to Three Cities. In the ordinary
course of our business, we may actively trade the Common Shares and other
securities of the Company, for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Special Committee. Our opinion
does not address the merits of the underlying decision by the Company to engage
in the Transaction and does not constitute a recommendation to any holder of the
Common Shares as to whether to tender such Common Shares in the Tender Offer or
as to how such holder should vote on the proposed Merger or any matter related
thereto.
We are not expressing any opinion herein as to the prices at which the Common
Shares will trade following the announcement of the Transaction.
<PAGE>
MERRILL LYNCH BUSINESS ADVISORY SERVICES
Business Resource Group
07/06/00
Page 3
On the basis of, and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Consideration to be received by the holders of the Common
Shares in the Transaction, other than the Participating Holders, is fair from a
financial point of view to the holders of Common Shares, other than the
Participating Holders.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Kit A. Kamholz
----------------------------------------
Kit A. Kamholz
Vice President
Merrill Lynch Business Advisory Services
