<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ARV Assisted Living, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
<PAGE> 2
[LETTERHEAD OF ARV ASSISTED LIVING]
FOR IMMEDIATE RELEASE
CONTACT: Mitch Gellman
Director of Investor Relations
714/435/4322
E-Mail: [email protected]
ARV ASSISTED LIVING REJECTS EMERITUS OFFER AS INADEQUATE
-- INTERESTS OF SHAREHOLDERS BEST SERVED BY ARV'S CONTINUED INDEPENDENCE --
COSTA MESA, Calif. -- January 5, 1998 -- ARV Assisted Living, Inc. (Amex:SRS)
announced today that its Board of Directors voted unanimously to recommend ARV
shareholders reject Emeritus Corporation's highly conditional $17.50 per share
tender offer (the "Emeritus Offer") and Emeritus' proposed second-step "squeeze
out" merger as inadequate and not in the best interests of ARV shareholders.
The Board stated that the interests of ARV shareholders would best be served by
the Company remaining an independent, publicly-traded company.
In its recommendation to ARV shareholders, the Board cited, among many other
things:
- The Emeritus Offer does not reflect the inherent value of ARV.
- The opinion of its financial advisors, Salomon Smith Barney,
that the Emeritus Offer is inadequate.
- Continued pursuit of ARV's strategic plan, including refinements
that may result from management's ongoing review, that produce
greater long-term value for ARV shareholders than proposed
Emeritus transactions.
- The numerous and significant conditions contained in Emeritus'
proposal, several of which are subject to the sole discretion of
Emeritus and EMAC Corp., a wholly-owned subsidiary of Emeritus.
- The Board's belief that, considering Emeritus' financial
condition, Emeritus may not be able to secure financing for the
proposed Emeritus transactions.
- The Board's concern that the consideration to be received by ARV
shareholders in the proposed squeeze out merger could consist,
in whole or in part, of securities of Emeritus.
--more--
<PAGE> 3
"ARV intends to remain independent and pursue its business strategy," said
Howard G. Phanstiel, Chairman and Chief Executive Officer of ARV. "Management
continues to refine ARV's strategic business plan and actively explore
opportunities to enhance the value for its shareholders."
ARV Assisted Living, Inc. was founded in 1980. ARV is one of the nation's
leading providers of assisted living. The company operates 48 communities
containing about 6,150 units in 10 states. It has six communities, containing
756 units, under construction in California, Florida, Massachusetts and Nevada.
# # #
<PAGE> 4
ARV LETTERHEAD
January 5, 1998
Dear Shareholder:
By now you have heard their pitch -- vote for us and you will get $17.50
per share in immediate cash. I am writing to tell you, DON'T BE FOOLED. DON'T
VOTE FOR EMERITUS'S SLATE.
We don't believe that Emeritus is offering you $17.50 in immediate cash.
They are offering you a pig in a poke. Their offer is filled with condition
after condition that gives Emeritus in its sole discretion the right to walk
away from that offer. And, if they do, or perhaps I should say when they do,
what will you have? You will not receive $17.50 in cash. You may get less cash,
or Emeritus stock instead of cash. Even worse, victory by an Emeritus slate
triggers a default in more than one-half of ARV's leases on existing facilities,
an event which jeopardizes ARV's right to occupy the leased premises and is
almost certain to result in significantly higher lease costs to ARV. THUS, IF
EMERITUS FAILS TO CONSUMMATE ANY TRANSACTION WITH ARV (AS OCCURRED RECENTLY WHEN
EMERITUS ATTEMPTED A FRIENDLY MERGER WITH ANOTHER ASSISTED LIVING COMPANY), YOU
MAY BE LEFT WITH ARV STOCK DEVALUED BY THE POTENTIAL LOSS OF PROPERTIES DUE TO
TERMINATED LEASES OR THE LIKELY HUGE ADDITIONAL EXPENSES RESULTING FROM THE
FORCED RENEGOTIATION OF A SIGNIFICANT NUMBER OF THOSE LEASES.
If you vote for Emeritus's slate, one thing you know you will have is a
board of directors whose primary loyalty is to Emeritus, not to you. Ask
yourself, when that board is in place, how will your investment be protected?
DON'T BE FOOLED. DON'T VOTE FOR EMERITUS'S SLATE.
A little over one month ago, I took the job as your Chairman and Chief
Executive Officer because I believed in ARV; I believed in the opportunity it
has to thrive in a market that is certain to grow in the coming years; I
believed in the opportunity created by ARV's strategic relationship with Lazard
Freres; and, I believed that new leadership would make a difference at a company
that had lost focus and was underperforming in part due to a lack of strategic
direction.
I AM CONVINCED MORE THAN EVER THAT I WAS RIGHT. In the short time since I
joined the Company, ARV has received an offer to buy its Rehab Therapy business.
The sale of this business by ARV will be accretive to earnings on a continuing
basis as a result of continuing contracts with the buyer to provide
rehabilitation services to ARV facilities. We have also acquired one new
development property and decided to commence construction on a second, both of
which I am confident will increase our earnings in 1999. And, we have begun to
cut our overhead expenses. ALL THAT IN MY FIRST COUPLE OF WEEKS.
Now, we are in the process of cementing a strategic relationship with
Kapson Senior Quarters, a leading East Coast based assisted living provider, so
that ARV can reduce its development costs and at the same time increase its
earning potential through the addition of new sites to manage and lease. We have
also sold an existing community that was a drain on our earnings and a
development site that does not fit our current cluster strategy. We are now
exploring acquisitions of new facilities that could increase our market
penetration in some of our key markets. ALL THAT IN ONE MONTH.
1
<PAGE> 5
As an investor, or as the custodian of the money of those for whom you
invest, you must decide whom you want to run this company. Do you want Emeritus,
with its illusory promise of immediate cash, its reckless proxy contest which
exposes over one-half of ARV's leases to default and thus termination or
renegotiation, its own track record of missing earnings estimates and a stock
that in 1996 and 1997 underperformed its peers dramatically? OR, do you want
your Board members, many of whom have significant holdings of ARV stock, and
your new CEO, who chose your company because of the significant opportunity it
presents? I think the choice is clear.
THE EMERITUS OFFER IS A PLOY;
THEY WILL NOT PAY YOU $17.50 PER SHARE IN IMMEDIATE CASH
Your Board has considered Emeritus's tender offer and determined that it is
not in the best interests of ARV's shareholders. Why? First, there are obvious
concerns about the price, given the opportunities that your Board and I believe
lie ahead for ARV. BUT, EVEN MORE IMPORTANTLY, YOUR BOARD BELIEVES THE OFFER IS
SIMPLY NOT A REAL ONE FOR $17.50 PER SHARE IN CASH. The Emeritus offer is
hopelessly conditional. Among other things, it is subject to Emeritus obtaining
$400 million of financing on terms satisfactory to it in its sole discretion.
What kind of an offer is that?
On December 23, I wrote to Emeritus asking it to provide us information
that would enable your Board to assess the likelihood that Emeritus would obtain
the financing it needs on terms satisfactory to it. When they finally answered
me last Friday, they refused to show us their commitment letters, refused to say
anything about their financing arrangements after the first $110 million and
provided ARV a lengthy list of the "more significant conditions" to obtaining a
loan for even that $110 million tranche. THE LIST INCLUDES AT LEAST TWO
CONDITIONS WE ARE NEARLY CERTAIN WILL PROVIDE EMERITUS'S FINANCIAL INSTITUTION
THE RIGHT TO WALK AWAY IF EMERITUS GAINS CONTROL OF ARV'S BOARD OF DIRECTORS. In
fact, one of the conditions is that there be no material adverse change in ARV's
business. However, as Emeritus knows only too well, if it buys ARV, or even
elects its nominees to ARV's Board, a material adverse change in ARV's business
will occur because of the defaults occasioned in ARV's leases upon a change of
control.
ANOTHER CONDITION OF THE OFFER MAKES CLEAR THAT IT IS NOT A REAL CASH OFFER
OF $17.50 PER SHARE. Emeritus states that its offer is conditioned on rescission
of the issuance of shares to Lazard Freres pursuant to ARV's redemption of the
$60 million note owed to Lazard Freres. The only way this can happen is through
a final court order compelling Lazard Freres to deliver the shares back to ARV
in exchange for a re-executed $60 million note. This simply cannot happen any
time soon. Do you seriously believe that Lazard Freres will not appeal any
adverse ruling? So, you have to ask yourself, is Emeritus making an offer to buy
your shares or not?
If you read Emeritus's tender offer document closely, you will see that
Emeritus calculates that it would cost Emeritus $14 million more to buy ARV if
the issuance of those shares is not cancelled. EMERITUS GOES ON TO RESERVE THE
RIGHT TO REDUCE THE PRICE IT IS WILLING TO PAY TO ARV'S SHAREHOLDERS BY THIS $14
MILLION IF THE ISSUANCE OF THE SHARES IS NOT CANCELLED. THIS IS A REDUCTION OF
ALMOST $.85 PER SHARE. AFTER REVIEWING THIS LANGUAGE, YOUR BOARD CONCLUDED THAT
EMERITUS HAD FRAMED ITS OFFER TO GIVE IT TWO MORE WAYS OUT (IN ADDITION TO THE
FINANCING OUT I'VE ALREADY DISCUSSED); FIRST, EMERITUS CAN SIMPLY WALK AWAY
BECAUSE THERE WILL BE NO FINAL COURT ORDER BY THE END OF JANUARY CANCELLING THE
SHARES
2
<PAGE> 6
LAZARD FRERES NOW OWNS AND, SECOND, IT CAN CANCEL ITS OFFER AND REDUCE THE PRICE
IT IS WILLING TO PAY IN ANY NEW OFFER FROM $17.50 PER SHARE TO AT LEAST $16.65
PER SHARE.
So, you might ask, what is Emeritus's plan? Good question. Again, on
December 29, I wrote to Emeritus asking its CEO to tell me what it plans to do
when, inevitably, it becomes clear that there will be no final court order any
time soon that requires Lazard Freres to return the shares it now owns. The
response I got was flabbergasting. If this occurs, Emeritus said, the ARV Board
will have an opportunity to react to a change in the purchase price. BUT IF
EMERITUS HAS ITS WAY, ITS NOMINEES WILL CONTROL ARV'S BOARD AND BE IN A POSITION
TO ACCEPT THAT REDUCED PRICE.
Your Board and its financial and legal advisors have carefully reviewed the
Emeritus tender offer and the letter they sent us regarding their financing. I
could go on and on describing the multiple unusual conditions that Emeritus has
attached to its offer or that operate as an escape hatch for Emeritus's
financiers. BUT WHAT IS CRITICAL IS THAT, AFTER A CAREFUL REVIEW, YOUR BOARD HAS
CONCLUDED THAT THE ODDS OF EMERITUS PAYING YOU $17.50 PER SHARE IN IMMEDIATE
CASH ARE REMOTE.
Believe it or not, there is even more evidence, apart from all of the
conditions to the Emeritus tender offer, to support our view that Emeritus does
not intend to pay you $17.50 cash for your shares. Emeritus has been pursuing
ARV since last June. AT EACH STEP OF THE WAY, EMERITUS HAS SUGGESTED IN WRITING
OR ORALLY THAT WHAT IT REALLY BELIEVES TO BE IN ITS BEST INTERESTS IS A STOCK
FOR STOCK MERGER.
DON'T BE FOOLED. DON'T VOTE FOR EMERITUS'S SLATE. EMERITUS IS NOT GOING TO
PAY YOU $17.50 PER SHARE IN IMMEDIATE CASH IF YOU ELECT ITS SLATE OF DIRECTORS.
ELECTING EMERITUS'S NOMINEES WILL
SIGNIFICANTLY HARM ARV'S FINANCIAL CONDITION
If Emeritus receives enough proxies to elect its slate of directors, ARV
may well suffer serious financial consequences. At least 18 of ARV's 32 leases
on its existing assisted living facilities have change of control provisions
that will be triggered if control of ARV's Board shifts to Emeritus's nominees.
These change of control provisions allow the landlords to declare ARV's tenancy
terminated. What will happen if these provisions are triggered? It is quite
possible that a number of these leases will be terminated. Even if the leases
are not terminated, ARV believes that, at a minimum, the landlords will seek to
renegotiate lease terms to bring the rental rates up to market levels and to
take into account the additional risk to them of doing business with an entity
controlled by Emeritus. (EMERITUS, AFTER ALL, IS IN EXTREMELY WEAK FINANCIAL
CONDITION -- IT IS LOSING MONEY AT A RATE OF $20 MILLION PER YEAR AND ITS STOCK
HAS BEEN FLAT FOR TWO YEARS WHILE ITS PEER GROUP HAS MORE THAN DOUBLED IN
VALUE.) ARV estimates that, even if we lose none of the facilities, our lease
costs could rise by as much as $3 million per year simply by electing Emeritus's
nominees to the Board. And, of course, this change in our lease costs will give
Emeritus and its financiers the right to walk away from their offer.
But something even more sinister could happen. Emeritus knows about these
provisions because it leases from some of the same landlords as ARV. When the
landlords come knocking on ARV's door to obtain increased rents, who will be
there? The answer is directors nominated by Emeritus, one of ARV's main
competitors. WHAT IS TO STOP THE EMERITUS NOMINEES FROM SIMPLY FAILING TO REACH
AGREEMENT WITH THESE LANDLORDS, WHILE
3
<PAGE> 7
EMERITUS ITSELF CALLS ON THOSE LANDLORDS AND OFFERS THEM A BETTER PRICE FOR
THEIR FACILITIES? IF YOU ELECT EMERITUS'S NOMINEES, THIS COULD HAPPEN TO ARV.
Sure, you would have a lawsuit for breach of fiduciary duty (if you could prove
the facts) but, ask yourself, are you willing to play this kind of Russian
roulette with your investment in ARV? If you vote for Emeritus' nominees and
this happens, how will you explain your vote to the people who have entrusted
you with their money?
DON'T BE FOOLED. DON'T PLAY RUSSIAN ROULETTE WITH YOUR INVESTMENT IN ARV.
DON'T VOTE FOR EMERITUS'S SLATE.
Emeritus wants you to vote for their slate supposedly so that slate can
then implement its proposed merger with ARV. But, we all know that deals often
do not close. In the case of a highly conditional, extremely leveraged
transaction like that proposed by Emeritus, there is an even greater likelihood
that no transaction will ever occur. This very thing has happened in a 1996
merger proposed by Emeritus with another assisted living company. Who then will
run your company? Certainly not the nominees proposed by Emeritus. You, the ARV
shareholders, will be left to pick up the pieces of a stock that has been
battered by lease renegotiations or defaults (triggered by the election of the
Emeritus nominees) and the absence of a business plan and a management to
implement a plan. What rational investor would take this risk?
WE URGE YOU TO RE-ELECT YOUR CURRENT BOARD OF DIRECTORS. PLEASE SIGN, DATE
AND PROMPTLY MAIL THE WHITE PROXY CARD THAT YOU RECEIVED OR WILL RECEIVE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR YOUR SUPPORT.
IMPORTANT
DO NOT VOTE ANY BLUE PROXY CARDS YOU MAY RECEIVE FROM EMERITUS
CORPORATION -- NOT EVEN TO WITHHOLD ON THE EMERITUS NOMINEES. DOING SO MAY HAVE
THE EFFECT OF CANCELING YOUR VOTE FOR ARV'S NOMINEES. ALSO, DO NOT VOTE ANY GOLD
PROXY CARDS.
TO BE CERTAIN YOUR VOTE WILL COUNT FOR ARV'S NOMINEES, PLEASE MARK, SIGN, DATE
AND PROMPTLY MAIL ARV'S WHITE PROXY CARD THAT YOU RECEIVED OR WILL RECEIVE IN
THE ENCLOSED ENVELOPE.
On Behalf of your Board of Directors,
Sincerely,
/s/ HOWARD G. PHANSTIEL
Howard Phanstiel
IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ADDITIONAL INFORMATION OR
ASSISTANCE, PLEASE CALL OUR PROXY SOLICITOR, MACKENZIE PARTNERS, AT
1-800-322-2885.
4
<PAGE> 8
CERTAIN ADDITIONAL INFORMATION: ARV Assisted Living, Inc. (the "Company") will
be soliciting proxies against the director nominees of Emeritus Corporation and
other shareholder proposals by Emeritus Corporation. The following individuals
may be deemed to be participants in the solicitation of proxies by the Company
and as of December 18, 1997 beneficially owned the number of shares of common
stock as indicated: Howard G. Phanstiel, Chairman of the Board and Chief
Executive Officer, 0 shares; John A. Booty, interim President, 699,246 shares;
David P. Collins, Executive Vice President, 558,939 shares; Graham P.
Espley-Jones, Executive Vice President and Chief Financial Officer, 274,964
shares; Sheila M. Muldoon, Vice President and General Counsel, 3,500 shares;
Eric K. Davidson, Senior Vice President, 14,538 shares; Robert P. Freeman,
Director, 6,183,238 shares; Murry N. Gunty, Director, 6,183,238 shares; Kenneth
M. Jacobs, Director, 6,183,238 shares; R. Bruce Andrews, Director, 5,000 shares;
Maurice J. DeWald, Director, 6,000 shares; and John J. Rydzewski, Director,
10,000 shares.
The Company has retained Salomon Smith Barney ("SSB") and Bear, Stearns
& Co., Inc. ("Bear Stearns") to act as financial advisors in connection with the
proxy solicitation. Pursuant to an engagement letter with SSB, the Company has
agreed to pay SSB (i) a fee of $250,000 for each fairness or inadequacy opinion
that it renders to the Company and (ii) additional fees equal to 1.1% of the
aggregate consideration payable to the Company in connection with an acquisition
or similar business combination involving the Company or relating to the
acquisition of more than 30% of the Company's voting securities from the Company
and/or its shareholders. Pursuant to an engagement letter with Bear Stearns, the
Company agreed to pay Bear Stearns a total of $500,000 for its advisory
services. In addition, the Company has agreed to reimburse SSB and Bear Stearns
for their reasonable out-of-pocket expenses, including fees of counsel and any
sales, use or similar taxes, and to indemnify SSB and Bear Stearns against
certain liabilities in connection with their engagement. Although SSB and Bear
Stearns do not admit that they or any of their directors, officers, employees or
affiliates are a "participant," as defined in Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended, by the Securities and Exchange
Commission, or that Schedule 14A requires the disclosure of certain information
concerning them, Wilder Fulford (Managing Director), Michael Rimland
(Associate), Vivek Seth (Associate), Mary Amor (Associate) and Aakash Aggarwal
(Analyst), in each case of SSB, and Curtis Lane (Senior Managing Director),
Court Houseworth (Managing Director), Patti Louie (Vice President), Justin
Lancer (Associate) and Dan Goldberg (Analyst), in each case of Bear Stearns
(collectively, the "Financial Advisory Participants"), may assist the Company in
the solicitation of proxies for the annual meeting.
SSB has provided financial advisory and investment banking services to
the Company from time to time for which they have received customary
compensation. Recently, SSB acted as the Company's financial advisor in
connection with an $86.9 million investment in the Company by Prometheus
Assisted Living LLC for which SSB received or is entitled to receive a fee equal
to 3% of the total transaction value.
In the ordinary course of their business, SSB and Bear Stearns may
actively trade securities for their own account and the account of their
customers and, accordingly, may at any time hold a long or short position in
such securities. According to a Schedule 13D filed by SSB on December 6, 1997,
as of October 29, 1997, SSB may be deemed to beneficially own 664,788 shares of
the Company's Common Stock. Bear Stearns has advised the Company that as of
January 2, 1997, Bear Stearns held a net long position of approximately 15,026
shares of the Company's Common Stock over which Bear Stearns exercised
investment discretion. Except as set forth above, to the Company's knowledge,
none of SSB, Bear Stearns or any of the Financial Advisory Participants has any
interest, direct or indirect, by security holdings or otherwise, in the Company.
